NEW YORK-Century Telephone Enterprises Inc., a Monroe, La., telecommunications firm, signed a letter of intent to purchase several cellular and personal communications services markets, primarily in the Midwest. The seller is Pacific Telecom Inc., a subsidiary of PacifiCorp, an electric utility headquartered in Portland, Ore.
Century will pay $164.4 million in cash and give Pacific more than 18,000 telephone access lines in Arizona, Colorado, Idaho and New Mexico. In return, Century will acquire ownership of Pacific’s wireless markets covering approximately 1.7 million cellular population equivalents and about 3 million personal communications services pops.
Once the transaction is completed, Century will have increased its cellular ownership by 21 percent to a territory covering a population of nearly 9.7 million. As a result of the acquisition, Century will operate eight additional cellular markets serving more than 90,000 subscribers. Most of the newly acquired territories are in Michigan, Minnesota and Wisconsin, although a small percentage of pops covered are in Oregon, South Dakota and Washington. The companies hope to finish the deal by July 1.
Century also is acquiring PCS licenses for 10 megahertz of spectrum in parts of Iowa, Michigan, Minnesota and Wisconsin. These purchases constitute an 80 percent increase in Century’s PCS ownership, to 7.1 million pops.
“The acquisition of these wireless markets is Century’s largest acquisition to date and a major step in the execution of our geographic clustering and bundling strategies,” said Glen F. Post III, president and chief executive officer of Century. “Although we are exchanging some of our Western telephone properties, they are in states where Century has no significant wireless presence and fewer bundling opportunities.”
Century, whose stock is traded on the New York Stock Exchange, expects the acquisition will cause a dilution in earnings per share of between 3 cents and 5 cents during the second half of the year, assuming the transaction closes July 1. By 1999, it expects the acquisition to contribute to earnings.
“These are strategic markets which add significant value to our existing properties in the Midwest; the price is attractive, and the transaction provides Century with additional markets in which to provide wireless, long distance, Internet and other communications services,” Post said.
Century Telephone Enterprises provides local exchange, long distance, wireless and Internet access to more than 1 million customers in 14 states, including 400,000 cellular customers in six states, Michigan and Wisconsin among them. In terms of number of access lines, it is the 16th largest local exchange carrier in the United States. In terms of population equivalents covered, it is the 12th largest cellular carrier. Century also owns PCS licenses in Michigan and Mississippi.
During 1996, Pacific Telecom reported $521 million in revenues, of which less than 10 percent were related to the cellular properties it is selling to Century. Pacific Telecom provides telecommunications services to rural and suburban customers in 10 Western and Midwestern states, as well as Alaska. It will retain its cellular interests in its Alaska markets, which cover 166,700 pops.
“Our cellular operations were not of sufficient scale to compete against larger wireless providers in the long term, nor did they provide an adequate geographic overlap with our existing local exchange operations,” said Charles E. Robinson, president and chief executive officer of Pacific Telecom.
“We are actively exploring ways to provide certain wireless services to our existing local exchange customers, and believe we are better able to accomplish this through PCS spectrum that we will continue to own [and plan to] obtain after this transaction is consummated.”
Robinson added that proceeds Pacific gains from the Century sale “should allow us to continue to actively pursue other significant rural local exchange expansion opportunities and PCS spectrum acquisition opportunities which overlay [our] local exchange operations.”
Pacific Telecom is expanding its local exchange operations in Colorado and Idaho, and plans to offer local exchange service in Arizona and New Mexico, he said.
