2019/10/23 Council Agenda Packet

sf@ City of Everett September 27,2019 Page 2 TRANSACTION: On May 28, 2019, Northwest Fiber entered into a Purchase Agreement with Frontier Communications Corporation, and its wholly owned subsidiary Frontier Communications ILEC Holdings, LLC. Under the Purchase Agreement, Northwest Fiber will acquire control of Frontier Communications Northwest, Inc. the cable franchisee in the City. Following the closing of the transaction, the franchisee will remain the same and all terms,conditions and obligations will remain. Northwest Fiber will continue to abide by the terms of the Franchise. Northwest Fiber is led by industry veterans with local expertise. Management includes Steve Weed as the Chairman of the Board, Harold Zeitz as CEO, Wayne Schattenkerk as CFO, and Byron Springer as General Counsel. These individuals are all formally the leadership at Wave Broadband, a Kirkland based telecommunications provider that maintains a separate telecommunications franchise within the City. Northwest Fiber's leadership will remain local in Kirkland, will continue to employ more than 1,000 employees in the Pacific Northwest(600-700 in Washington),and will maintain a call center in Everett. Northwest Fiber is a newly formed entity jointly owned by WaveDivision Capital VII, LLC and investment funds affiliated with Searchlight Capital Partners,L.P.Searchlight related entities have invested more than $2.65 billion in 10 different communications companies, including Charter Communications and Electric Lightwave. The transaction is all-cash, and is valued at about $1.352 billion. At closing, Northwest Fiber will have approximately $300 million dollars on the balance sheet to continue operations, and more than half a billion dollars in available liquidity. Northwest Fiber will take ownership of all Frontier state entities, networks, and assets in the Pacific Northwest. Northwest Fiber's business plan aims to expand the fiber availability for both residential and commercial customers, as well as improve product capabilities and service quality. To support the transition, Frontier will continue to provide transition services for at least six months(up to three years) after closing. Frontier will assist with a smooth transition of critical operations support systems and functions, as well as employees. Though the Franchise is only for cable services,the infrastructure within the City includes both telephone and broadband services. Northwest Fiber plans to continue to operate these systems throughout the City. Northwest Fiber plans on building better and more reliable networks, providing better internet service and changing out the older coax cable for fiber. Northwest Fiber has committed to abide by the terms of the current franchise. RECOMMENDATION Based on the information provided by Frontier and Northwest Fiber, I recommend that the City Council approve the attached Ordinance and the change of control. ENCLOSURES The following documents are enclosed with this memorandum: {EF222016691,DOCX;2/00005.0$002$/} 7 8 2