SureWest Deals to Buy WINfirst

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SureWest Communications said last week it signed a purchase agreement to buy "certain assets" from the bankrupt Western Integrated Networks LLC at the fire-sale price of $12 million.

The bankrupt company, which does business as WINfirst, only has one active system in Sacramento, Calif. The company listed about 3,000 subscribers by name as "accounts receivables" in bankruptcy papers, but officials have told regulators recently that the sub count is now "almost 5,000."

Local assets include a state-of-the-art operations center. WINfirst competes against AT&T Broadband in Sacramento.

The same day the purchase agreement was announced (June 19), WINfirst's president and co-founder, Frank Casazza, resigned. Casazza founded the overbuilder along with cable veteran James Vaughn, who helped fund the start-up with proceeds from the sale of FrontierVision Partners L.P.

Vaughn left WINfirst around the time of the bankruptcy filing in March. WINfirst is now under the control of William McKenzie, the court-appointed chief restructuring officer, a spokesman for the company confirmed.

BUYER'S A CLEC

SureWest is California's fourth-largest competitive local-exchange carrier, providing broadband services in Sacramento through companies such as Roseville Telephone and SureWest Internet.

In a prepared statement, CEO Brian Strom noted that there are still challenges to closing the acquisition, including gaining the cooperation of WINfirst's employees, vendors and customers.

Another company, Orange Broadband of North Carolina, obtained a cable license from Sacramento city and county at the same time SureWest did. Once SureWest submitted its asset-purchase plan to Judge Elizabeth Brown in U.S. Bankruptcy Court in Denver, the clock began on a 21-day period in which another entity, such as Orange Broadband, could attempt to overbid SureWest.

Orange Broadband is backed by some of the same investors that funded WINfirst, including J.P. Morgan, MC Venture Partners and Columbia Capital.

There are also unresolved issues pertaining to WINfirst's Sacramento franchise.

Rich Esposto, executive director of the Sacramento Metropolitan Cable Commission, said the company still has corrective work to do in the county. Plant placement and engineering faults, called Gigs, may cost the new owner up to $1 million to fix, Esposto said.

STAFF CUTS

WINfirst also has an outstanding bill of between $300,000 and $400,000 for past-due inspection fees, he added.

The cable commission said it has been told of additional layoffs at WINfirst's system, mostly in the sales and marketing departments.

SureWest did not indicate any broadband aspirations beyond Sacramento. WINfirst has franchises with other communities including San Diego, Los Angeles, San Antonio and Dallas.

Strom's announcement said the company would hold a conference call after the acquisition, if it is completed, to discuss operational plans.

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