General Communication, Inc. (Nasdaq: GNCMA) (GCI) announced it has agreed to acquire from WorldCom, Inc. (WorldCom) an 85 percent controlling interest in the corporation owning the 800-mile fiber optic cable system that extends from Prudhoe Bay, Alaska to Valdez, Alaska via Fairbanks. The corporation owning the fiber optic system will be operated as GCI Fiber Communication Co., (GCIFCC).
Under terms of the agreement, GCI will issue to WorldCom shares of a new series of Class "C" preferred stock valued at $10 million. The stock is convertible at $12 per share into GCI Class "A" common stock. The new series is non-voting and pays a quarterly cash dividend of 6 percent. As part of the transaction, WorldCom will be released from a financial guarantee that was delivered in connection with the construction of the system.
GCI plans to enhance the system and incorporate its operation into GCI's operations control systems. These enhancements will improve GCI's voice, Internet and data services in Interior Alaska, as well as third-party vendor services that utilize capacity on the fiber optic system.
Currently, WorldCom owns an 85 percent stake in GCIFCC. The remaining 15 percent is owned in equal shares by Arctic Slope Regional Corporation (ASRC), Ahtna Incorporated (Ahtna) and Chugach Alaska Corporation (CAC).
According to Ron Duncan, GCI president, the transaction will benefit Alaskans by moving ownership and management of the broadband facility onto Alaska-based and operated providers. With this transition, Alaska's telecommunications infrastructure will be able to more quickly adapt to accommodate the broadband demands of education, commerce and the general public.
GCIFCC was originally formed in 1996 as a high capacity network provider of communication services to Alyeska Pipeline Service Company and other customers in central Alaska. ASRC, Ahtna, CAC and Adesta Communications, Inc. — formerly known as MFS Network Technologies, Inc. — owned the company equally. In March 2000, the ownership of GCIFCC was restructured with WorldCom obtaining an 80 percent interest in order to protect its construction-related financial guaranties. WorldCom subsequently acquired the interest of Adesta. GCI was selected to provide day-to-day management services for the system.
GCIFCC interconnects to GCI's fiber optic cable in Valdez that extends to Anchorage, Juneau and Seattle. After the transaction closes, GCI's fiber optic system will connect North Slope oil production facilities with the state's largest economic, educational and military communities, and the lower 48 states.
The Regulatory Commission of Alaska must approve the transaction. After approvals are received, GCI will issue its Class "C" stock to Worldcom. GCI expects regulatory approval during the second quarter of 2001.
According to Marsha Burns, GCI vice president, GCI has entered into an interim services agreement with Alyeska Pipeline to provide voice, video and data services to support operations of the Trans Alaska Pipeline System. The parties have drafted a proposed 15-year agreement that will be submitted to the Board of Directors of both companies for consideration. The interim agreement provides for provisional services during this review process.
About GCI:
GCI is an Alaska-based integrated communications provider that delivers voice, video and data services through its fiber optic, satellite, hybrid fiber coaxial and metropolitan area network facilities. For more information, visit www.gci.com.