SureWest cell clients face new terms under Verizon

SureWest's 50,000 cellular customers can expect changes to their calling plans, given the company's announcement Tuesday that it is selling its struggling Sacramento-area mobile business to Verizon Wireless.

With the $69 million all-cash deal, Roseville-based SureWest Communications closes in on its goal of focusing on its telephone and broadband businesses.

Customers and some employees will transition to Verizon within about eight months, and over the next 60 to 90 days, the two companies will map out how SureWest subscribers will fit into Verizon's calling plans.

Nearly all SureWest customers have contracts for unlimited minutes. Verizon doesn't offer such plans. In a document sent to SureWest, Verizon said it considers customers bound by SureWest contracts, including early termination fees – unless Verizon decides to waive them.

Verizon spokeswoman Heidi Flato said she could not provide details about possible changes to customer plans, conditions under which Verizon would waive early termination fees, or any other matters specific to this deal until it becomes final.

"If you look at our past acquisitions ... we are always doing our best to be fair to the customers," she said.

At SureWest, Karlyn Oberg, executive director of enterprise initiatives, noted that not all SureWest customers spend a lot of time on their cell phones.

"Although Verizon might not offer an 'all-you-can-eat' plan, it might be fine for customers not using all their minutes," she said.

Oberg also said SureWest customers can keep their old phones once they switch to Verizon since both companies use the same CDMA network.

Art Neill, an attorney with the Utility Consumers' Action Network, said that cell phone companies can and often do change plans on their customers, regardless of a corporate takeover.

"All they have to do is give notice," said Neill, noting that the companies have a right to make changes as part of the user agreements that cell phone users sign.

He also said customers have a legal right to get out of their contracts without early termination fees if changes imposed by cellular companies are harmful to them.

"Here's the trick," he said. "If the change is materially adverse to you, you can opt out. The problem is that the companies are really bad about honoring it."

He suggested SureWest customers look at their bills carefully and know what they have. "Now's the time for SureWest customers to be very aware of what their contracts do and don't require," he said.

Neill also said that many companies, including Verizon, are beginning to prorate their early termination fees as contracts get close to the time of expiration.

"The problem with the (early termination fees) is that you can be in the 23rd month of a 24-month plan, or in the second month, and the fee is the same," Neill said, noting that an average such fee is $200.

The deal comes as SureWest's cell phone business has been hammered by a declining subscriber base and falling revenue. Chief executive Steve Oldham said SureWest's wireless unit was too small to compete against giants like Verizon Wireless and AT&T.

"This business requires a tremendous amount of scale to be successful," he said.

News of the sale initially impressed investors, who bid up SureWest stock by as much as $1.19 a share before it settled back to close with a gain of 27 cents at $14.58 a share in Nasdaq trading Tuesday.

Telecommunications analyst Chris King called the sale a positive move for SureWest, allowing the company to shed an underperforming unit.

"It's something that investors had been waiting for. It's very positive they were able to get it done in this market environment," said King, of Stifel Nicolaus & Co. in Baltimore.

SureWest announced in December that it was negotiating a sale. In its last quarterly earnings report, SureWest said its wireless revenue fell 5 percent as it lost 3 percent of its cellular subscribers in the fiercely competitive Sacramento market.

The deal, which needs approval from the Federal Communications Commission and the Justice Department, is the latest in a reshuffling of SureWest's business units as it focuses on high-speed phone, data and video networks.

A year ago it sold its phone directory business for $110 million, and last month it announced the purchase of Everest Broadband, a cable TV and high-speed Internet business in suburban Kansas City for $173 million.

SureWest said it plans to use the $69 million from its wireless sale toward paying off debt expected from the Everest Broadband acquisition.

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