PROVO City officials and Broadweave Networks may have reached a "modified closing" in the iProvo transaction Monday night, but City Councilman George Stewart says the deal's not done yet.
"A closing isn't a closing until it's a closing," he said. And as long as it's not closed, the city is exposed to the risk the deal won't go through, he added.
Provo officials and South Jordan-based telecommunications company Broadweave Networks signed closing documents late Monday night to transfer operation of the citywide fiber optic network. The final settlement will take place within 60 days.
Not every detail has been ironed out, Billings said, but the deal is sealed.
"While everything has not been finalized ... the transaction between Provo and Broadweave is, for all intents and purpose, complete," he said.
Billings said the date of the final settlement was delayed to allow potential investors to complete due diligence. Sorenson Capital a private equity firm has been evaluating an investment in Broadweave and still needs to complete its analysis of the proposed sale.
Sorenson managing director Fraser Bullock was unavailable for comment, but issued a statement saying, "There proved to be insufficient time to complete all of the required legal and business due diligence analysis before the June 30 deadline."
Under the terms of the deal, the city will receive a $40.6 million payment for the network by taking out a loan in what's described as an owner-financed transaction.
Broadweave will immediately assume operation of the iProvo network and will make monthly bond payments of $277,000 for the next 19 years to pay off Provo's bonds, plus interest, for a total of about $63.2 million. Broadweave will also put up a $6 million surety in case the company misses a bond payment.
Although the city and Broadweave have entered into an interim network operation agreement pending the final settlement, Broadweave CEO Steve Christensen said he doesn't expect the deal to fall through.
"I'm very confident in this deal going forward," he said.
Christensen said Broadweave will keep in touch with customers over the coming weeks to keep them apprised of the transition process. He said the company will honor their existing package prices. He also said they will send out letters to current customers offering them rebates of one month credit if they sign up for a year of service. He said customers should anticipate a smooth transition, with only one difference.
"They will notice an increase in service quality," he said. "But it's going to take time to work through those issues."
Broadweave already had to take on some of the iProvo customer base earlier this month in an emergency transition. Colorado-based New Global Telecom Inc., a third-party phone service provider, suddenly cut off service to about 1,400 Mstar customers, saying the company was behind on payments. Mstar.net president and CEO Ben Gould said that claim is simply not true.
"We weren't behind," he said. The company continues to service its customers on the UTOPIA network.
Most of the customers were successfully transferred to Broadweave without disruption, but some customers reported difficulties with their phone service. Daril Johnson, an accountant at Brigham Young University, said his home phone stopped receiving calls; then he couldn't place calls either.
Johnson said he received an e-mail from Broadweave explaining the situation. He also said he had to call four different entities before he could get his phone service up and running.
"Nobody seemed to know what's going on anywhere," he said.
Stewart also lost phone service during the cutoff, but he said Broadweave was helpful.
Though the city hasn't officially closed the deal, Stewart said he's optimistic it will finally be settled within 60 days and iProvo will be off the public's shoulders. Between 2001 and 2005, the city transferred $13.5 million to keep iProvo afloat. Over the next five years, the network was on track to cost the city another $15.6 million if it wasn't sold, he said."It's just a big relief," he said. "We're facing really difficult budgetary times ... we just could not afford another year of the iProvo costs."