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Wholesale Channel – Montana Power Decides Future Lies in Telecom

Posted: 06/2001

Wholesale Channel

Montana Power Decides Future Lies in Telecom
By Bruce Christian

As utility companies look to the future and see potential in adding bandwidth to their natural gas, oil, coal and electricity, the Montana Power Company (www.mtpower.com) has decided its future lies strictly in telecommunications.

The company announced in late February that it was spinning off its utility arm to focus on its telecom division, Touch America Inc. (www.tamerica.com). A short time later, it completed the sale of its independent power business.

“We remain on track to transform Montana Power into Touch America, our growing broadband information transport company,” says Bob Gannon, Montana Power’s chairman, president and chief executive, as well as chairman and CEO of Touch America. “We are meeting the company’s goals of receiving good, solid values for our energy businesses and a promising future for their employees.”

Gannon says that Montana Power has had a long history–dating back to 1912–of operating multiple unregulated businesses.

It began dealing in oil and gas back in the 1930s and went into coal during the 1950s. Its first foray into telecom was in the 1980s, after the AT&T divestiture.

“We’ve always been a little different because of the unregulated activities in the west,” Gannon says, adding that many of the businesses the company ran were “quite dissimilar, even though they were energy.”

The differences became more apparent as Montana Power got deeper into the telecom space, Gannon says.

As the company began to lay fiber, it noticed the telecom portion of its company began to take off, and the separation from the energy side became more noticeable.

“A lot of that had to do with the kind of expectations the shareholders have, and with growth,” he says.

Gannon says the company had to re-examine itself.

“We were confronted with the obvious fact that all of our energy businesses were quite small for the entire sector of Montana Power,” he adds. “Once we concluded that a separation of telecom should take place, we wanted to ensure we placed our energy business in [the] hands of people who ensure stronger growth.”

In selling off each aspect of its utility, Gannon says he expects to raise $1.3

billion, which will be reinvested into Touch America.

“We will have $1.6 billion in assets and $350 million cash, with no debt by the end of the year,” Gannon says. “In the world we will be in, we will be very well-positioned financially.”

At year’s end, Gannon also expects that a 27,000 route-mile fiber optic network will be complete. He says the national footprint is similar in size to competitors such as Williams Communications (www.williams

communications.com), Level 3 Communica-tions Inc. (www.level3.com) and 360 Net-works Inc. (www.360.net).

Much of the network is a result of

Touch America’s acquisition last summer of Qwest Communications International Inc.’s (www.qwest.com) in-region long distance network, which it had to relinquish when it merged with US West.

With that acquisition, Touch America also picked up a more significant sales

presence, as it incorporated 157 sales people from Qwest. It has since added an

additional 40 to 50 people and has plans to place them as it lights up its network in Dallas; Denver; Los Angeles; Minneapolis; Omaha, Neb.; Phoenix; San Diego; Seattle and St. Louis.

Gannon says Touch America was primarily a wholesaler throughout the 1990s, but it is now hitting the business market. It also has an agent program.


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