This is a continuation of a series on telecom companies who invested lots of dough on developing fiber networks.
Actually, $2B is a very rough guess as I was unable to find much information about GST on the Internet. I found this amazing. GST declared bankruptcy on May 12, 2000. Most of the assets were acquired by TW Telecom for $690M in January 2001. Not acquired by TWT was GST’s Hawaii property. More on the Hawaii portion in a post later this week.
Here is what little I could learn in a 45 minute web search. The company started in the early 1990’s. It went public in the late 1990’s. GST’s focus was in the western U.S., including Washington State (where it was headquarted), California, and Hawaii. I think they had local and intercity fiber, though that is not clear. In addition to bandwidth, it became involved in a wide assortment of telecom products and services. The company might have had $1.2B in debt at the time of bankruptcy. This is about all I could learn. Even TWT’s annual reports seemed (based on a quick review) to provide little information on GTS. I suspect there is more info somewhere with TWT’s web site but it wasn’t easily found.
Nonetheless they spent a lot of money and therefore needed to be included in this litany of fiber boom companies.
I am looking for additional information on GTS. What was its origin? What were its initial markets? How much fiber did it build? Did it acquire any other networks along the way? How much money did they burn through? There must have been some intriguing boom and meltdown GTS stories–can anyone out there share them? Bearonbusiness readers–help!
GST is only one piece of the TW Telecom story. I will share the rest of their story over a few upcoming posts. No surprise, though, that TW Telecom has a seat at the Final Table–and they have a big stack of chips in front of them.
Posted by Dan Caruso (May 20, 2008)
May 20th, 2008 at 4:24 am
GST Telecom’s annual reports back to 1997 can be found on the SEC site in raw text form: http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000911522&owner=include&count=40
I haven’t read through them in detail though.
Rob
May 20th, 2008 at 6:37 am
Thanks Rob. I’ll print out and skim through.
May 20th, 2008 at 10:13 am
Dan,
GST did a lot of guvvie business as well…There was a time when GST was winning lots of Army and Air Force business…
they were also very big in hospitality…that LOB was also excluded when TW Teleom the assets…IIRC(I could be wrong) Starwood was a large customer of GST…
I know TW Telecom did not get the GST Hawaii operations, but I thought TW Telecom did acquire 10 or 12 inter-island fibers and access to certain landing stations on Hawaii as part of the GST deal?
maybe I am wrong, but I seem to recall that….
as a side note, there was a rumor circulating back in 99 and 00 at ICG that ICG and GST were very close to merging….and if that happened the 2 would have acquired either Teligent, Windstar or Advance Radio Telecom….but alas it was just rumor as both ICG and GST imploded…
May 20th, 2008 at 11:00 am
Thanks Scott for the comment. I appreciate you reading the blog.
I can’t wait to tell the ICG story.
May 20th, 2008 at 12:14 pm
As a former ICGer in the days of J. Shelby Bryant, Sheldon Ohringer, Hank Carabelli and Doug Faulk and having had a hand in deploying and provisioning the DSL network and integrating Netcom, I cannot wait to hear your ICG story!!!!
PS:
I have been an avvid reader since you started your blog…it was nice seeing you again at the alumni reunion…
May 20th, 2008 at 2:49 pm
Dan,
As it stands in todays valuations for Assets, the $690M paid by TWT for GST was grossly over paid.
Does anyone remember if John Warda and group took GST over or were they the orginal founders. I know that John went on to Electric Lightwave afterwards but not sure if he was the founder or the work out dude.
Mike
May 20th, 2008 at 7:04 pm
Had some time. Thought I’d dig. Talk of GST brings back memories as I worked on the 1995 route survey for part of their Bay Area network while a Project Engineer at MFS Network Technologies.
GST was founded in Canada in 1987 as Greenstar Resources, Ltd., which was re-named Greenstar Telecommunications, Inc. in 1993 then changed again to GST Telecommunications, Inc. in 1995. It seems the company was originally a switched LD reseller that moved into transport networks during the 1990s fiber boom: up until 1998, GST owned all or part of NACT, a well known supplier of accounting peripherals for LC circuit switches (a so called “black box” system). Over time, they grew their product portfolio to include:
DATA SERVICES: DATA TRANSPORT SERVICES, INTERNET ACCESS SERVICES
WHOLESALE SERVICES: LONG-HAUL UN-SWITCHED SERVICES, DARK FIBER AND CONDUIT RIGHTS
VOICE AND BUNDLED SERVICES: LOCAL SERVICES, COLLOCATION SERVICES, PRIVATE LINE SERVICES, LONG DISTANCE SERVICES
One of the earliest fiber business activities I can find for Greenstar was a JV deal in 1992 to build a competitive access fiber optic telecom network in Phoenix. Greenstar pumped $5M into Phoenix Fiber Access with the balance of the project’s estimated $16.2M cost covered by the JV partner. The JV partner? None other than IntelCom Group, Inc. (formerly Intertel Communications Inc.) which eventually changed its name in 1996 to… drum roll!… ICG Communications, Inc. I suppose this deal supports the rumors Scott H. mentioned, although it happened several years earlier.
Early GST networks:
* San Bernardino, CA -> San Bernardino, Riverside, Rialto, Bloomington -> Operational Apr’95
* Hawaii -> Oahu, Maui, Molokai, Hawaii -> Operational Sep’88
* Ontario, CA -> Ontario, City of Industry, Monterey Park -> Operational Aug’95
* Tucson, Arizona -> Tucson metro -> Operational Sep’95
* Fresno, CA -> Fresno -> Operational Jan’96
* Albuquerque, NM -> Albuquerque metro -> Operational Jan’96
* Bay Area, CA -> Oakland, East Bay -> Operational Jan’96
* Phoenix, AZ -> Phoenix metro -> Operational Feb’94
GST’s final annual report for 1999 indicated:
* 4,415 route mi and 252,642 fiber mi w/ an add’l 917 route mi under construction
* An add’l 52,100 fiber miles owned, but leased TO other carriers
* 838 route miles and 9,054 fiber miles leased FROM other carriers
When Time Warner Telecom acquired GST in 2000, GST claimed services offered in 49 cities across eight western states.
Here’s a great article chronicling the ultimate demise of GST:
http://www.xchangemag.com/articles/0a1feat3.html
I’m particular fond of this statement from the article:
“Malone said the real problems at GST stemmed from the fact that it was involved in too many lines of business, including selling conduit, fiber-optic sales, the long-distance business, Internet and the local exchange. ‘The weight of those businesses was too much for our back office, and [we] simply could not support it all,’ Malone said, adding he’s not sure if management was adept at all those businesses.”
Clearly, this supports the Bear on Business philosophies espoused in the recent “Vonage per Ike Elliott and Mr. Blog” post about getting good at your core business before you try to do more.
Some other tidbits from GST’s history are below. Lots o’ M&A. There might be enough financial info there to validate the $2B estimated GTS spend.
——————–
2000
—-
DIVESITURES: GST sells ACTION TELCOM CO. to NTS Communications.
ACQUISITIONS: GST is acquired by Time Warner Telecom for $690M.
1999
—-
At the end of 1999, GST had ~$1,192.8M of indebtedness outstanding and cash, cash equivalents and investments of ~$117.3M.
1998
—-
DIVESITURES: GST sold its remaining 63% interest in NACT Telecommunications, Inc. (aka National Applied Computer Technologies, Inc.) for net proceeds of ~$85.0M. NACT produced advanced telecommunications switching platforms with integrated applications software and network telemanagement capabilities.
ACQUISITIONS: GST acquired ICON COMMUNICATIONS CORP. which provided long distance and ancillary communications services; KLP, INC. (dba CALL AMERICA PHOENIX) which provided long distance services; and WHOLE EARTH NETWORKS, LLC which was an Internet services provider.
FUND RAISING: GST sold $500.0M principal amount at maturity of the 1998 Notes in a private placement. The net proceeds of this offering was ~$288.9M.
At the end of 1998, GST had ~$1,131.8M of indebtedness outstanding and cash, cash equivalents and investments of ~$383.7M.
1997
—-
ACQUISITIONS: GST acquired ACTION TELCOM CO. which provided long distance and ancillary telecommunications services and produced software used in the telecommunications industry; and the assets of the Guam operations of Sprint Communications Company L.P. which provided long distance and ancillary services in Guam.
FUND RAISING: GST consummated a private placement of $50.0M Series A Preference Shares; NACT completed an initial public offering of its common stock which netted ~$10.0M for GST; GST Equipment Funding, Inc. completed the sale of $265.0 million principal amount of Secured Notes with a net proceeds of $255.8 million; and GST completed a public offering of netting $77.3M cash and $144.0M of Accrual Notes.
At the end of 1997, GST had $790.3M of indebtedness outstanding and cash, cash equivalents and investments of ~$351.1M.
1996
—-
ACQUISITIONS: GST acquired the remaining 50% of PHOENIX FIBER ACCESS, INC., previously 50% owned through a joint venture with ICG Telecom Group, Inc. GST also acquired CALL AMERICA BUSINESS COMMUNICATIONS, CORP. which provided long distance and ancillary communications services and TOTALNET COMMUNICATIONS, INC. which was a long distance service provider. Also, in a series of transactions between 1994 and 1996, GST purchased GST Telecom from Pacwest, LLC (yes… they bought themselves somehow ;-)), which developed, constructed and operated competitive local exchange networks and other communications systems. And GST finished the buyout of GST PACIFIC LIGHTWAVE INC. from Tomen America, Inc., a GST Telecom subsidiary which operated a fiber optic competitive local exchange network in southern California. Finally, GST acquired Reservations, Inc. (dba Hawaii OnLine) an Internet service provider; Texas-Ohio Communications, Inc. a long distance service provider; and Tri-Star Residential Communications, Inc. a provider of shared tenant services consisting of long distance, cable television and security service to tenants of multi-dwelling apartment units. Big year.
FUND RAISING: GST completed a private placement of Special Warrants for a net proceeds of $20.8M, entered into a loan agreement with Siemens that provided for loans of up to $226M and entered into another loan for $50M in equipment financing from NTFC Capital Corporation (part of GE Capital).
At the end of 1996, GST had cash, cash equivalents, restricted cash and marketable securities of $24.5 M. I couldn’t find debt figures for this period.
1995
—-
ACQUISITIONS: GST acquired International Telemanagement Group, Inc. which was an international and domestic long distance carrier. The deal included ITG subsidiary Wasatch International Network Services, Inc. which offered enhanced long distance services.
FUND RAISING: GST completed a $180M debt offering consisting of $160M in senior discount notes and $20M in convertible senior subordinated discount notes with a net proceeds of $171.3M.
GST becomes entangled in the GST Global Telecommunications Inc. / Global Light Telecommunications Inc. project in Mexico to create Bestel.
1994
—-
GST and Tomen America, Inc., a subsidiary of Tomen Corporation, an international general trading company, entered into agreements under which Tomen made available up to $100.0M in financing for competitive access network construction.
GST loaned $200,000 to Pacwest Network, LLC.
GST made various loans to Starcom International Optics Corp. totaling $4.5M relating to a proposed JV to construct a fiber network between Vancouver, BC and Seattle, WA.
1992
—-
GST joint venture with ICG inked which appears to be the “real” origin of GST as a facilities-based provider.
May 21st, 2008 at 6:13 am
Dave, thanks so much for doing this digging and sharing it with us. We are going to set up a wiki for fiber-based telecom companies so that we can capture the history of the epic boom and bust. When we do, we will include this info you provided.
May 21st, 2008 at 6:27 am
Mike,
I think TWT would acknowledge that they overpaid for GST. Enough years have gone by. The wounds, though deep at the time, are largely heeled. It is widely believed that their hesitancy about acquisitions is rooted in the GTS disaster. Xspedius was (I think) the only material acquisition they’ve done int he past many years.
Thanks for commenting on the blog.
Dan
May 21st, 2008 at 9:19 am
Great stuff Dave…the rumor I referred to was circulating back in 98/99 right after ICG spun off MTN and sold the rest of ICG Satellite, which ironically, was the only BU at that time making boat loads of cash for ICG…
Flush w/that cash the hallways were buzzing about GST/ICG merging…and then Teligent was going to be next….
thanks for the refresher on GST..that was great sutff..