Grace Leong

In yet another surprising twist to the iProvo saga, Broadweave Networks has dropped its plans to buy the operations and customer base of iProvo phone and data service provider Veracity.

Christensen declined to immediately comment on reasons for the separation, but said more details will be revealed later today.

"We're working on a plan that makes a little more sense given the new direction we're going," he said.

The privatization of the iProvo fiber-optics network is still going into its next phase with West Jordan-based Broadweave's acquisition of 10,500 residential customers from Mstar Metro and Nuvont Communications, two other former iProvo service providers -- but without Veracity. Instead, the Provo company will continue to provide service to its 3,000-plus business customers including 350 on the iProvo network.

Christensen maintained that Broadweave is still moving ahead with completing the $40.6 million acquisition of iProvo in the next 60 days. The deal was supposed to have closed on Monday but the deadline was extended because the city and at least half a dozen companies involved needed more time to complete their due diligence on the iProvo sale.

Christensen disputed rumors posted by a blogger that claimed Sorenson Capital may have withdrawn financial backing as a result of the merger's dissolution, and that the 60-day extension was just an effort by Broadweave to buy time to find new investors.

"It's an absolute lie that Sorenson is backing out," he said. "The 60-day extension has nothing to do with Veracity and Broadweave parting ways. To get a deal like this done, it's typically a 60- to 90-day process for just one company, and we're trying to do it for three to four companies, and in three weeks, too. We only started focusing on due diligence the day after the Provo Municipal Council approved the deal."

Fraser Bullock, managing director of Sorenson Capital, declined to comment beyond a statement he made Tuesday regarding the 60-day delay.

"Due to the extreme complexity of structuring a transaction involving multiple entities, there proved to be insufficient time to complete all of the required legal and business due diligence analysis before the June 30 deadline, despite significant efforts by all parties involved," he said Tuesday.

As a result of the merger's dissolution, Veracity will continue to retain its brand name, and its owners, Drew Peterson and Kevin Mayberry, will no longer join Broadweave's executive management.

"The 3,000 business customers were the key attraction of Veracity. Most of them, however, are on Qwest. Veracity focuses on commercial customers, and most of them aren't on iProvo. But Broadweave will continue to support them as a wholesale access network provider, and Veracity will continue to be the retail service provider of the 350 business customers," Christensen said.

"This doesn't change our plans one bit. We still have 10,500 residential customers to service, and that's the biggest part of the iProvo network right now," Christensen said.

Another key factor that made Veracity an attractive acquisition was its strong management, engineering and customer support team, and what Christensen had described as a real capability to sell and deliver quality services to businesses in Utah -- a large revenue segment iProvo has failed to tap to date.

Veracity, which claims to have the largest Internet phone-based service in the state, has an annual revenue growth rate of more than 200 percent. Its customers include Brigham Young University, Alpine School District, Mountain America Credit Union, RC Willey and the United Way Agencies of Utah.

News of the merger's dissolution rattled state Senate Majority Leader Curt Bramble, R-Provo.

"To have major changes in a complex transaction at the eleventh hour is cause for some concerns," Bramble said. "The key question now is, how critical was the Veracity piece to making the entire proposal work?"

Already, several Utah legislators are questioning the credibility of the deal because of the 60-day delay in closing the iProvo sale. The merger's dissolution comes on the heels of the 60-day delay and a fiasco that left as many as 200 Mstar Metro customers on iProvo without phone service. Just two weeks ago, Broadweave had to scramble to take over providing phone services to between 1,200 and 1,300 Mstar phone customers because Mstar's third-party phone service provider, New Global Telecom of Colorado, abruptly cut off services on the iProvo network for alleged unpaid bills.

"It's too early at this point to tell how this [breakup] will affect the iProvo sale," Bramble said. "It is still in Provo's best interest to find ways to make this transaction happen. But to have a major component of a complex transaction part ways should raise concerns for Provo. There is $40 million of public money involved. Provo citizens have a right to know where the deal stands and what to expect in the future, and whether this will be a major blow to closing the deal.

"What I want to know is what they're doing to adjust to this change and how they are structuring the transaction to make it viable," Bramble said. "There is no Plan B."