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AP&T Press Release on Sale of Telecom to Comcast

NEWS INFORMATION

Release: IMMEDIATE, November 15, 2008
Contact: M. T. McCabe

ALAMEDA PUB TO CONSIDER SALE OF TELECOMMUNICATIONS

At its meeting Monday, November 17, Alameda’s Public Utilities Board will consider recommending to the City Council that Alameda Power & Telecom’s telecommunications business line be sold to Comcast.

“We’re proposing this action to bring certainty and to eliminate future financial risk to Alameda Power & Telecom and the City from continued operation of the telecommunications system,” said General Manager Girish Balachandran. “Selling now also enables us to focus on our core electric business.”

If approved by the Public Utilities Board, the matter will be put before the City Council the following evening, Tuesday, November 18.

In 2004, the utility borrowed $33 million through bond anticipation notes secured by telecommunications system net revenues. Payment on the notes is due in June 2009.

Over the past two years, the Public Utilities Board and utility staff have solicited extensive public input, evaluated and implemented operational efficiencies, and taken advantage of cost-cutting opportunities. These steps were taken to increase profitability and move the telecommunication system toward becoming self-sufficient and able to support its debt.

“At the time the decision was made to get into the telecom business, circumstances were very different than they are today,” Balachandran continued. “The Naval Air Station was closing and electric deregulation was imminent. Alameda was underserved by the incumbent cable TV provider, and dot.com thinking and investment were widespread.”

“The landscape has changed radically. There are now multiple providers of telecom products available to residents. National companies are competing locally; and there are higher expectations of service offerings,” Balachandran explained. “Besides growing competition, technology continues to change, and significant capital will be required to keep up. Our labor costs, relative to non-municipal providers is high, and programming costs continue to grow.”

A year ago, the Public Utilities Board authorized retention of an independent financial advisory team to examine these issues and the ability of the telecommunications business line to address existing debt. A range of options was explored, including refinancing the current system, refinancing and expanding, or selling. The team’s findings conclude that both refinancing and expansion are infeasible without a commitment of electric or General Fund monies.

Balachandran added, “If the Public Utilities Board and City Council concur with our recommendation, we will do our best to ensure a seamless transfer of customer accounts.”

The Public Utilities Board meeting will begin at 7:00 p.m. and be held in the City Council Chambers, on the third floor of City Hall, 2263 Santa Clara Avenue. The meeting will be televised on cable Channel 15. Supporting materials and reports are available on the Alameda Power & Telecom web site, www.alamedapt.com.

The City Council meeting will begin at 7:30 p.m. on Tuesday, November 18, in the City Council Chambers and also will be televised on cable Channel 15. The City Council report is available online at www.ci.alameda.ca.us.

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