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CALIFORNIA RESELLER ISSUES SENIOR NOTES FOR GROWTH

NEW YORK-Prime Matrix Wireless Communications, a California-based cellular reseller, plans to sell publicly an $80 million issue of senior notes due 2004.

Prime Matrix, headquartered in Calabasas, will be the largest cellular reseller in California after completing its announced acquisition of ComTech Inc. in Hayward, according to Moody’s Investors’s Service Inc., New York. The combined company will have about 103,000 subscribers, more than half of which are the result of acquisitions.

With less than $3 million in contributed equity, the company will be highly leveraged in its debt-to-equity ratio, Moody’s said in assigning a speculative grade rating of Caa to the proposed note sale. Prime Matrix also hasn’t yet demonstrated it can reduce its above industry average churn rates and grow its subscriber base internally, although it resells wireless services through its own stores, through direct sales and telemarketing and by means of exclusive arrangements with independent dealers.

That said however, the rating agency also accorded a “positive outlook” to Prime Matrix’s debt because of the company’s growing cash flow, its dominance as a reseller in its markets and the likelihood that wireless telecommunications carriers will turn increasingly to reseller channels.

“The overall market for wireless communications, particularly [personal communications services] is characterized by excess capacity … combined with extremely low marginal costs per extra minute of use and the need to increase cash flow to pay for the expensive cost of network build-outs,” said James Parrish and Eric Goldstein, managing director and senior analyst, respectively, in Moody’s speculative grade ratings group.

“Resellers, such as Prime Matrix, provide an additional channel of distribution to increase subscribers and minutes without adding incremental costs to the facilities-based provider; therefore, opportunities for resellers will grow as long as excess capacity exists in the market.”

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