|
|
| Mergers and Acquisitions |
Rural Telephone Service
Lenora, Kansas |
|
 |
| Rural Telephone Service Co., Inc. (RTS) was interested in acquiring telephone properties from a national telecommunications company in order to provide superior products and services to customers overlooked by the incumbent provider. RTS is a cooperative, headquartered in Lenora, Kansas, offering telephone service to 29 exchanges in western Kansas. Its subsidiaries offer Long Distance, Internet, Cable TV, competitive Local and Wireless services. |
 |
| In June of 2005, RTS and Consortia launched a strategy to: |
• Evaluate the potential purchase of 12 exchanges
• Develop a model to value the current and future financial
position of these exchanges
• Initiate the dialogue with the Kansas Corporation Commission
(KCC) and Rural Utilities Service (RUS)
• Establish a model format and a set of model assumptions by mid July 2005 |
 |
| The challenge was to build a financial model to address the numerous support, reporting and filing issues that were identified. Early in the process, the model allowed RTS to realize the need to leverage the operating synergies from existing RTS operations in order for the acquisition to be successful. A plan was cultivated to: |
• Minimize expense required to operate the 12 exchanges.
• Schedule subsequent new investment to maximize USF support
• Develop a strategy for new investment while, at the same time, managing
cash flow
• Develop a financial model with the flexibility to manage the numerous
regulatory filing requirements |
| After running many different model scenarios, RTS made an offer to purchase the 12 exchanges from the incumbent carrier. |
 |
| The two parties were able to come to an agreement shortly after the offer was made. RTS is asking the FCC for a Study Area waiver to include these exchanges in their existing Study Area. The transaction is scheduled to close in September of 2006. |
|