Application Form [pdf]

This document pretains to ITC-T/C-INTR2018-05435 for Transfer of Control on a International Telecommunications filing.

IBFS_ITCTCINTR201805435_1521095

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 ) In the Matter of the Joint Application of ) ) SMART CITY HOLDINGS, LLC, ) WC Docket No. 18-_______ Transferor, ) ) ITC-T/C-2018___________ and ) ) SAPPHIRE INTERMEDIATE HOLDINGS, LLC ) Transferee, ) ) For Grant of Authority Pursuant to Section 214 ) of the Communications Act of 1934, as Amended, and ) Section 63.04 and 63.24 of the Commission’s Rules ) to Complete a Transfer of Control of ) Smart City Telecommunications LLC, Smart City ) Solutions, LLC, Smart City Networks, Limited ) Partnership, Smart City of Washington D.C., LLC and ) Convention Communications Provisioners, Inc. ) _____________________________________________) JOINT DOMESTIC AND INTERNATIONAL TRANSFER OF CONTROL APPLICATION Smart City Holdings, LLC (“Smart City” or “Transferor”) and Sapphire Intermediate Holdings, LLC (“Sapphire Intermediate Holdings” or “Transferee”) (and jointly, the “Applicants”), pursuant to Section 214 of the Communications Act of 1934, as amended (the “Act”), 47 U.S.C. § 214, and Sections 63.04 and 63.24 of the Commission’s Rules, 47 C.F.R. §§ 63.04, 63.24(e), respectfully request authority for Smart City to transfer indirect control of Smart City Telecommunications LLC (“SCT”); Smart City Solutions, LLC (“SCS”); Smart City Networks, Limited Partnership (“SCN”); Smart City of Washington D.C., LLC (“SDC”); and Convention Communications Provisioners, Inc. (“CCP”) (collectively “Licensees”) to

Transferee. Pursuant to Section 63.04(b) of the Commission’s Rules, 47 C.F.R. § 63.04(b), the Applicants are filing this combined domestic and international application for the proposed transfer of control of the Licensees.1 The Applicants provide below the information required by Sections 63.24(e)(2) and 63.04(a)(6) through (a)(12) of the Commission’s Rules, 47 C.F.R. §§ 63.24(e)(2), 63.04(a)(6-12). The proposed transaction also contemplates a pro forma reorganization for one of the Licensees as more fully described below. Request for Streamlined Processing The Applicants respectfully request streamlined treatment for this Application, pursuant to Sections 63.03 and 63.12 of the Commission’s Rules, 47 C.F.R. §§ 63.03, 63.12. SCT, one of the Licensees, serves as an incumbent local exchange carrier (“ILEC”) in Florida, and SCS and SCN are competitive local exchange carriers in Florida. Buyer does not provide telecommunications services, but as described in Section I.B. below, certain of Buyer’s upstream owners indirectly own and/or control other telecommunications providers. This Application is eligible for streamlined processing pursuant to Section 63.03 because (i) the transaction will not result in Transferee and its affiliates, including Licensees, holding a ten (10) percent share of the interstate interexchange market; (ii) the transaction will not result in Transferee and its affiliates, including Licensees, serving two (2) percent of nationwide U.S. subscriber lines; and (iii) Transferee does not provide telecommunications services and its affiliates do not provide telecommunications services in Florida that overlap with or are adjacent 1 Applicants are concurrently filing an application for Commission consent to transfer control of a wireless license (Call Sign WQLY883) held by Smart City Networks, Limited Partnership (FRN 0019854603) to Transferee. -2-

to SCT’s ILEC service areas in Florida, as set forth more fully in Section I.B.2 See 47 C.F.R. § 63.03(b)(2). Alternatively, for the reasons set forth above, Applicants request streamlined treatment on a case-by-case approach, and for the Commission to process this Application using similar timeframes for comments and approvals as would be used for an Application granted streamlined processing.3 The Application also qualifies for streamlined processing pursuant to Section 63.12 because none of the Applicants is a foreign carrier, or is affiliated with any foreign carrier, and thus, none of the scenarios outlined in Section 63.12(c) of the Commission’s Rules applies.4 In support of this Application, Applicants provide the following information: I. DESCRIPTION OF THE APPLICANTS A. Smart City Holdings, LLC Smart City is a limited liability company organized under the laws of Delaware. The principal place of business for Smart City and Licensees is at 3100 Bonnet Creek Road, Lake Buena Vista, FL 32830-2555. Smart City is the sole member of several subsidiaries including Smart City Finance, LLC, SCN-GP, LLC, and SCN-LP LLC, which in turn hold the membership interests in or stock of the Licensees (individually, “Company”, collectively, “Companies”). 2 As described in more detail below, Momentum Telecom, Inc. is authorized to provide Alternative Local Exchange Telecommunications Services in Florida and Conterra Ultra Broad- band, LLC is authorized to provide Alternative Access Vendor Services in Florida, but neither company currently provides telecommunications services in areas that overlap with or are adja- cent to SCT’s ILEC service areas in Florida. 3 See Implementation of Further Streamlining Measures for Domestic 214 Authorizations, Report and Order, 17 FCC Rcd. 5517, ¶ 34 (2002). 4 47 C.F.R. § 63.12(c) (excluding from streamlined processing applications where the ap- plicant is affiliated with a foreign carrier unless certain exceptions apply or where the applicant has an affiliation with a dominant U.S. carrier whose international switched or private line ser- vices the applicant seeks authority to resell). -3-

SCT is a limited liability company organized under the laws of Delaware. SCT provides local exchange, interexchange and high-speed data services to residential and business customers in Celebration, Lake Buena Vista, Little Lake Bryan, and Bay Lake, Florida. SCT provides domestic interstate services pursuant to blanket domestic Section 214 authority and holds an international Section 214 authorization to provide international resale services pursuant to File No. ITC-214-19940830-00265, which was originally granted to Vista-United Telecommunications.5 SCS is a limited liability company organized under the laws of Florida. SCS provides competitive domestic interstate services pursuant to blanket domestic Section 214 authority and provides intrastate services in Florida. SCN is a limited partnership organized under the laws of Florida. SCN, along with its subsidiaries SDC and CCP, is the leading communications provider for convention centers and meeting facilities. It manages the technology services for more than 3,000 events annually, including Fortune 500 company events, major tradeshows, and national political party conventions. SCN provides competitive domestic interstate services pursuant to blanket domestic Section 214 authority. It is also authorized to provide intrastate telecommunications services in Florida, North Carolina and Nevada and operates as an interconnected Voice Over Internet Protocol (“VoIP”) provider in the following states: Arizona, California, Florida, Kentucky, Minnesota, Missouri, Nevada, North Carolina, Ohio, Texas, Virginia and Washington. 5 Pursuant to a transfer of control application, the FCC granted a transfer from Vista-United Telecommunications to SCT on November 29, 2000. See File No. ITC-T/C-20001025-00656. -4-

SDC is a limited liability company organized under the laws of the District of Columbia. SDC provides competitive domestic interstate services pursuant to blanket domestic Section 214 authority and operates in Washington, D.C. CCP is a corporation organized under the laws of Washington. CCP provides competitive domestic interstate services pursuant to blanket domestic Section 214 authority and operates in the state of Washington. B. Transferee Sapphire Intermediate Holdings, LLC, the Transferee, is a Delaware limited liability company formed on August 16, 2018 for the purpose of consummating this transaction and ultimately acquiring indirect control of the Licensees. Transferee is the sole stockholder (with 100% equity and voting interest) of two subsidiaries —Sapphire Telecom, Inc. and Sapphire Convention, Inc., each a Delaware corporation—which upon closing will hold the interests of Smart City Finance, LLC, SCN-GP, LLC, and SCN-LP LLC, which in turn hold the membership interests in the Licensees. Sapphire Acquisition Holdings, LLC (“Sapphire Parent”) is a Delaware limited liability company formed on August 16, 2018 to hold the collective investments made by Smart City’s (and Licensees’) management and investment funds (“Funds”) managed by the professionals at Court Square Capital Partners (“Court Square”), a leading private equity firm. CSC Sapphire Holdings, L.P. (“CSC Sapphire Aggregator”) is a Delaware limited partnership and holding company formed by Court Square on August 20, 2018 to hold the Funds’ aggregate equity investments in Sapphire Parent. At closing, the Funds will collectively own 100% of the limited -5-

partnership interests in CSC Sapphire Aggregator and will indirectly own between 93% and 95.1% of the equity of the Licensees (through Sapphire Parent and Transferee).6 Each Fund and CSC Sapphire Aggregator are controlled and managed by their sole general partner, Court Square Capital GP III, LLC (“GP”).7 The Fund making the largest investment in CSC Sapphire Aggregator is Court Square Capital Partners III, L.P., a Delaware limited partnership (“CSC Fund III”). CSC Fund III will hold 96.82% of the membership interests in CSC Sapphire Aggregator, and in turn, will indirectly hold between 90.04% and 92% of the equity in Sapphire Parent and, thereby, the Licensees.8 Each Fund is owned by numerous “insulated” limited partners who include pension funds, high net worth individuals, and other institutional investors. The Funds do not have any uninsulated limited partners within the meaning of Section 1.992(b)(2)(ii)(A) of the Commission’s rules, 47 C.F.R. § 1.992(b)(2)(ii)(A). No limited partner in any Fund (including CSC Fund III) will hold a 10% or greater direct or indirect interest in CSC Sapphire Aggregator, Sapphire Parent, Sapphire Intermediate 6 Members of Transferor’s (and Licensees’) management are expected to collectively acquire, as personal investments or through their respective family investment companies or family trusts, between 4.9% and 7% of the aggregate ownership interests in Sapphire Parent at closing, however, the exact amount of management’s investment will not be known until closing. In no event, however, will any individual management investor have a ten (10) percent or greater aggregate direct and/or indirect interest in the Transferee, Sapphire Parent or any of the Licensees. 7 All of the Court Square entities and Funds identified in this Application have the same mailing address and contact information provided for Sapphire Intermediate Holdings in Section IV(a). 8 This figure assumes members of Transferor’s (and Licensees’) management will acquire 4.9% of the ownership interests in Sapphire Parent at closing. As noted, in footnote 6, management may acquire additional interests in Sapphire Parent thereby diluting CSC Sapphire Aggregator’s interests in Sapphire Parent and thereby Transferee and Licensees. -6-

Holdings (Transferee), or the Licensees. Except for CSC Fund III, CSC Sapphire Aggregator and Sapphire Parent, no other investor (through its ownership in any of the Funds, CSC Sapphire Aggregator, Sapphire Parent or in combination with any other interest) will individually or in the aggregate hold greater than 10% direct or indirect equity or voting interest in Sapphire Intermediate Holdings (Transferee).9 As discussed above, CSC Sapphire Aggregator, CSC Fund III and each of the other Funds are managed and controlled by the GP.10 No member of the GP (through its ownership in the GP or in combination with any other interest) will hold a 10% or greater direct or indirect interest in CSC Sapphire Aggregator, Sapphire Parent, Sapphire Intermediate Holdings. Pursuant to the terms of an investment management agreement, certain of the Funds’ investment decisions have been delegated to an investment committee comprising the board members of the GP. The GP is well-qualified to obtain control of the Licensees. Court Square is one of the most experienced private equity firms in the industry and its management team has extensive experience investing in the telecommunications industry. 9 As described above, Transferee, will hold 100% equity and voting interests in Sapphire Telecom, Inc. and Sapphire Convention, Inc.; and Sapphire Telecom, Inc. and Sapphire Convention, Inc. will hold 100% equity and voting interest in Smart City Finance, LLC, SCN GP LLC, and SCN LP LLC, which in turn hold the membership interests in the Licensees. Dynamic Concepts, Inc. currently holds, and upon closing will continue to hold, a 10 percent stake in one Licensee, SDC. 10 The GP is owned by the investment professionals at Court Square, each of whom is a United States citizen. The GP is managed and controlled by a Board of Managers (“Board”) composed of the following members of the GP, all of whom are U.S. citizens: William Comfort, David Thomas, Michael Delaney, Joseph Silvestri, Ian Highet, John Weber, Christopher D. Bloise, Thomas McWilliams and John Civantos, each of whom was appointed in the limited liability company agreement of the GP and each of whom will continue to serve on the Board so long as they remain investment professionals at Court Square. Decisions of the Board, including designation of replacement members, are made by the approval of a majority of the Board mem- bers. -7-

Court Square currently controls Conterra Ultra Broadband Holdings, Inc. (“Conterra Holdings”) and Conterra Holdings’ regulated subsidiaries Broadplex LLC (“Broadplex”), Conterra Ultra Broadband, LLC (“Conterra”), Detel Wireless, LLC (“Detel”), Network USA, LLC (“Network USA”), Sun America Communications, LLC (“Sun America”) and Tim Ron Enterprises, LLC d/b/a Network Communications Telecom (“NCT”).  Broadplex provides local exchange and interexchange services on a private contract basis to customers located in North Carolina and South Carolina.  Conterra provides backhaul and fronthaul transport for wireless carriers and access and broadband networks for K-12, healthcare, and government entities in the following states: Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Illinois, Iowa, Kansas, Mississippi, Montana, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and Washington. Conterra holds a domestic Section 214 authorization as well as wireless licenses issued by the Commission. o Conterra owns 100% of Conterra Wireless Broadband LLC, which provides services in California.  Detel provides competitive local exchange and interexchange telecommunications services in Mississippi and Louisiana. Detel also holds a domestic Section 214 authorization as well as wireless licenses issued by the Commission.  Network USA and Sun America provide access and transport services to enterprise customers in Arkansas, Louisiana, Mississippi, and Texas. -8-

 NCT provides competitive telecommunications services primarily to small, mid- sized, and enterprise customers in northeastern Texas and Louisiana. Court Square also recently acquired MBS Holdings, Inc. (“MBS Holdings”) and MBS Holdings’ subsidiaries, Alteva of Warwick, LLC (“Alteva of Warwick”) and Momentum Telecom, Inc. (“Momentum”).  Alteva of Warwick operates as the ILEC in certain towns in New Jersey and New York. Alteva of Warwick also operates as a competitive local exchange carrier (“CLEC”) in portions of both states. Alteva of Warwick is also licensed to provide domestic interstate and intrastate interexchange and international telecommunications services and holds international Section 214 authority. See FCC File No. ITC-214-1993102200192.  Momentum is a leading provider of wholesale hosted VoIP and unified communications services and serves as the wholesale “CLEC partner” and broadband system manager to Tier II and Tier III cable providers. Momentum is authorized to operate as an IXC or CLEC in the following states: Alabama, California, Florida, Georgia, Kentucky, Louisiana, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, and the U.S. Virgin Islands. Momentum also holds international Section 214 authority. See FCC File No. ITC-214-20081400480. Court Square also controls Encompass Digital Media Group (“Encompass”), including its regulated subsidiary BFI Licenses, LLC (“BFI”). BFI provides a variety of digital media services and holds wireless authorizations, satellite earth station authorizations and an international Section 214 authorization. See FCC File No. ITC-214-19940411-00382. Except -9-

for the interests in Conterra Holdings, MBS Holdings, and Encompass (and their respective subsidiaries) described above, Court Square, its affiliates (including CSC Sapphire Aggregator, Sapphire Parent, and Sapphire Intermediate Holdings), and the members of the Board of the GP do not currently offer any regulated telecommunications services and are not affiliated with any other telecommunications carrier.11 II. DESCRIPTION OF THE TRANSACTION (ANSWER TO QUESTION 13) Pursuant to the terms of a Purchase Agreement (“Agreement”) dated August 22, 2018, Smart City will transfer all of its limited liability company membership interests in each of Smart City Finance, LLC; SCN-GP, LLC; SCN-LP LLC; and AppBurst LLC to Transferee. After the acquisition, Transferee will indirectly own and control the Licensees. For the Commission’s convenience, pre- and post-transaction corporate organizational charts are provided as Exhibit A. As part of the proposed transaction, two pro forma transactions are planned to be completed before and contemporaneously with closing. First, prior to closing, the 90% equity interest in SCS currently held by Smart City Finance, LLC will be transferred to SCN or a subsidiary thereof (or extinguished), and then certain SCS assets, excluding assets related to, and customer contracts for, its convention center business in Florida, will be transferred to a newly 11 Court Square previously owned a controlling interest in Fibertech Networks, LLC (a broad- band provider that operates one of the largest independently owned metro-area fiber optic foot- prints in the United States), co-owned a controlling interest in NTELOS (a diversified, regional communications provider offering wireless and wireline services in Virginia and West Virginia) and held a minority interest in ILEC provider Valor Telecommunications. Court Square no longer holds any interest in these companies. - 10 -

formed subsidiary Smart City Solutions II, LLC (“SCS II”).12 Second, contemporaneously with closing, Transferee will insert two newly formed sister holding companies (Sapphire Telecom, Inc. and Sapphire Convention, Inc.) into the corporate ownership structure. At closing, Transferee will directly hold 100% equity and voting interests in Sapphire Telecom, Inc. and Sapphire Convention, Inc. Sapphire Telecom, Inc. will directly hold 100% of the equity and voting interest in Smart City Finance, LLC and indirectly hold 100% equity and voting interest SCT and SCS II. Sapphire Convention, Inc. will hold 100% equity and voting interest in SCN- GP, LLC, and SCN-LP LLC, which in turn hold the membership interests in SCN and indirectly hold the membership interests in SCS, SDC and CCP. These pro forma transactions are being conducted to streamline operations of Smart City into separate telecom and convention business segments and are expected to be completed in two steps with one occurring prior to the transfer of control to Transferee and the other occurring contemporaneously with the transfer of control to Transferee. After consummation of the transfer of control of the Licensees to Transferee, the Licensees will continue to exist and operate under the same names, providing service pursuant to then-existing rates, terms and conditions for the near term. Any future changes to the rates, terms, and conditions of service will be undertaken pursuant to customers’ contracts, tariffs and applicable law. Other than the pro forma transactions described above, no carrier changes will result from this transaction and no customer service or billing contact information will change as a result of this transaction. 12 Upon completion of this pro forma transaction, SCS II will begin providing telecommunications and will hold a domestic section 214 authorization. After closing, SCS II is expected to change its name to Smart City Solutions, LLC, and the former Smart City Solutions, LLC is expected to change its name to Smart City Networks of Orange County, LLC. - 11 -

III. PUBLIC INTEREST STATEMENT Applicants respectfully submit that the transaction described herein will serve the public interest. Applicants expect that the proposed acquisition will enable the Licensees to continue to offer innovative products and to further strengthen their marketplace positions to the benefit of consumers and the national telecommunications marketplace. The Licensees will also enjoy access to financial and managerial resources of Transferee. Further, the transaction will be conducted in a manner that will be virtually seamless to customers of the Licensees. The transfer of control of the Licensees will not result in a change of carrier for end user customers. Following consummation of the proposed transaction, the Licensees will continue to provide high-quality communications services to their customers without interruption and without immediate changes in tariffs, rates, terms or conditions. The Applicants intend that the Licensees’ existing management team and personnel will remain in place, ensuring that their managerial, technical and operational standards will be maintained. Other than the pro forma transactions described above, the only change resulting from the transaction will be that the Licensees will ultimately be owned by Transferee. Following closing, the Licensees will enjoy access to the financial resources of Transferee, which is financially well- qualified to become the new ultimate owner of the Licensees. The transaction also poses no threat to competition in particular states, the national U.S. market, or abroad. Transferee is a holding company and neither it nor its affiliates provide telecommunications services in Florida that overlap with or are adjacent to SCT’s ILEC service areas in Florida. Thus, there will be no concentration of resources or elimination of competitors. The communications market sectors in Florida will remain highly competitive. - 12 -

Given the increasingly competitive nature of the interstate and international telecommunications markets, Applicants are seeking to complete the proposed transaction as soon as possible in order to ensure that Applicants can rapidly obtain the benefits of the proposed transaction. Accordingly, Applicants respectfully request that the Commission process, consider and approve this Application as expeditiously as possible. IV. INFORMATION REQUIRED BY SECTION 63.24(e) Pursuant to Section 63.24(e)(2) of the Commission’s Rules, the Applicants submit the following information requested in Section 63.18(a) through (d), and (h) through (p) for both Transferor and Transferee. (a) Name, address and telephone number of each Applicant: Transferor: Smart City Holdings, LLC FRN: 0024681223 P.O. Box 22555 3100 Bonnet Creek Road Lake Buena Vista, FL 328330-2555 Tel: 407-827-2000 Licensees: Smart City Telecommunications LLC FRN: 0004381505 Smart City Solutions, LLC FRN: 0008209074 Smart City Networks, Limited Partnership FRN: 0007805401 Smart City of Washington D.C., LLC FRN: 0025414327 Convention Communications Provisioners, Inc. FRN: 0025414236 P.O. Box 22555 3100 Bonnet Creek Road Lake Buena Vista, FL 32830-2555 Tel: 407-828-6600 Transferee: Sapphire Intermediate Holdings, LLC FRN: 0027818798 c/o Court Square Capital Partners 55 East 52nd Street, 34th Floor - 13 -


Document Created: 2019-04-05 00:59:11
Document Modified: 2019-04-05 00:59:11
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