Suddenlink has filed a countersuit against rival FiberNet and its parent nTelos, accusing nTelos of fraud associated with statements it made to Suddenlink to grease the skids for its acquisition of FiberNet for $169 million in December.
Several weeks ago, FiberNet filed suit against Suddenlink, alleging that Suddenlink hired three former FiberNet sales employees who wrongfully used knowledge of FiberNet customers to induce those customers to switch from FiberNet to Suddenlink. FiberNet said it lost about $1 million in customer accounts.
Suddenlink, in its response to the FiberNet suit, denies any knowledge of any of the claims and then goes on to deny the applicability under law of most of the charges. Suddenlink further alleges that FiberNet’s demands for punitive damages are unconstitutional.
An element of FiberNet’s original complaint is an accusation that the three employees named in the suit misrepresented a state Public Service Commission (PSC) ruling that required FiberNet to waive early termination fees for subscribers with bundled packages.
According to Suddenlink’s countersuit, before nTelos purchased FiberNet, Suddenlink wanted assurance that nTelos would waive early termination fees for any FiberNet customers who wanted to switch providers.
Suddenlink represents that this is a common condition in the approval of any merger among communications providers and cites a precedent in the West Virginia market in which Suddenlink and nTelos/FiberNet are now competing with each other. When Frontier Communications recently purchased Verizon West Virginia, the state PSC imposed the condition that Frontier would wave early termination fees for any Verizon West Virginia customers who wanted to switch providers immediately following the acquisition.
Suddenlink states in its countersuit that it wanted assurance that nTelos/FiberNet would, like Frontier, waive early termination fees for a period following their merger. Ordinarily, that would mean asking the PSC to impose the condition.
Suddenlink states that for financial reasons, nTelos and FiberNet were in a hurry to conclude a merger, however, and to that end, nTelos and FiberNet wanted to avoid a lengthy review before the state PSC.
Suddenlink in its countersuit says that Suddenlink CEO Jerry Kent and nTelos Chairman Michael Huber discussed the issue in October and November, during the run-up to the acquisition. Suddenlink states that Huber agreed that nTelos/FiberNet would volunteer to waive early termination fees, in exchange for Suddenlink relinquishing its right to challenge the acquisition before the PSC, which would have delayed the acquisition process.
Suddenlink alleges that nTelos/FiberNet is not abiding by that agreement in a specific instance: It does not waive early termination fees for customers who have bundles that do include broadband service (e.g., a bundle of local and long-distance telephone service), which Suddenlink claims Frontier did.
Furthermore, Suddenlink alleges, nTelos/FiberNet failed to notify any customers that it was waiving early termination fees for anyone who wanted to switch services following the acquisition, also as Frontier did.
The suit says after nTelos purchased FiberNet, Kent met with Huber and complained nTelos/FiberNet was not abiding by their verbal agreement. According to Suddenlink’s suit, Huber did not deny Kent’s complaint. Instead, he told Kent that he (Huber) did not have the authority to bind nTelos/FiberNet to abide by any agreement he made. At that point, Kent threatened to sue nTelos/FiberNet.
Suddenlink is claiming that nTelos made fraudulent claims and tortious interference with the aim of keeping Suddenlink out of the regulatory process, thereby enabling a quick merger; further, by not hewing to the agreement, nTelos/FiberNet has avoided a mass exodus of dissatisfied FiberNet customers to Suddenlink.
Suddenlink is suing for compensatory damages, punitive damages and legal fees.