NEW YORK-Global TeleSystems Group Inc., an American carrier providing wireless and wireline phone service in the former Soviet Republic and Eastern Europe, plans to go public.
With Merrill Lynch & Co., New York, as lead underwriter, the company has registered with the Securities and Exchange Commission to sell 11 million shares of common stock in an expected price range of $17 to $19 per share. The stock will trade on NASDAQ and is expected also to be traded on the European Association of Securities Dealers Automated Quotation system, or EASDAQ.
Global TeleSystems Group hopes to raise net proceeds of about $187 million from the initial public offering. About $70 million of the public equity raised will be used to repay loans from GTS’ existing private stockholders.
The financier and philanthropist George Soros and foundations and other entities affiliated with him own about 26 percent of the carrier. Soros Fund Management loaned GTS $40 million in 1996. Capital Research International loaned GTS $30 million the same year. Capital, which is unrelated to Soros’ enterprises, owns approximately 13 percent of Global TeleSystems.
Concurrent with the IPO, GTS also has registered to sell $100 million in senior debt notes due 2005. The equity and debt sales are contingent upon each other.
Net proceeds of the note issue, which GTS expects to amount to about $96 million, along with $117 million from the IPO, will be used primarily for working capital to fund the carrier’s telecommunications ventures, especially those in Russia and some of the former Soviet republics, which now are part of the Commonwealth of Independent States, or CIS.
Global TeleSystems, headquartered in McLean, Va., said it was among the first foreign telecommunications operators in the commonwealth, where it began offering data links to the United States in 1986, international long- distance service in 1992, local access to its networks in 1994 and cellular services in 1995.
GTS Cellular had 16,300 cellular subscribers as of Sept. 30. It operates cellular networks in Kiev, Ukraine, and in 12 regions of Russia with licenses covering a population of about 25 million.
Through Vostok Mobile, GTS Cellular participates in 11 Advanced Mobile Phone Service joint ventures in Russia. “The ventures intend to convert to D-AMPS (digital AMPS) at such time as there exists sufficient competitive pressures and/or market demand for digital services to merit the additional investment,” the preliminary offering statement for the IPO said.
In Ukraine, GTS is part owner of Bancomsvyaz, which operates a network in Kiev using Digital Communications System-1800, a technology in the personal communications services band that is based on Global System for Mobile communications technology.
“Whenever practical, GTS’ businesses integrate and co-market their service offerings in Russia and the CIS, utilizing TeleRoss as the domestic long-distance provider, Sovintel as the international gateway, TCM and GTS Cellular for local access and Sovam as the data communications and Internet access network for business applications and on-line services,” the preliminary prospectus said.
GTS also offers wireless local loop service in the greater Moscow metropolitan area through its 50-percent ownership of Sovintel, a joint venture with Rostelecom, the national long-distance carrier. Sovintel built and operates a fully digital network, which includes microwave and WLL.
“Most Russian cellular markets have the potential for three licensed operators, including one for each of the GSM and NMT-450 (Nordic Mobile Telephone) cellular standards, which Russia has adopted as national standards, and one operator using the AMPS cellular standard, which has been set as a regional standard,” the red herring said.
The document said that additional GSM licenses were auctioned off early last year, so that new GSM operators may enter certain markets sometime this year.
“In addition, a [Code Division Multiple Access] auction is likely to occur in the future, which could result in one or more CDMA operators entering the market” it said.
