Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1925-09-01

6OTo TO 1900 above the pre-war lev
Ell, and that three-fifth Of every dol
lar of the Company's expenses repre-
sents wage payments. AS against
the 1870 increase in telephone rates
in the past 10 years Mr.. Grant cited
steam railroad fares as having in
creased 55e6, street railway fares,
64To. and freight charges. $500.
Necessity for Higher Rates
In explanation of why the Com
pany deems it necessary at this late
| date to ask for higher rates, not
outstanding it has carried on it's
business without rate increases for
|. several years since the general rise
in prices, Mr.. Grant said: This Com
| pany is constantly adding additional
plant to serve new subscribers, at a
| cost very much greater than was re-
CURED for plant installed before the
rise In wages and commodity prices
Because its plant is depreciable and
Is continually undergoing renewal
and reconstruction, the Company is
Obliged every month to retire from
service considerable quantities of old
| plant, constructed at the lower pre-
war prices and to install replacing
| plant constructed at the much high
er prices of today. Moreover, some
of this replacing plantNis of differ
| ent character than the old plant,
| and more costly, also for that rea-
son. In other words, the Company
| plant is gradually changing over to
a higher price level.
| Sufficient of these changes have
already taken place up to 1924, and
VIII continue to take place during
1879 and 1926, to reduce the Com
| panys earnings on the cost of it's
| plant, including a reasonable amount
| OF working capital in the year 1925
under present rates in Maine, to ap-
proXimately 4.25496 and in 1926 to
approximately 4.11I. From these
figures, it is obvious that condition
exists which must be Immediately
changed, if proper telephone service
is TO continue in Maine"
He expressed the belief that pres
emit price levels are likely to sub
stantially obtain during the next ten
years, and said he would present
supporting evidence for this belief.
one of the reasons he gave was that
the United States incurred its war
Indebtedness at war time prices, and
the price deflation policy would make
1t more difficult for the government
to keep within it's budget. Such a
policy would be likely to cause a de-
preston in general business, thus
adversely affecting individual wage
earners. His conclusion was that
sensible men, whose business de-
mands the further investment of
large sums, should plan on the basis
OF the continuance of the present
average price level, subject to short
term fluctuations which accompany
| the ehh and flow nf =;
| ties.
Net Growth in Telephone Service
During TIE five and a half years
from January l., 1920, to August l,
1925, the net growth in telephones
Tor the Company in Maine was
42.6lgo. In other words, during five
years the Company gained about
one-haf as many subscribers as it
mad enrolled during the previous
forty years. Notwithstanding its
earnest efforts to meet this increased
demand. the Company, he said, had
found it impossible to entirely salts
~ all of the applicants for service
in Maine.
Mr.. Grant then went into an eX-
tended explanation of the necessity
of maintaining the Company's credit,
so that the new capital necessary TO
maintain and extend the telephone
business in Maine may be obtained.
THE biggest problem which the
management of the Company faces
at any time" he said. lis to find new
money in the amounts needed to pro-
vide for the extension and improve
ment of the plant The Company
cannot obtain this money unless it
has GOOD credit. 1t cannot have
| good credit unless 1t is permitted to
/ earn dividends large enough to make
Its securities attractive for the saw
ings of New England people. Public
utilities must pay the going price for
capital, as they must pay the going
price for wages and materials. More
over. the investment market is 81
highly competitive market, and buy
! ers in that market must face COM
| petitive conditions.
I'VE shall undertake to show you
that, If the Company should reduce
, its dividend to 79c or lower, its stock
would sell below par in the market.
| Prior to 1920, for a short time, the
Company paid 79o dividend and it's
stock then sold below par. When the
dividend was increased from 7Go TO
| sec, it's stock was sold in the mar
ket at about 500 per share. We be-
lieve therefore that the reduction of
the dividend rate would impair the
Company credit, hamper its financ-
| ing and delay construction"
He went on to explain that the, law
says that the Company may not sell
new stock for less than par There
fore, under such conditions, it is i'm
! possible to issue new stock, the pro-
ceeds of which are necessary, from
time to time, for new construction.
Cannot Delay Construction
CONSTRUCTION cannot be delayed"
he added. "A public utility differs
from private enterprise in that the
latter may, at it's discretion, delay a
construction program until such time
as its management believed condi-
lions most favorable; but a public
| utility has no option. The appli-
| cants for telephone service want 1T
noW-not next year. The Company
cannot restrict growth; it's develop
ment must keep pace with the bus
illness needs of the state and of New
England"
Under the proposed new rates, Mr..
Grant said that for the year 1926, the
first full year in which the proposed
rates could become effective, the
gross increase in telephone revenue
for the entire Company is estimated
at $1O,690,000, and for the state of
Maine 100000. Out of this $1O,690,-
600 of new revenue, however Federal
taxes upon net earnings, and addi-
tlonal state taxes upon stock prop
erty will call for an increased pay
ment of $2,566,000, and there will be
an additional payment under the Ii
cense contract with the American
Telephone and Telegraph Company of
$477,OOO, a proper amount of which
Is chargeable to Maine.
The amount available as surplus
! during 1926 is $730,000, but this sur
plus during succeeding wears will