NEW YORK-Esat Holdings Ltd., Dublin, plans to sell privately about $85 million in debt securities, partly to help finance buildout of a Global System for Mobile communications system that will provide Ireland’s second cellular service.
Esat Holdings owns a 40 percent stake in Esat Digifone, which was awarded a 15-year national cellular license last May after agreeing to pay a set price of $7 for each of Ireland’s 3.6 million pops. Telenor of Norway also owns a 40 percent stake in Esat Digifone.
The competitive bid award was delayed by several months pending the Irish government’s consideration and rejection of challenges by a separate license bidding consortium that included three American companies: Motorola Inc., AT&T Wireless Services Inc. and Southwestern Bell Corp.
Esat Holdings also owns 100 percent of Esat Telecom, Ireland’s second-largest long-distance telephone company, and will use some of the proceeds of its debt issuance to finance expansion of this part of its business.
Due to deregulation expected to become effective July 1, Esat Telecom will be able to move its long-distance calls from leased lines owned by its competitor, Telecom Eireann, onto cheaper microwave links owned by Esat Digifone.
Telecom Eireann, Ireland’s state-owned telephone company, is the largest long-distance and cellular carrier in the country.
Moody’s Investors Service Inc., New York, accorded a speculative grade rating of Caa to Esat Holdings’ planned issuance of senior deferred coupon notes due 2007, with warrants to purchase common stock. The debt obligations are to be sold under Securities and Exchange Commission Rule 144A, which permits issuers to forgo formal, detailed registration of securities sold in the United States, provided they are offered only to large, institutional investors.
“Although Digifone will not provide available cash flows to Esat until 2003, its position as one of only two cellular providers in a market with … 6.35 percent cellular penetration should represent an appreciating investment to Esat creditors over time,” said the Moody’s report, written by Eric Goldstein, senior analyst, speculative grade ratings. “As it pertains to additional wireless competition, Digifone should have a couple of years before [personal communications services] licenses are potentially auctioned and deployed.”
According to Moody’s, the Irish telecommunications market could be deregulated completely by 2000. “[This] holds the specter of additional competition from more formidable competitors, although the possibility does exist that foreign competition could look to partner with Esat Telecom as a means of entry into the Irish market.”
