Broadwing Sells Prized Fiber-optic
by: execooo1 (46/M/Plano, Texas) 03/01/03 09:12 pm
Msg: 160783 of 160845
Subsidiary For A Pittance
Austin American-Statesman, Texas (February 26, 2003)
Feb. 26--Broadwing Inc. used to brag that its Austin-based fiber-optic subsidiary was a crown jewel, the owner of the most advanced communications network in the nation.
But on Tuesday, the debt-ridden Cincinnati company said it would sell that once-prized asset, Broadwing Communications Inc., for about 3 cents in cash for every dollar it spent building the network.
The buyers, Cequel III, a St. Louis-based investment company, and Corvis Corp., a Maryland-based maker of telecommunications equipment, agreed to pay just $129 million for the subsidiary and its gleaming 18,700-mile network that stretches from Seattle to Boston.
They also will assume about $375 million in business liabilities, which include leased lines on other networks.
But Broadwing's parent company, which owns Cincinnati Bell, will end up paying off $1.8 billion in debt incurred to build the network.
All 1,100 workers at Broadwing Communications, including 550 people in Austin, will retain their jobs in the purchase, which is expected to be completed within the next four to six months after approvals from federal and state regulators. The sale does not include Broadwing's Internet data center in North Austin, which employs a handful of workers.
The buyers will get a national communications company that is debt-free and that remains on track to break even by midyear.
"They are getting a great deal," said Michael Hodel of Morningstar Inc. in Chicago. "If they can hold onto what they've got and run it efficiently, they should benefit."
Broadwing Communications accounted for about half of the $2.15 billion in revenue that its parent reported for 2002. But analysts estimated last summer that the Austin subsidiary was losing more than $200 million a year. Broadwing trimmed costs in the fall with an austerity campaign that cut 500 jobs from the payroll.
The company had projected that the Austin subsidiary would reach break-even status by the end of June. |
