NEW HAVEN, Conn.-SNET Mobility said it will pay $450 million cash for certain of Nynex Corp.’s and Bell Atlantic Corp.’s cellular properties, and, ironically, become a fierce competitor of the two Baby Bells.
The properties affected are areas where BAM and Nynex each hold cellular licenses. The companies are required to sell one of the properties in markets where they each operate in order to merge their cellular operations as a result of an agreement made between the two operators earlier this year.
In SNET’s largest-ever acquisition, the properties to be purchased are within or adjacent to cellular properties the company already serves. Those areas include all of Rhode Island, and the New Bedford, Mass., area now owned by Bell Atlantic, Nynex’s 80 percent ownership of the Pittsfield, Mass., market and a 16.1 percent interest in a cellular partnership currently 82.5 percent managed by SNET.
“This acquisition improves the economies of scale in our cellular business and it strengthens our competitive position in the wireless marketplace,” said Daniel Miglio, SNET chairman and chief executive officer, adding the purchase is “significantly expanding our position in the strategic New York-Boston corridor.”
If the purchase is completed, SNET will nearly double its potential customer base. The company’s current service area has a population of about 3.2 million people. About 2.3 million people live in the new areas SNET plans to acquire, giving it a combined total of 5.5 million pops, an increase of 70 percent, the company noted. As such, the company paid about $1.99 per potential customer.
SNET said the acquisition will allow it to become the largest cellular provider between Boston and New York, increasing its subscriber base by about 45 percent, from 132,000 customers to 192,000.
Other benefits SNET said it will receive from the purchase include anticipated higher growth in a market where the company has a proven track record, one large footprint created by new and existing SNET properties combined, which may indicate customers will start paying home rates in some areas where they currently pay roaming rates, and estimated increased revenues. For the nine month period ended in September, the company’s current revenues of $71 million would increase to about $104 million if the new properties were included, SNET said.
Donald Shassian, SNET vice president and chief financial officer said the company will finance the deal through long-term debt. Following the announcement of the agreement Nov. 22, SNET’s stock fell 75 cents to $32.75 a share on the New York Stock Exchange.
Completing the transaction is contingent on a successful merger between BAM and Nynex cellular divisions. The deal also is pending regulatory approval. The sale of the Pittsfield, Mass., market is subject to a first right of refusal by a third party owner, Richmond Cellular Telephone Co., which has 20 percent ownership of the license.
The company also said it is discussing options for joint ventures with a full range of telecommunications players, citing the significance of forming a “winning alliance” in the changing telecommunications climate.