NEW YORK-Moody’s Investors Service assigned a speculative grade rating of B1 to a $130 million bank credit facility that Centennial Puerto Rico Wireless Corp. obtained to finance operating losses and the rollout of its personal communications services network.
At the end of November, the year-old PCS carrier had 51,000 customers and had turned cash flow positive.
“The B1 rating … reflects the start-up nature of the Puerto Rican operations and high leverage compared to cash flow … (but) it also reflects the company’s ability to provide a full range of telecommunications services including wireless, fixed wireless and competitive access provider, [as well as] its strong prospects for subscriber growth,” said M.G. Subhas, managing director, and Cyrille R. Conseil, senior analyst, for Moody’s speculative grade ratings group.
“CPR has been successful in the initial deployment of its services and is rapidly establishing itself as a service provider to contend with, thanks to its lower embedded-cost basis. In addition, AT&T (Wireless Services Inc.) has yet to offer any service since it acquired spectrum to offer PCS in Puerto Rico through the [Federal Communications Commission] auctions.”
Centennial Puerto Rico is owned by Centennial Cellular Corp., New Canaan, Conn. Moody’s also said it is upgrading a notch-to Ba3 from B1-its ratings on about $350 million of outstanding or pending debt issuance by the parent company.
In the continental United States, Centennial Cellular is a facilities-based carrier whose footprint covers 5.4 million people in three clusters: Michigan-Indiana, east Texas-Louisiana and a small portion of the Southwest. Its domestic cellular subscriber base was 220,000 at the end of November, up from 160,000 customers a year earlier.
“While relatively modest in [comparative] size, total revenues and cash flow have improved steadily … driven by subscriber growth and sustained strong roaming revenues,” Subhas and Conseil said.
For the first six months of its fiscal year, which ended Nov. 30, the carrier generated $108 million in service revenues and $45 million in cash flow.
Centennial Cellular has signed several roaming agreements with personal communications services providers that should further strengthen how much roaming service contributes to revenues, they said.
Although new wireless providers “may emerge in its operating territories in 1998,” the analysts said they don’t anticipate PCS carriers will match Centennial’s coverage in its rural footprint for the “intermediate term.”
The sparsely populated nature of its territory means that Centennial Cellular’s market penetration is less than 5 percent, or about half the domestic industry average of 10 percent. This should provide additional growth opportunities for the carrier, Moody’s said.
