WVT Communications, Verizon ink partnership for 4G service ...

Duane Albro, president of WVT Communications

Warwick Valley Telephone is the little telephone company that could ? and did ? manage to make the transition from a small mom-and-pop operation into a growing broadband and data service.

The 100-year-old Warwick-based company doesn?t have operators interrupting party lines anymore, and though its physical territory is rural and limited, the telecommunications industry has made it possible for companies like WVT to morph into WVT Communications, broadening? its horizons through the acquisition of a new subsidiary, USA Datanet, and bringing digital phone service and ?cloud? computing? around the state.

Now, in a deal inked with Verizon Wireless of the East LP, it will also be guaranteed $39.6 million in cash distributions over three years and a place in the world of 4G technology, which serves the new smartphones and other higher data-driven devices.

?Warwick Valley Telephone? has had a minority partnership interest in Verizon through the Orange (County)-Poughkeepsie (Limited) Partnership, which goes back to the 1980s, when it was called? Nynex, and cellular companies were in the formative years,? said Duane Albro, president of WVT Communications. ?It was an unusual partnership interest in that it was a wholesale, not a retail, partnership.?

Under the old? agreement, the partnership sold cellular services wholesale, primarily to Verizon, but to other resellers as well. WVT owns? 8.1 percent of the partnership.

?The wholesale partnership was selling the service to Verizon retail; but? none of those retail costs were included in the partnership agreement,? Albro said.

The arrangement worked out for WVT, because the partnership generated between $8 million to $12 million for the company, but the agreement WVT Communications and Verizon has put together is more cost-effective for Verizon and gives WVT Communications a solid footing in 4G technology and the ability to grow outside of its designated footprint.

?The original arrangement really was not in Verizon?s best interests,? Albro said.? ?As a wholesale partner, we generated anywhere between? $8 million to $12 million. If the retail costs would have been included, our revenue would have been much lower.?

When 4G came along, Verizon decided not to put the service into the partnership, which meant WVT would receive less revenue. The partnership renegotiated its agreement with Verizon; as a result, revenues for WVT will continue and? now includes 4G service.

Verizon agreed to pay WVT $13.6 million in 2011 and $13 million in both 2012 and 2013.

?In? 2014, WVT has ?put option,? an ability for us to force Verizon to buy out our 8.1 percent interest in the Orange-Poughkeepsie Partnership for $50 million if we want to.?

Being a retail partner makes no difference to WVT Communications as long as the cash distribution from the partnership doesn?t change, Albro said. It is a benefit to Verizon, as it will now be able to include its retail costs in the partnership.

Regulated telephone companies continue to shrink as the thirst for cellular service grows and landline service diminishes, Albro said.

?As a company, we?ve undertaken a two-pronged strategy. We?ve focused on offering broadband services within our regulated footprint, which runs from? Vernon, New Jersey to Florida, New York. Over 60 percent of our customers are at 15MG (megabits) broadband. Separately, we acquired USA Datanet and growing that operation to offset the loss in our regulated footprint and to increase our presence in the market.?

As a result, WVT Communications expanded its penetration in the telecommunications industry through USA Datanet, Albro said. ?We?re seeing good growth in the wholesale business, where we are now leasing? our spare capacity outside our regulated footprint. Since there is not a lot of housing or business growth in the Warwick Valley Telephone footprint, we are growing through WVT Communications subsidiary, USA Datanet.?

In the four years under his presidency, the company has increased its net cash from operation and reduced its debt to nearly zero, said Albro, who has spent the bulk of his career in the telecommunications industry ? from rotary phones to VOIP (voice over internet protocol).? ?We are on solid financial footing.?

Warwick Valley Telephone has about 100 employees. ?A few positions were eliminated, simply because landline service is diminishing,? Albro said. ?On the other side, USA Datanet is continuing to grow and expand. As the population gravitates towards wireless, we have literally gone ?into the cloud,? which has allowed us to grow and remain a solid company.?

USA Datanet has help expand services throughout the state, and the company recently opened an office in White Plains.? ?Our ?footprint? customers are receiving the best possible service, but now, we?re able to remain a profitable company because of our expansion into data services.?

The publicly owned company had a total of $24.4 million in revenue in 2010 and a net income of $2.9 million, which Albro said translates into dividends to its shareholders, despite the recession. In June the company declared a regular quarterly dividend of? 26 cents per share.

?Our goal is to provide the best service we can to our customer base and to expand our reach to allow the company to grow, but remain part of the local community.?

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Source: http://westfaironline.com/2011/14828-wvt-communications-verizon-ink-partnership-for-4g-service/

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