Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 8-K

 


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 10, 2008

 


PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED

(Exact name of registrant as specified in its charter)

 


 

Delaware   0-29092   54-1708481
(State or other jurisdiction of incorporation)   (Commission File No.)   (IRS Employer Identification No.)

7901 Jones Branch Drive, McLean, VA 22102

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (703) 902-2800

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-(c))

 



Item 2.02. Results of Operations and Financial Condition

 

Item 8.01. Other Events

PRIMUS Telecommunications Group, Incorporated (OTCBB: PRTL), an integrated communications services provider, today announced that the Australian Competition and Consumer Commission (“ACCC”) issued two separate Final Determinations (“Final Determinations” or “FDs”) concerning access disputes between Primus Australia (“Primus”), an indirectly wholly-owned subsidiary, and Telstra Corporation for unconditioned local loop services (“ULLS”) and line sharing services (“LSS”). These services are key components of high speed broadband services offered by Primus.

The Final Determination issued by ACCC for ULLS services for Band 2 (metropolitan areas where most Primus customers reside) mandated a monthly charge of Aus$14.30, as compared to Telstra’s proposed charge of Aus$30.00 per month. The Final Determination issued by ACCC for LSS services mandated a monthly charge of Aus$2.50, as compared to Telstra’s proposed charge of Aus$9.00 per month.

The FDs take formal effect on January 10, 2008. The FD pricing directives are to be retroactively applied to services procured by Primus from Telstra from February 3, 2006 for ULLS and from October 9, 2006 for LSS. As a result, Primus expects to receive refunds from Telstra of previous over-payments for the ULLS and LSS services in the range of Aus$7.0 million to Aus$7.5 million plus interest of approximately Aus$0.7 million. At current customer levels, Primus’s recurring costs would be reduced by approximately Aus$3.0 million per year as a result of the FDs. The effectiveness of the ULLS determination expires on June 30, 2008, and the LSS determination expires on July 31, 2009. Although Telstra cannot directly appeal the Final Determinations, it may seek judicial review of the ACCC’s decisions. With respect to the ULLS pricing, it is expected that ACCC will publish indicative prices in early 2008 to provide a basis for pricing beyond June 30, 2008. Absent changed circumstances, it is expected that such “indicative prices” will reflect the ULLS FD pricing, but there can be no assurances of that outcome.

Statements in this Current Report on Form 8-K concerning refund amounts, recurring costs, future indicative pricing and competitive effects related to the FDs and our Australian operations and strategies constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on current expectations, and are not strictly historical statements. Factors and risks that could cause actual results or circumstances to differ materially from those set forth or contemplated in forward-looking statements include, without limitation: any judicial review of the ACCC’s FD decision, or certain risks and uncertainties, including those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Short and Long-Term Liquidity Considerations and Risks”; and “-Special Note Regarding Forward-Looking Statements” contained in our annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission.

 

Item 9.01. Exhibits

 

Exhibit No.   

Description

99.1    Press release dated January 9, 2008.
99.2    Final Determination under Section 152CP of the Trade Practices Act 1974 of the ACCESS DISPUTE BETWEEN PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER) AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER) regarding UNCONDITIONED LOCAL LOOP SERVICE (ULLS) as Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 6 March 2006.
99.3    Final Determination under section 152CP of the Trade Practices Act 1974 of the ACCESS DISPUTE BETWEEN PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER) AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER) regarding LINE SHARING SERVICE (LSS) as Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 24 January 2007.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   

PRIMUS TELECOMMUNICATIONS GROUP,

INCORPORATED

Dated: January 10, 2008     By:   /s/ THOMAS R. KLOSTER
      Name: Thomas R. Kloster
      Title:   Chief Financial Officer


INDEX TO EXHIBITS

 

Exhibit No.   

Description

99.1    Press release dated January 9, 2008.
99.2    Final Determination under Section 152CP of the Trade Practices Act 1974 of the ACCESS DISPUTE BETWEEN PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER) AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER) regarding UNCONDITIONED LOCAL LOOP SERVICE (ULLS) as Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 6 March 2006.
99.3    Final Determination under section 152CP of the Trade Practices Act 1974 of the ACCESS DISPUTE BETWEEN PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER) AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER) regarding LINE SHARING SERVICE (LSS) as Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 24 January 2007.
Exhibit 99.1

Exhibit 99.1

LOGO

PRIMUS TELECOMMUNICATIONS ANNOUNCES FAVORABLE

REGULATORY DETERMINATIONS IN AUSTRALIA

McLEAN, VA – (MARKET WIRE) – January 9, 2008 — PRIMUS Telecommunications Group, Incorporated (OTCBB: PRTL), an integrated communications services provider, today announced that the Australian Competition and Consumer Commission (“ACCC”) issued two separate Final Determinations (“Final Determinations” or “FDs”) concerning access disputes between Primus Australia (“Primus”), an indirectly wholly-owned subsidiary, and Telstra Corporation for unconditioned local loop services (“ULLS”) and line sharing services (“LSS”). These services are key components of high speed broadband services offered by Primus.

The Final Determination issued by ACCC for ULLS services for Band 2 (metropolitan areas where most Primus customers reside) mandated a monthly charge of Aus$14.30, as compared to Telstra’s proposed charge of Aus$30.00 per month. The Final Determination issued by ACCC for LSS services mandated a monthly charge of Aus$2.50, as compared to Telstra’s proposed charge of Aus$9.00 per month.

“ACCC’s issuance of the FDs on these fundamental access disputes—despite enormous opposition from Telstra—are major pro-consumer decisions,” stated Ravi Bhatia, Managing Director of Primus Australia. “As demonstrated by these decisions, had Telstra been unfettered in imposing its wholly arbitrary pricing of declared services, Primus would have been subjected to price increases of between 110% and 260% above the levels that the ACCC ultimately mandated through the FDs. Thus, mandated competitive wholesale pricing is critical to Primus’s ability to continue to offer Australian consumers a choice of outstanding high speed broadband services at attractive and affordable prices. Moreover, the FDs also allow us to make investment decisions to expand our broadband service portfolio and coverage and offer higher speed broadband services.”

The FDs take formal effect on January 10, 2008. The FD pricing directives are to be retroactively applied to services procured by Primus from Telstra from February 3, 2006 for ULLS and from October 9, 2006 for LSS. As a result, Primus expects to receive refunds from Telstra of previous over-payments for the ULLS and LSS services in the range of Aus$7.0 million to Aus$7.5 million plus interest of approximately Aus$0.7 million. At current customer levels, Primus’s recurring costs would be reduced by approximately Aus$3.0 million per year as a result of the FDs. The effectiveness of the ULLS determination expires on June 30, 2008, and the LSS determination expires on July 31, 2009. Although Telstra cannot directly appeal the Final Determinations, it may seek judicial review of the ACCC’s decisions. With respect to the ULLS pricing, it is


expected that ACCC will publish indicative prices in early 2008 to provide a basis for pricing beyond June 30, 2008. Absent changed circumstances, it is expected that such “indicative prices” will reflect the ULLS FD pricing, but there can be no assurances of that outcome.

* * *

PRIMUS Telecommunications Group, Incorporated (OTCBB: PRTL) is an integrated communications services provider offering international and domestic voice, voice-over-Internet protocol (VOIP), Internet, wireless, data and hosting services to business and residential retail customers and other carriers located primarily in the United States, Canada, Australia, the United Kingdom and western Europe. PRIMUS provides services over its global network of owned and leased transmission facilities, including approximately 350 points-of-presence (POPs) throughout the world, ownership interests in undersea fiber optic cable systems, 15 carrier-grade international gateway and domestic switches, and a variety of operating relationships that allow it to deliver traffic worldwide. Founded in 1994, PRIMUS is based in McLean, Virginia.

* * *

Statements in this press release concerning refund amounts, recurring costs, future indicative pricing and competitive effects related to the FDs and our Australian operations and strategies constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on current expectations, and are not strictly historical statements. Factors and risks that could cause actual results or circumstances to differ materially from those set forth or contemplated in forward-looking statements include, without limitation: any judicial review of the ACCC’s FD decision, or certain risks and uncertainties, including those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Short and Long-Term Liquidity Considerations and Risks”; and “-Special Note Regarding Forward-Looking Statements” contained in our annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission.

For more information:

John DePodesta

Executive Vice President

PRIMUS Telecommunications Group, Incorporated

703-748-8050

ir@primustel.com

Exhibit 99.2

Exhibit 99.2

ACCESS DISPUTE BETWEEN

PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER)

AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER)

UNCONDITIONED LOCAL LOOP SERVICE (ULLS)

Access Dispute Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 6 March 2006

Final Determination under Section 152CP of the Trade Practices Act 1974

Background

 

1. On 6 March 2006, the Australian Competition and Consumer Commission (the ACCC) received a written notification (the notification) from Primus Telecommunications Pty Ltd (Primus) of an access dispute relating to the supply by Telstra Corporation Limited (Telstra) of the Unconditioned Local Loop Service (ULLS). Primus’ notification was provided to the ACCC pursuant to subsection 152CM(1) of the Trade Practices Act 1974 (the TPA).

 

2. The ULLS is an access service involving the use of unconditioned cable, primarily copper pairs, between end-users and a telephone exchange where the unconditioned cable terminates. The ULLS is used by access seekers in conjunction with their own infrastructure in the exchange to provide services, including traditional voice services and high speed internet and data services, to end-users.

 

3. After holding a public inquiry, the ACCC declared the ULLS, pursuant to subsection 152AL(3) of the TPA, in August 1999. A copy of the declaration was published in the Commonwealth of Australia Gazette GN32 on 11 August 1999. After holding a further public inquiry, the ACCC renewed the declaration of the ULLS, pursuant to subsection 152AL(3) of the TPA, to apply from 1 August 2006 to 31 July 2009. A copy of the declaration was published in the Commonwealth of Australia Gazette GN31 on 9 August 2006.

 

4. The ACCC has formed the view that, with respect to the notification, the requirements of subsection 152CM(1) of the TPA are satisfied. That is:

 

   

Telstra is a carrier;

 

   

Telstra supplies the declared ULLS;

 

   

Telstra has an obligation under subsection 152AR(3) of the TPA to supply the ULLS to Primus; and

 

   

Primus is unable to agree with Telstra about terms and conditions of access to the ULLS, including the charges and other terms and conditions that are the subject of this final determination.

 

5. On 4 May 2006, the ACCC made an interim determination in this matter. On 31 August 2006, the ACCC revoked the first interim determination, and made a further interim determination which was specified to expire on 4 May 2007.

 

6. On 3 May 2007, the ACCC extended the period of operation of this further interim determination.

 

1


7. Pursuant to subsection 152CP(1) of the TPA, this instrument is the final determination relating to the terms and conditions of access by Primus to the ULLS provided by Telstra.

Final Determination

 

Terms and conditions of access

 

8. This Final Determination specifies ULLS annual charges, as per Schedule 1.

 

9. Subject to clause 10, other terms and conditions upon which Telstra and Primus have agreed for the supply of the ULLS are to continue to apply.

 

10. Except where the parties expressly agree otherwise, in the event of any inconsistency between the terms and conditions upon which Telstra and Primus have agreed for the supply of the ULLS and the intended operation of this determination, this determination is taken to apply to override any such pre-existing agreement to the extent of any inconsistency.

 

11. All charges in this Final Determination are expressed on a GST exclusive basis.

 

Settlement of over or under paid amounts and interest

 

12. The total amount that arises from the difference between charges that have been paid by Primus and the charges specified in this determination (‘the settlement amount’) is to be paid:

 

  (a) where the charges paid by Primus are less than the charges specified in this determination, by Primus to Telstra; or,

 

  (b) where the charges paid by Primus are more than the charges specified in this determination, by Telstra to Primus.

Note: For calculating the amount of money required to be paid, parties must take into account the charges paid by Primus under the interim determinations.

 

13. Interest is payable on the settlement amount, compounded daily at the applicable monthly rate specified in the Large Business Variable Indicator Rate published by the Reserve Bank of Australia, for the period commencing on the price calculation date, and ending on the date that this determination takes effect.

Note: A copy of the Large Business Variable Indicator Rate is available at http://www.rba.gov.au/Statistics/Bulletin/F05hist.xls

 

14. Except where the parties agree otherwise, the settlement amount is to be paid within 42 days after the date on which this determination is made.

 

Commencement and expiry

 

15. This determination has effect 21 days after the date it is made and ceases to have effect on 30 June 2008 (the expiry date).

 

16. For the purposes of this determination the price calculation date is 3 February 2006.

Definitions

 

17. For the purpose of this Final Determination, the following definitions apply:

 

  (i) ‘Band’ refers to the geographic classification of exchange service areas (ESAs).

 

2


  (ii) ‘Band 1’ means the following central business districts:

 

  (a) NSW (City South, Dalley, Haymarket, Pitt, Kent)

 

  (b) QLD (Charlotte, Edison, Roma Street, Spring Hill)

 

  (c) South Australia (Flinders, Waymouth)

 

  (d) Victoria (Batman, Exhibition, Lonsdale)

 

  (e) WA (Bulwer, Pier, Wellington).

 

  (iii) ‘Band 2’ means an exchange service area with more than 108.4 services in operation in a square kilometre area at the time this determination is made, which is not a Band 1 area,

 

  (iv) ‘Band 3’ means an exchange service area with 6.56 or more, but less than 108.4, services in operation in a square kilometre area at the time this determination is made

 

  (v) ‘Band 4’ means an exchange service area with 6.55 or less services in operation in a square kilometre area at the time this determination is made.

Note 1: These Band definitions are taken from Annexure A (Key Performance Indicators Operational Document) to Telstra’s Service Quality Strategy dated 23 June 2006 (available at http://telstrawholesale.com//dobusiness/customer-commitment/docs/op_sep_quality_strategy.pdf).

Note 2: The applicable Band is the Band in which the relevant service lies at the time the service is supplied.

Note 3: Brief descriptions of the four Bands are:

 

   

Band 1 – central business districts in New South Wales, Queensland, South Australia, Victoria and Western Australia

 

   

Band 2 – metropolitan

 

   

Band 3 – provincial

 

   

Band 4 – rural

Note 4: Telstra provided a listing of the applicable current classification of ESAs into Bands on 31 August 2007.

 

/s/ Graeme Julian Samuel

 

/s/ Ed Willett

Graeme Julian Samuel   Ed Willett
Chairman   Commissioner
DATED: 20 December 2007  

 

3


Schedule 1 ULLS annual charges

 

1. Except where the parties subsequently agree otherwise, the ULLS Annual Charges payable by Primus to Telstra per month for the ULLS for the period from the price calculation date until the expiry date are as follows:

 

Band

   2005-06    2006-07    2007-08

Band 1

   $ 5.60    $ 6.00    $ 6.20

Band 2

   $ 12.30    $ 13.70    $ 14.30

Band 3

   $ 25.00    $ 27.30    $ 28.50

 

2. This determination does not specify Annual Charges to apply in Band 4.

 

4

Exhibit 99.3

Exhibit 99.3

ACCESS DISPUTE BETWEEN

PRIMUS TELECOMMUNICATIONS PTY LTD (ACCESS SEEKER)

AND TELSTRA CORPORATION LIMITED (ACCESS PROVIDER)

LINE SHARING SERVICE (LSS)

Access Dispute Notified under subsection 152CM(1) of the Trade Practices Act 1974 on 24 January 2007

Final Determination under section 152CP of the Trade Practices Act 1974

Background

 

1. On 24 January 2007, the Australian Competition and Consumer Commission (the Commission) received written notification (the notification) from Primus Telecommunications Pty Ltd (Primus) of an access dispute relating to the supply, by Telstra Corporation Limited (Telstra), of the Line Sharing Service (LSS). Primus’s notification was provided to the Commission pursuant to subsection 152CM(1) of the Trade Practices Act 1974 (the Act).

 

2. The LSS is an access service that allows access to the higher frequency spectrum of a line (metallic pair) on which a PSTN voice service is being supplied. It typically allows two carriers to provide separate services over a line. Access to the higher frequency spectrum is generally used to supply broadband (DSL) services, while the PSTN voice service is supplied over the lower frequency spectrum.

 

3. The LSS is a declared service. After holding a public inquiry, the Commission declared the LSS on 30 August 2002, pursuant to subsection 152AL(3) of the Act. A copy of the declaration was published in the Commonwealth of Australia Gazette No. GN41, 16 October 2002. Following a further public inquiry, the Commission extended the LSS to expire on 31 July 2009. A copy of the extension notice was published in the Commonwealth of Australia Special Gazette No. S214, 29 October 2007.

 

4. The notification states that the dispute relates to the prices charged by Telstra for the supply of the LSS to Primus.

 

5. The Commission has formed the view that, with respect to the notification, the requirements of subsection 152CM(1) of the Act are satisfied. That is:

 

   

Telstra is a carrier;

 

   

Telstra supplies the declared LSS;

 

   

Telstra has an obligation under subsection 152AR(3) of the Act to supply the LSS to Primus; and

 

   

Primus is unable to agree with Telstra about the terms and conditions of access to the LSS, including the charges and other terms and conditions that are the subject of this final determination.

 

6. Pursuant to subsection 152CP(1) of the Act, this instrument is the final determination relating to the terms and conditions of access by Primus to the LSS provided by Telstra.


Final Determination

Terms and conditions of access

 

7. This Final Determination specifies LSS annual charges, as per Schedule 1.

 

8. Subject to clause 8, other terms and conditions upon which Telstra and Primus have agreed for the supply of the LSS are to continue to apply.

 

9. Except where the parties expressly agree otherwise, in the event of any inconsistency between the terms and conditions upon which Telstra and Primus have agreed for the supply of the LSS and the intended operation of this determination, this determination is to apply and overrides any pre-existing agreement to the extent of the inconsistency.

 

10. All charges in this Final Determination are expressed on a GST exclusive basis.

Settlement of over or under paid amounts and interest

 

11. The total amount that arises from the difference between charges that have been paid by Primus and the charges specified in this determination (‘the settlement amount’) is to be paid:

 

  (a) where the charges paid by Primus are less than the charges specified in this determination, by Primus to Telstra; or

 

  (b) where the charges paid by Primus are more than the charges specified in this determination, by Telstra to Primus.

 

12. Interest is payable on the settlement amount, compounded daily at the applicable monthly rate specified in the Large Business Variable Indicator Rate published by the Reserve Bank of Australia, for the period commencing on the date that the charge specified in this determination commences, and ending on the date that this determination takes effect.

Note: A copy of the Large Business Variable Indicator Rate is available at http://www.rba.gov.au/Statistics/Bulletin/F05hist.xls.

 

13. Except where the parties agree otherwise, the settlement amount is to be paid within 42 days after the date on which this determination is made.

Commencement and expiry

 

14. This determination takes effect 21 days from the date it is made, and ceases to have effect on 31 July 2009.

 

/s/ Graeme Julian Samuel

  

/s/ Ed Willett

Graeme Julian Samuel    Ed Willett
Chairman    Commissioner
DATED: 20 December 2007   

 

2


Schedule 1 LSS annual charges

 

1. Except where the parties subsequently agree otherwise, the LSS Annual Charge payable by Primus to Telstra for the LSS for the period from 9 October 2006 until 31 July 2009 is $30.00 per LSS per annum ($2.50 per LSS per month).