NEW YORK-Omnipoint Corp., parent of personal communications services provider Omnipoint
Communications Inc., began a second round of serious discussions in January with potential strategic equity investors,
said the corporation’s chairman and chief executive officer, Douglas G. Smith, last week.
In October, Omnipoint
retained two New York investment banks, Allen & Co. Inc. and Lehman Brothers Inc., as financial advisers in its
search, he said during a conference call.
“About 15 to 20 parties expressed an interest … We are still in
discussions with four or five … Some are domestic and some international. [We are] in serious negotiations with most
of these,” Smith said.
Laura Knight, director of investor relations for Omnipoint Corp., said the discussions
revolve around selling an equity stake of at least 20 percent, although the financial advisers are considering all options,
including the sale of the entire company.
Omnipoint retained Allen and Lehman after its own search, which started
in late 1997, foundered as the result of troubles in the public debt markets last summer, Smith said.
“Two
parties came to us, and we reached terms on all the major points,” he said.
“For reasons beyond our
control, neither party could consummate the deal (by mid-1998), and they asked us to wait until the fall. Then the debt
markets melted down generally and particularly for us.”
Besides an equity capital infusion, Smith said
Omnipoint is seeking strategic partnering opportunities that can “provide operational benefits and help our
marketing position.”
Some of those “potential partners,” along with “certain financial
institutions” are interested in providing capital for “various license opportunities” in connection with
Omnipoint’s filing for the C-block license re-auction, scheduled to begin March 23, Smith said.
“If you look at
the licenses available and our existing footprint, (you can discern) where our interests would be,” he
said.
“We don’t view (participating in) the C-block (re-auction) as an overextension of Omnipoint’s
resources.”
The Federal Communications Commission rejected Omnipoint Corp.’s waiver request for a 25
percent “very small business” bidding credit in the March 23 re-auction of C-block personal
communications services licenses.
Omnipoint said it still will compete in the auction as a “small
business,” a category good for 15 percent bidding credit.
At the end of December, Omnipoint closed on a
$125 million unsecured debt financing, bringing its available cash to about $230 million, exclusive of $53 million on
deposit for convertible preferred equity.
It also received a new $200 million loan commitment from Siemens and
$50 million in additional funding from Nortel Networks, bringing the total unused vendor financing available to $450
million. Of this total, Omnipoint can use $150 million for working capital.
Omnipoint, which will release its year-
end and fourth quarter 1998 results in early March, also announced Feb. 17 it added 102,000 net new subscribers
during the last quarter of 1998, bringing its total customer base to 375,000. By the end of January, its subscriber base
grew to more than 400,000, including customers from its new Indianapolis and Detroit markets, which it launched in
late December.
The subscriber totals exclude prepaid customers whose accounts have been inactive for more than
110 days, said George Schmitt, president of Omnipoint Communications.
Prepaid customers account for about 55
percent of the carrier’s total base. While Omnipoint has had success in encouraging prepaid-to-postpaid conversion in
the New York metropolitan area through bonus minutes incentives, Schmitt said, “we haven’t decided yet
whether to expand this to other markets.”
Average monthly revenue per subscriber was about $47 during both
the third and fourth quarters, down from $54 during the second quarter and above the $43 Knight said is expected by
securities analysts who follow Omnipoint.
The churn rate during the fourth quarter was 3.2 percent, including 30-
day returns, and 2.5 percent excluding them. The numbers impressed several securities analysts participating in the
conference call.
Schmitt attributed some of the success in controlling churn to the postpaid conversion plan in New
York and to deployment of a new intelligent network platform that lets prepaid customers know their available balance
each time they make a call from their Omnipoint handset.
