NEW YORK-Omnipoint Corp. is going shopping for wireless licenses to enhance its value to prospective strategic partners and fill in gaps in the GSM North America Alliance’s national footprint. The personal communications services carrier specifically is interested in Pocket Communications Inc.’s Chicago and Dallas markets.
Omnipoint raised $325 million in a private placement of preferred stock earlier this month to finance its offer for the Chicago and Dallas personal communications services licenses of bankrupt C-block winner Pocket Communications Inc., said Douglas G. Smith, president and chief executive officer.
A group of Pocket creditors called New GSMCo.-which includes Ericsson Inc., Masa Telecom Inc., Pacific Eagle Investments Ltd. and Siemens Telecom Networks-has proposed buying the Dallas and Chicago markets. Pocket’s remaining 41 licenses would be returned to the government for debt relief. Some reports have estimated that New GSM Co. would pay between $350 million and $400 million for the licenses that make up the Chicago and Dallas markets.
Pocket bid around $752 million for those licenses.
Omnipoint’s Smith said a private placement was a fast way to raise the cash required for companies negotiating to obtain the PCS licenses. Smith was speaking at a teleconference to announce the Bethesda, Md., company’s quarterly results. The bankruptcy court and the Federal Communications Commission will not allow contenders to use capital from third parties or public securities offerings for the purchase, he said.
“In addition to Chicago and Dallas, there are many other license opportunities available over the very near term that we can’t talk about in too much detail,” he said.
“We are in negotiations on a number of fronts that we think not only will provide us with the opportunity to significantly expand our enterprise but also to fill in the last few holes in the national [Global System for Mobile communications] footprint.”
Wireless carriers with GSM licenses cover 94 percent of the population of North America, he added. As the only GSM carrier in each of its markets, “[Omnipoint has] the de facto exclusive on inbound roaming.
“There are 40 million people each year coming to the United States from GSM countries. All the vendors of GSM (handsets) have said that, within a few years, they will only make the World Phone to sell in all 110 countries with GSM.”
The expanded enterprise value Omnipoint seeks in gaining PCS licenses up for grabs in the United States “will enhance our strategic assets and make us even more attractive to parties we … continue to be in discussions with regarding strategic partnerships,” Smith said.
However, the chief executive said there have been delays in those partnering negotiations “caused by external parties and third parties.” He did not elaborate further.
In its first-quarter earnings teleconference, Omnipoint announced dramatic increases in PCS revenues for the first quarter, accompanied by increased losses associated with network buildout and commercial service launches.
Omnipoint reported a net loss of $124.78 million, more than double the $52.36 million announced the prior quarter. Its net loss per share was $2.38 vs. $1.02 the prior quarter. Much of this is due to an operating cash flow loss of $69.9 million, attributed to expenses related to distribution and its pioneer’s preference requirement, as well as a $2 million loss stemming from its joint venture properties in Wichita, Kansas, and Pennsylvania.
Omnipoint reported $34.1 million in revenues, 98 percent of which came from Omnipoint Communications Services Inc., its PCS operating company, which is headquartered in Cedar Knolls, N.J. Total parent company revenues for fourth-quarter 1997 were $23.7 million.
Omnipoint Communications exceeded analyst expectations by generating 50,000 net new internal subscriber additions during the quarter to close with more than 190,000 net subscribers, a 35-percent increase from the prior quarter. Average monthly revenue per unit was $57, and that it is expected to remain in “the mid-$50s range,” said George F. Schmitt, president of Omnipoint.
Led by falling prices in handsets, customer-acquisition costs “continue to decline and were below $500 for the first quarter of this year,” he said.
