More Questions about Networx 

In June 2005, Joseph Lee lobbied the city to up its investment in Memphis Networx.

"We don't believe that having a $32-million stake in [Networx] and failing to get a $6-million loan guarantee should result in us losing such a strong equity position," he said, stressing the value of the Memphis utility's majority share in the public/private telecom venture.

Ah, hind site. Memphis didn't ante up and lost its majority stake in the startup company. But did we also lose access to the exit strategies available to both public and private parties under Networx state-approved operating agreement? Is it possible that if a private investment firm from Colorado can acquire the entire property for $11 million, that the city could have taken sole ownership for much less? Do we not have the ability to control our interest and enter a partnership with the Boulder-based CII?

In his testimony before the State Regulatory Authority prior to Networx licensing, Larry Thompson, former COO of MLGW, was called on to explain the agreements protecting both the private party and the public interest. Citing specific language in the amended operating agreement Williams stated:

"I believe it is customary for any private investor to seek some type of exit strategy from a new business venture. ... Upon the occurrence of certain conditions as specified in the amended and restated operating agreement ... Memphis Broadband has the option to sell, and MLGW has the obligation to purchase Memphis Broadband's interest in Memphis Networx. These put options give MLGW the ability to buy out Memphis Broadband's interest in Memphis Networx at a price that is based upon a formula set forth in the agreement. MLGW has the discretion to buy the entire business and run it alone; buy the entire business and seek another partner; or join with Memphis Broadband in selling the entire business. Thus MLGW has the ability to control its own destiny.” (emphasis ours)

Maybe the operating agreement has been changed since the state granted Networx its license in 2001. Requests for information about changes to the agreement regarding MLGW's exit options are in the works.

--Chris Davis

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