3. The Transaction

The transaction is a complicated financial transaction commonly associated with changes in control of telecommunications corporations. We first describe the parties to the transaction, including their current business operations, and then the terms of the transaction itself.

3.1. Parties to the Transaction

The parties to the financial transaction resulting in the change of control are CCHI, CCI, and Merger Sub II on the one side, and SureWest Communications, SureWest Telephone, SureWest Long Distance, and SureWest TeleVideo, on the other. We describe each entity briefly.

CCHI is a corporation organized under the laws of Delaware. CCHI is:

... a publicly traded company (NASDAQ: CNSL) that through its operating subsidiaries provides a wide range of telecommunications services to residential and business customers in Illinois, Texas and Pennsylvania, including: local and long-distance telephone service, high-speed broadband Internet access, standard and high-definition digital television, and digital telephone service, custom calling features, private line services, carrier access services, network capacity services over regional fiber optic networks, directory publishing. CCHI's operating subsidiaries include both incumbent and competitive local exchange carriers. As of December 31, 2010, CCHI's operating subsidiaries had 237,141 local access lines, 106,387 broadband lines, 29,236 digital television subscribers, and an estimated 81,090 CLEC access line equivalents.¹²

For the purposes of this transaction there are three entities associated with CCHI. They are:

· CCHI - the holding company described above.

· CCI - a corporation organized under the laws of Illinois. CCI is a holding company and wholly owned direct subsidiary of CCHI.

· WH Acquisition II Corp. or Merger Sub II - a corporation organized under the laws of California. This is a holding company and wholly owned direct subsidiary of CCI. This company was created for the purposes of the transaction and will assume SureWest Communications operations upon completion of the mergers.

The SureWest companies consist of:

· SureWest Communications - a corporation organized under the laws of California. SureWest Commnications "currently owns all the stock of SureWest Telephone, SureWest Long Distance, and SureWest TeleVideo and other unregulated businesses and assets."¹³ SureWest Communications is the parent holding company for all the SureWest Companies.

· SureWest Telephone - a corporation organized under the laws of California (U1015C). SureWest Telephone is an "incumbent local exchange carrier regulated by the Commission which provides local exchange service in Sacramento and Placer Counties, California."¹⁴

· SureWest Long Distance - a corporation organized under the laws of California (U5817C). SureWest Long Distance is a "non-dominant interexchange carrier regulated by the Commission which provides resold long distance services throughout California."¹⁵

· SureWest TeleVideo - a corporation organized under the laws of California (U6324C). SureWest TeleVideo is "a limited facilities-based and resale provider of interexchange and competitive local exchange carrier regulated by the Commission."¹⁶ It provides competitive local telephone service and cable television service.

3.2. Terms of the Transaction

The end result of this transfer of control transaction is that CCHI will become the ultimate parent company of the SureWest Companies.

The steps to achieving this result are complicated. First, SureWest Communications will merge into WH Acquisition I Corp., which will then cease to exist. The surviving SureWest Communications will then merge into Merger Sub II, and SureWest Communications will cease to exist. The surviving Merger Sub II will be a subsidiary of CCI, which will then be the parent holding company for the SureWest Telephone, SureWest Long Distance and SureWest TeleVideo companies, which will have the same structure as independent subsidiaries of a holding company.

In addition, the SureWest Companies will encumber assets to secure the financing arrangements of CCHI and CCI. As part of this transaction "SureWest Communications' existing debt of approximately $204 million, for which the SureWest California Utilities have already encumbered their assets, will be repaid and redeemed in full."¹⁷

The Applicants assert that this transaction "advances the public interest."¹⁸ They claim that the transaction will produce long-term benefits: The SureWest California Utilities will enjoy enhanced access to capital on account of the transaction, which will be an immediately available benefit upon closing of the transaction. The long-term benefits to customers arise from the opportunity that access to such capital affords the SureWest California Utilities to upgrade, replace and expand infrastructure and to provide advanced telecommunications services to customers. In addition, the deployment of advanced telecommunications technologies such as SHDSL (Symmetric High Speed Digital Subscriber Line) for copper-based Metro Ethernet and copper-based pair bonding would drive affordable, higher bandwidth applications deeper into the network and close the speed gap between fiber and traditional copper solutions. These advanced telecommunications services include, but are not limited to: local and long-distance service; high-speed broadband Internet access; standard and high-definition digital television (IPTV); digital telephone service (VOIP); custom calling features; private line services; carrier access services; and network capacity services over regional fiber optic network.¹⁹

In addition, the Applicants assert that the transaction will speed the introduction of certain practices that will improve the performance and quality of a customer's Internet experience and that the transaction will result in a stronger company better able to "offer new products and services and consumer choice for telecommunications and broadband services ..." and that "the quality of service ... will improve."²⁰

¹² Joint Application at 9-10.

¹³ Joint Application at 10.

¹⁴ Id.

¹⁵ Id. at 11.

¹⁶ Id. at 11.

¹⁷ Id. at 13.

¹⁸ Id. at 18.

¹⁹ Id. at 18-19.

²⁰ Id. at 19.