*Pages 1--5 from Microsoft Word - 53937.doc* PUBLIC NOTICE Federal Communications Commission 445 12 th Street, S. W. Washington, D. C. 20554 News Media Information 202 / 418- 0500 Fax- On- Demand 202 / 418- 2830 TTY 202 / 418- 2555 Internet: http:// www. fcc. gov ftp. fcc. gov DA 05- 3274 Released: December 22, 2005 DOMESTIC SECTION 214 APPLICATION FILED FOR TRANSFER OF CONTROL OF TELSCAPE COMMUNICATIONS, INC. TO SCORPION CAPITAL PARTNERS, L. P. STREAMLINED PLEADING CYCLE ESTABLISHED WC Docket No. 05- 343 Comments Due: January 5, 2006 Reply Comments Due: January 12, 2006 On December 8, 2005, Scorpion Capital Partners, L. P. (“ Scorpion” or “Transferee”) and Telscape Communications, Inc. (“ Telscape” or “Transferor”), collectively “Applicants,” filed an application, pursuant to sections 63.03 and 63.04 of the Commission’s rules, 1 seeking approval to transfer control of Telscape to Scorpion. 2 Applicants assert that this transaction is entitled to presumptive streamlined treatment pursuant to section 63.03( b)( 2)( i) of the Commission’s rules because immediately following the transaction: (1) Applicants and their affiliates (as defined in Section 3( 1) of the Communications Act – “Affiliates”) combined will hold less than a ten percent (10%) share of the interstate, interexchange market; (2) to the extent that the Applicants or their Affiliates provide U. S. local exchange services or exchange access services, those services will be provided only in geographic areas served by a dominant local exchange carrier that is not a party to the proposed transaction and; (3) none of the Applicants nor their Affiliates is dominant with respect to any U. S. domestic telecommunications service. 3 Telscape, a corporation formed under Delaware law, is a non- dominant interexchange and competitive local exchange carrier operating in California and Nevada. Telscape provides 1 47 C. F. R §§ 63.03, 63.04; see 47 U. S. C. § 214. 2 Any action on this domestic section 214 application is without prejudice to Commission action on other related, pending applications. 3 47 C. F. R. § 63.03( b)( 2)( i). 1 2 intrastate, interstate, and international telephone service to residential customers. Telscape is wholly owned by Telscape Holdings, Inc. (“ Holdings”), a U. S. corporation, which currently holds all of Telscape’s stock. Telscape is currently indirectly controlled by TSG Capital Fund III, LP (“ TSG”), a U. S. Limited Partnership, which holds 96% of Holdings’ stock. 4 The following entities hold a ten percent or greater ownership interest in TSG: Oregon Public Employee’s Pension System, a U. S. pension fund, 15%; State Board of Administration of Florida, a U. S. pension fund, 19%; and Washington State Investment Board, a U. S. pension fund, 15% (collectively “the pension funds”). There are no other ten percent or greater owners of TSG, nor are there any other ten percent or greater owners of the pension funds. 5 Scorpion, a limited liability company formed under Delaware law, is a Small Business Investment Company licensed by the federal Small Business Administration, which focuses on middle market companies that Scorpion believes are positioned for strong future performance. Scorpion makes its investments in partnership with companies’ senior management teams in order to help ensure appropriate alignment of interest. In addition, Scorpion provides a variety of investment and financial services. Kinaro Investments, Ltd., British Virgin Islands company, has a 14% limited partner equity interest in Scorpion. Scorpion GP LLC, a U. S. limited liability company, is the sole general partner of Scorpion. Scorpion GP LLC has no actual ownership interest in Scorpion. The following individuals have a ten percent or greater controlling interest in Scorpion GP LLC as its managers: Kevin McCarthy, a U. S. citizen, 50%; and Nuno Brandolini, a U. S. citizen, 50%. Pursuant to a stock purchase agreement to be entered into in accordance with a formal letter of intent (“ LOI”) dated November 4, 2005, Scorpion will acquire, through a new investment entity that is being formed for the purposes of this proposed transaction (“ NewHoldCo”), a majority of Telscape’s issued and outstanding shares of stock. The stock will be purchased from Holdings. Under the stock purchase agreement, the purchase price will be paid in cash, as of the closing, subject to standard adjustments. Holdings will then distribute the cash payment to its shareholders. As part of the transaction, certain existing minority shareholders in Holdings will re- acquire indirect equity interest in Telscape, which they will hold through NewHoldCo. Certain new investors will acquire indirect equity interest in Telscape which they, likewise, will hold through NewHoldCo. In addition, employment agreements will be entered into between Telscape and its existing principal executive management team, Ruben Garcia, who is Telscape’s chief executive officer, and Phillip Siegel, who is Telscape’s chief financial officer. Following completion of the proposed transaction, all direct ownership interest in Telscape communications, Inc. will be held by NewHoldCo, a new, non- operating holding company. NewHoldCo will be formed as of, or before, the date of closing under the laws of the United States and will maintain its principal office at 606 E. Huntington Drive, Monrovia, 4 Supplemental Letter from John L. Clark, counsel for Applicants, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 05- 343, at 1 (filed December 20, 2005) (“ Supplemental Letter”). 5 Supplemental Letter at 2. 2 5 (1) The Commission’s duplicating contractor, Best Copy and Printing, Inc., 445 12th Street, S. W., Room CY- B402, Washington, D. C. 20554, www. bcpiweb. com; phone: (202) 488- 5300 fax: (202) 488- 5563; (2) Tracey Wilson- Parker, Competition Policy Division, Wireline Competition Bureau, 445 12th Street, S. W., Room 5- C212, Washington, D. C. 20554; email: tracey. wilson- parker@ fcc. gov; (3) Kimberly Jackson, Competition Policy Division, Wireline Competition Bureau, 445 12th Street, S. W., Room 5- C142, Washington, D. C. 20554; e- mail: kimberly. jackson@ fcc. gov; (4) Susan O’Connell, Policy Division, International Bureau, 445 12th Street, S. W., Room 7- B544, Washington, D. C. 20554; email: susan. o’connell@ fcc. gov; and (5) James Bird, Office of General Counsel, 445 12th Street, S. W., Room 8- C824, Washington, D. C. 20554; e- mail: james. bird@ fcc. gov. Filings and comments are also available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, S. W., Room CY- A257, Washington, D. C. 20554. They may also be purchased from the Commission’s duplicating contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street, S. W., Room CY-B402, Washington, D. C. 20554, telephone: (202) 488- 5300, fax: (202) 488- 5563, or via e- mail www. bcpiweb. com. For further information, please contact Tracey Wilson- Parker at (202) 418- 1394, or Kimberly Jackson at (202) 418- 7393. - FCC - 5