NEW YORK-Western Wireless Corp. went public May 22 with an 11 million share common stock offering priced at $23.50 each. At the same time, the company sold a 10-year, $150 million debt issue priced to yield 10.5 percent.
The initial public offering of common stock was divided into two parts, with 8.8 million shares sold in the United States and 2.2 million sold internationally, according to Goldman, Sachs & Co., New York, which was the lead underwriter.
Headquartered in Issaquah, Wash., Western Wireless was formed in 1994 through the merger of several companies, including General Cellular Corp. and Markets Cellular L.P. In its cellular markets, it has 240,000 subscribers.
Through the Federal Communications Commission auction that ended last March, Western Wireless won the broadband personal communications services licenses for six major trading areas: Honolulu, Salt Lake City, Portland, Ore., Des Moines/Quad Cities, Iowa, El Paso, Texas/Albuquerque, N.M., and Oklahoma City. The auction price for these MTAs, which cover a population of about 15 million, was $144 million. In February, it became the first FCC PCS auction winner to begin commercial operations when it commenced service in Honolulu.
Also earlier this year, Western Wireless agreed to pay $66 million for GTE Mobilnet Inc.’s broadband PCS license for the Denver MTA, which covers a population of about 4.4 million.
Moody’s Investors Service assigned a B3 rating to the $150 million senior subordinated note issue, citing Western Wireless’ “rapid and significant leveraging to develop a greatly expanded wireless communications sales and service network*…*its extensive capital expenditure requirements to complete buildout of the new PCS network and fund internal operations*…*and the three-to-five-year horizon before meaningful cash flows will be generated.”
Through the end of 1998, Western Wireless estimates it will need $500 million to finance the buildout of PCS systems. It plans to use proceeds of the new debt issue to repay a revolving loan facility, while it plans to use proceeds of the IPO to help build its PCS system, buy the Denver PCS license from GTE, expand its cellular operations and for other corporate purposes.
Moody’s said it is optimistic about prospects for Western Wireless, despite risk factors that include competition from other PCS providers, impediments to PCS network buildout (including affordable handset prices, cell site acquisition and relocation of fixed microwave licensees), and consumer acceptance of PCS. The company already has a Hawaii PCS system built and activated.
“Western has a practical and logical development strategy of traditional cellular service for its rural customers and digital PCS for its urban customers,” the rating agency said.
