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Citizens Exits Distribution, says 'Hello' to Telecom

Citizens Exits Distribution, says 'Hello' to Telecom

Seeking increased growth opportunities, Citizens Utilities of Stamford, CT, is getting out of the business of distributing gas, electricity and water in order to invest in telecommunications. The company is divesting its Public Services distribution businesses, as well as its wastewater treatment business. As previously announced, Citizens plans to fund $2.3 billion of telephone access line acquisitions with sale proceeds.

The telecommunications acquisitions, definitive agreements for which were signed in May and June, will make Citizens among the largest telecommunications companies in the nation, with about 1.7 million access lines in 21 states. The acquisitions are expected to close in 2000.

"We believe that the significant recent demand for distribution properties in each of our Public Services business sectors, coupled with the high quality of Citizens' properties, creates an outstanding opportunity to maximize value for our security holders," said Robert J. DeSantis, chief financial officer.

"Our strategy is to realize the hidden value of our Public Services properties and use the proceeds to significantly expand our telecommunications business. We expect to sell assets for double-digit multiples of cash flow and use the proceeds to fund assets that we have purchased for single-digit multiples of cash flow-in a business that grows twice as fast as those businesses we are divesting.

"This acquisition and divestiture process should add significant incremental EBITDA with no increase in long-term debt. These transactions will clearly establish Citizens as a pure telecommunications company, focusing its expansion on a business sector that commands higher public and private market values."

Citizens Public Services serves about 900,000 customers in 10 states. Combined Public Services revenues were about $610 million in 1998. A company spokeswoman did not return a call for further comment.

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