PROVO — The Provo City Council may dip into its energy-department reserves to restructure the payments for the iProvo fiber-optic network.
Broadweave Networks, which bought the troubled cable television, Internet and telephone service from the city more than a year ago, is merging with another telecommunications company, Veracity Communications. The marriage should strengthen the cash flow of Broadweave as the two companies combine resources, while giving Veracity more customers.
Broadweave has 15,000 residential customers in Provo, while Veracity has 5,000 mostly business customers from Logan to St. George and across the state line to Mesquite, Nev.
But to make the merger work, Broadweave Chief Executive Officer Dave Moon asked the City Council last week to restructure its payments from $277,000 a month to $195,000 monthly for 18 months starting in September.
However, the bond holder must still be paid, so with Mayor Lewis K. Billings' urging, the City Council is considering taking $82,000 a month from its energy-department reserves to make up the difference. The council is scheduled to make its decision Sept. 1.
After 18 months, the payments from the new company, Veracity Networks, would return to $277,000 a month for two years before rising another $25,000 a month for seven years. The payments then would return to $277,000 month until the bond is paid.
Provo's energy-department reserves are sitting in a state fund pool earning 1 percent interest. If they are used to help the merger, they will earn 5.16 percent interest, Billings said.
Reducing the payments will allow more growth, Moon said.
Broadweave has been struggling to grow the company while making the monthly payments almost since it bought the fiber-optic service, dipping into its $6 million surety fund. Reducing the payments would give the merger some breathing room to grow, Moon said.
While iProvo's focus is on residential customers, Veracity's is on commercial business, said Drew Peterson, Veracity's chief executive officer. Unlike Broadweave, Veracity has strong cash flow. Both will be 50 percent owners.
Peterson will be the CEO of the blended company, and Moon will be chairman of the board. The merger's financial details were not released.
Designed as a seamless transition, the only change customers may see is a new name on their bills, Peterson said.
e-mail: rodger@desnews.com