Time Warner Telecom Inc., which had already set aggressive goals for market growth this year, could expand even faster if a Delaware bankruptcy court approves the firm's bid to buy bankrupt GST Telecommunications Inc. for $450 million.
Time Warner Telecom, which builds and operates fiber-optic networks, is 48 percent owned by Time Warner Inc. Executives of the competitive local-exchange carrier confirmed that on May 17, it executed a letter of intent to buy GST, a troubled Internet-service provider and CLEC based in Vancouver, British Columbia.
GST filed for Chapter 11 bankruptcy-law protection from creditors May 17 in federal court in Delaware. According to the company, the action was taken when its debt hit the $1.2 billion mark. Its stock has dipped below $1 per share.
GST is certified to operate in Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington.
Time Warner Telecom's offer is to buy "substantially all" of the company's assets, according to director of marketing and communications Bob Meldrum.
The strength of those assets varies. In Hawaii, the company operates the largest dial-up ISP in Oahu, and it built a fiber-optic network linking the islands. Inpdeed, AT & T Corp. leases part of that network to provide telephony service.
It is not known how the Time Warner Telecom division there, Oceanic Communications Inc., would link Internet services with its cable sister, Oceanic Cablevision, which serves 22,000 high-speed Road Runner customers.
On the other extreme, one of GST's intended operations in California has had a construction delay, according to press reports. Native Americans protested facility placement on what they deemed to be tribal burial lands.
Time Warner Telecom's acquisition will have to be approved by the court, which has scheduled a hearing June 2.
The move is likely to be challenged. A Maui, Hawaii-based telecommunications firm, MBN Communications, claimed that it made a bid for the GST properties one month before the deal was struck with Time Warner Telecom.
According to a statement from MBN, its offer of $76 million in cash would actually leave stockholders better off than Time Warner Telecom's offer. MBN will present its offer to GST's largest creditors, according to a company statement.
Time Warner wants the court to expedite the sale, which it hopes to complete by June 23, MBN said.
A GST acquisition could substantially accelerate Time Warner Telecom's growth this year.
In February, the CLEC said it would expand by eight to 12 new markets by the end of the year, for a total of 29 markets. It also plans, in existing markets, to begin serving small, midsized and large businesses and to introduce new data products. The deal would expand that growth, Meldrum said.