Sprint Corp., citing poor market conditions, said it is postponing its planned public offering of its Sprint PCS venture.
The Kansas City, Mo.-based long-distance carrier said it will continue to evaluate market conditions and may proceed with a public offering later. The carrier hoped to raise about $604 million.
“It’s difficult to raise equity and any capital at all,” said Chris Larsen, senior wireless analyst with Prudential Securities Inc. in New York. “The new issuance market is very dry, and for companies that are expected to lose money, it’s doubly difficult.”
Sprint PCS expects to incur billions in losses during the next several years as it pays for its personal communications services licenses and builds out its nationwide Code Division Multiple Access network.
Perry Walter, wireless analyst with Robinson-Humphrey Co. in Atlanta, said falling world economies have scared investors, making them less willing to invest in any new ventures.
“In particular, the poor performance of smaller-cap stocks has led to a smaller pool of investors that are willing to invest in IPOs. Everyone has seen it,” said Walter.
Stock-market volatility has caused 160 companies that filed for IPOs this year-half of them in the third quarter-to delay or cancel those plans, said Securities Data Corp. in Newark, N.J. Analysts say many of those same companies are finding they are barred from seeking funds in the private-equity placement for at least six months.
Finding additional financing has become difficult for PCS operator Omnipoint Corp., which recently asked its primary infrastructure vendors, Ericsson Inc. and Northern Telecom Inc., to provide more financing. The Bethesda, Md.-based company hopes these negotiations will give yield more than $200 million in additional financing, bringing its total liquidity to more than $1 billion.
“The company also is taking additional steps to assure its ability to pursue its business goals in the current financial market conditions,” said Douglas Smith, president and chief executive officer of Omnipoint. “The company is prudently deferring certain discretionary expansion opportunities and other expenditures. In addition, we have been in expanded discussions over the last several weeks with a number of newly interested strategic investors regarding transactions that reflect the inherent long-term value of the company.”
Sprint said it will proceed with a tax-free recapitalization of its common stock to complete its restructuring deal announced in May with its cable partners Tele-Communications Inc., Comcast Corp. and Cox Communications Inc. Sprint will gain ownership and management control of Sprint PCS. Sprint will hold a special shareholders’ meeting Nov. 13 to vote on the restructuring plan.
Each share of Sprint’s publicly traded common stock will be reclassified into .5 share of PCS stock and one share of a newly created class of Sprint common stock.
Sprint said it plans to buy out its cable partners’ interests in the venture by the end of the year. TCI, Comcast and Cox have been anxious to leave the venture because of steep losses incurred by Sprint PCS and their desire to address increased competition in their core cable TV businesses.
TCI is seeking to quickly dump its 30-percent interest in Sprint PCS as it attempts to consummate a $48 billion merger with AT&T Corp. Stakes in both companies would violate Federal Communications Commission rules since both companies own wireless licenses in the same markets.
TCI President Leo Hindery recently told federal regulators his company’s interest in Sprint PCS will be divested or placed in a voting trust.
