NEW YORK-AirGate PCS Inc., a Sprint PCS affiliate headquartered in Atlanta, has registered with the Securities and Exchange Commission to go public through an initial public offering of $100 million of common stock.
Donaldson Lufkin & Jenrette Securities Corp., New York, is lead manager of the IPO and a $150 million issue of 10-year, senior secured notes planned for concurrent sale.
In its SEC filing, AirGate said, “[We] believe the proceeds of the IPO and debt offering (in addition to $158.7 million in) vendor equipment financing will provide [enough] to build [our] network and to finance expected operating losses and working capital through 2002.”
By then, the fledgling Code Division Multiple Access PCS carrier said it expects to reach break-even operating cash flow.
“[We] plan to initiate service only in areas where [we can provide] population coverage comparable to or more extensive than our competitors,” AirGate said. “We expect to offer service to 22 percent of residents during the first quarter of 2000 and to 74 percent by the end of 2000 … [more than] the requirements of our agreement with Sprint PCS.”
Sprint PCS spent nearly $47 million to purchase all the wireless licenses for AirGate’s service territory. The affiliate’s licenses cover 6.8 million people in 20 contiguous markets in most of South Carolina and parts of North Carolina and eastern Georgia.
Also, Sprint incurred additional expenses to remove microwave incumbents from AirGate’s spectrum, the registration statement said.
In filing for SEC approval to offer equity and debt securities for public sale, AirGate said, “Sprint also intends to enter into … an agreement [to] limit its rights or remedies … including its rights to terminate its agreements [with us] and withhold payments, until our vendor equipment financing and senior discount notes are satisfied in full.”
In the region it plans to serve, AirGate has the exclusive affiliation franchise with Sprint PCS. It is licensed to use the Sprint brand royalty-free during its entire affiliation with Sprint.
AirGate will retain all of the roaming and subscriber equipment revenues from customers “in our territory,” the company said. It also will keep 92 percent of “collected service revenues,” and Sprint PCS will get the remainder.
“[We] gain access to Sprint PCS’ national marketing support and distribution programs and are entitled to buy network and subscriber equipment and handsets at discounted rates from [its] vendors,” AirGate said.
Sprint PCS also has given AirGate the option to purchase back-office services from it at discounted rates reflecting economies of scale, the registration statement said.
Once it has completed building out its existing territory, AirGate said it plans to “explore expansion … focused on the Southeastern United States, provided capital is available.”
