Anticipating sale of company, union representing FairPoint workers blasts LePage veto of new standards for telecom mergers

Gov. Paul LePage
Troy R. Bennett | BDN
Gov. Paul LePage
Posted April 22, 2014, at 4:53 p.m.

PORTLAND, Maine — Officials at the union that represents most employees of FairPoint Communications say telephone and broadband customers remain exposed to the negative consequences of a bad merger or acquisition after Gov. Paul LePage on Friday vetoed a bill setting new standards for such a deal.

The bill, LD 1761, would have set new criteria for state regulators to consider for any proposed reorganization at FairPoint, requiring that any deal involving a telecommunications utility with more than $50 million in annual revenue would have to demonstrate a net benefit for the state. The current standard requires regulators to find that a deal would do no harm.

“This bill was an opportunity for us to raise that bar of approval for a new sale,” said Peter McLaughlin, business manager for the International Brotherhood of Electrical Workers Local 2327, in a phone interview Tuesday. He represents around 650 FairPoint employees through IBEW and will represent nearly 2,000 in contract negotiations with the company, which are scheduled to start Friday. The North Carolina-based public company has agreed to 32 other bargaining sessions regarding the contract that expires Aug. 2.

The governor wrote in his veto letter that he turned down the bill because it only pertained to FairPoint and because he felt the new standards stood to make review more subjective for a telecommunications utility transaction coming before the PUC.

Echoing LePage’s position, FairPoint spokesman Jeff Nevins said the company viewed the bill as “a layer of regulation that’s just not needed.”

The union, regulators and public officials have broadly agreed terms of the company’s acquisition of Verizon’s Northern New England assets, which led to problems for customers, layoffs and FairPoint’s bankruptcy in 2011, should not have been approved.

Public Advocate Tim Schneider, a LePage appointee who is charged with representing ratepayer interests at the PUC, said while the bill failed, the experience with Verizon and FairPoint was both uncommon and provided caution to regulators going forward.

“All the other transactions involve a Maine utility being purchased by a much larger company,” Schneider said. “In these transactions, the Maine utility is the smaller fish. With [the FairPoint-Verizon deal] you had a big fish trying to be swallowed by a smaller fish and a lot of the problems we saw were because of that.”

PUC staff and the public advocate had recommended against approval of that deal, which Schneider said will likely turn additional scrutiny on any future telecom deals, “regardless of a new standard,” he said.

Still, Schneider said the bill would have given state regulators more leverage in making demands of utilities, which they can do through what are called stipulation agreements.

McLaughlin said the union supported the bill to get out in front of speculation that the company’s owners are preparing for a sale. Analysts point to the company’s ownership coming out of its Chapter 11 bankruptcy as an indicator that a sale is likely in the near future.

Randy Barber, a consultant to the union, testified before the Legislature’s Energy, Utilities and Technology Committee in late February that four of FairPoint’s top five shareholders, a group of 191, are hedge funds. The company’s stock has been on a steady climb since December, when analyst Christopher King with the St. Louis-based investment banking firm Stifel highlighted the company as a potential money maker for shareholders in 2014.

The company’s renegotiation of its labor contract and its request for $67.6 million from a fund to help subsidize landline telephone service throughout the state will be key to its financial performance in Maine.

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