Farmers Mutual Telephone Company and Federated Telephone are both cooperatives in rural Minnesota. Farmers Mutual serves an estimated 1,000 patrons, and Federated an estimated 5,000. Both are working on FTTH for their patrons. Kevin Beyer serves as General Manager for both.
Tomorrow they are asking their members to consider a merger. Both companies are doing well financially but apparently could save $200,000 a year by consolidating. It seems that the merger is a strategy to bolster strength for potential changes in the industry.
The West Central Tribune reports…
The biggest challenge is the anticipated cuts to federal subsidies for rural telephone service. Discussions in Washington, D.C., focus on reductions of anywhere from 30 to 60 percent. That translates to a 15 to 40 percent loss in revenues to the two cooperatives, according to Beyer.
The two rural cooperatives also face growing competitive challenges from large cellular telephone service providers. Cell phone usage represents lost billing minutes for the cooperatives. Beyer said some of the large cellular providers refuse to pay an interconnection fee to the rural cooperatives; those that do only allocate one-fourth of what an interconnection fee on a land line would be.
The merger would also mean that the new cooperative can offer cable television service to patrons now served by Farmers Mutual. Currently, Farmers Mutual has been unable to find a legal avenue to allow it to provide this service. Federated has the right and offers the service to its patrons.