The phones still ring

Despite magazine speculation, CEO says Warwick Valley Telephone has no plan to sell telephone business, By Roger Gavan Warwick - When telephone service began in the Village of Warwick in April 1902, a single operator attended the Warwick Valley Telephone switchboard. In the century since then, the company has established itself as a regional communications business with more than 100 employees whose services now include telephone as well as Internet and digital TV products. “Four years ago,” noted Herb Gareiss, president and chief executive officer of WVT Communications, “we were the last telephone company in New York State to stop using live operators.” The issue of whether the company would need operators - live or recorded - at all was raised in an article appearing in the Jan. 30 edition of Business Week titled, “Will a small operator hang up its phones.” The article reported that light trading was one reason the stock of Warwick Valley Telephone (WWVY), now doing business as WVT Communications, had dropped from $25 per share in July to $17 in January. (Shares of the common stock, which are traded on the NASDAQ, have since recovered from that 52 week low and were trading this week at about $22.) The company has always paid a dividend and the return on investment over a long term, say five years or so, has been excellent. Business Week went on to report, however, that Joshua Eudowe, a spokesperson for Santa Monica Partners Asset Management, a Larchmont investment partnership that owns stock in Warwick Valley Telephone, believes the shares could be worth double the current market price. The reason, he argued, is that Warwick Valley has a 7.5-percent interest in the highly profitable Orange County Poughkeepsie Limited Partnership (OCP), a wholesale provider of wireless minutes. The partnership is 85 percent owned by Verizon Communications (Verizon of the East L.P.). Fairpoint Communications owns the remaining 7.5 percent. According to the Business Week article, Eudowe, who believes the parts are worth more than the whole, would like to see Warwick Valley Telephone sell its phone business and operate as an investment firm. However, Larry Goldstein, president of Santa Monica Partners, had recently advocated that Warwick Valley sell its interest in Orange County Poughkeepsie and give the money to the shareholders. Last fall, shareholders defeated him in his second proxy fight. “Investment partnerships like this,” said Gareiss, the WVT Communications president and CEO, “often look for opportunities to break up companies just to make a quick profit.” Gareiss explained that Warwick Valley Telephone is not always free to make spur of the moment business decisions. The company is heavily regulated by government agencies like the Public Service Commission. And, in its Orange County Poughkeepsie partnership, private contractual agreements with the other partners, which are not permitted to be disclosed, would make it difficult for Warwick Valley to sell its interest. Nevertheless, Warwick Valley Telephone has hired an outside investment firm to explore strategic alternatives. “As with any company responsible to its shareholders,” said Gareiss, “all options are on the table.” Although the company is financially sound, he admits that in the fast moving world of telecommunications, competition has been stiff and the company has had to keep on its toes to face new challenges. “That’s why we’re having a third party review our strategy for the future,” he said. Gareiss said that contrary to a “declined comment” statement in the article, he was never contacted by Business Week. However, had he been asked, he would have said that WVT Communications has no immediate plans to change the way it does business. Of course, any future decision to sell part or all of the company or even to acquire new interests would probably have little impact on subscribers. The company, under any form or even new ownership, would continue to provide full-service residential and business telecommunications. But it could signal the end of an era. The Warwick Valley Telephone Company has been serving this area for well over 100 years and there are residents who may still remember when that service was a 10-party phone line.