Tired of listening to the same dry quarterly conference calls? Try listening to Bob Price, chief executive officer of rural cellular operator Price Communications Corp. He’s sure to add some color to your life.
Last week, the fiery CEO hammered a stock downgrade from Dillon Warburg Read, disparaged personal communications services operators, hinted about who may want to buy his company and named the carrier Price Communications is bidding on.
WDR downgraded Price Communications’ stock to “hold” from “buy,” based on the stock’s valuation. Analyst Kevin Condon believed the stock’s valuation has included a takeover premium that no longer is merited since AT&T Corp. isn’t a likely buyer any more.
Condon reasoned that AT&T PCS affiliate markets overlap too many of Price Communications’ markets. Since the downgrade, Price Communications’ shares had fallen roughly $6 by RCR press time.
“If any of you know the man at AT&T in charge of acquisitions, you might ask him in the last two or three weeks when we didn’t have a call in which they were interested in acquiring us,” Price shot out. He accused WDR of pitching some of the AT&T affiliate underwritings. Condon denied this. “If you bought our stock for an acquisition purpose, let me tell you how that works. I don’t want to sell this company,” Price said.
Price said he opposed the sale of PriCellular Corp. to American Cellular Corp. early last year because he believed it could have been sold for more money if the board of directors would have waited longer. American Cellular-which bought the PriCellular properties for about $1.4 billion in a combination of cash and debt repayment-earlier this month turned around and sold to Dobson Communications Corp. and AT&T for $2.3 billion, 14 times American Cellular’s 1999 cash flow.
Price said he believes Price Communications will be worth more in a year as well. Rural cellular operators today are characterized as cash cows, recording high cash-flow margins and reaping generous roaming revenues from nationwide operators, such as AT&T, which offer no-roaming cost pricing plans. Larger operators have been willing to pay top dollar to acquire these companies and eliminate the high roaming fees they pay them as well as cash in on revenue benefits.
Price Communications’ cash-flow margins reached a record 58.4 percent in the third quarter, with revenues jumping to $65.1 million, compared with $51.9 million the previous year. Roaming revenue was about $10.1 million for the third quarter. Price said he expects cash flow to reach $110 million for the year.
Possible buyers?
As far as other interested buyers are concerned: “Last week, we had in our offices representatives from GTE and Bell Atlantic,” revealed Price. “I’m not saying why they were in our office, but it wasn’t to give us a free telephone.”
Price also said AT&T gave his company the first shot at building PCS markets under an affiliate agreement, but he declined.
“It’s fraught with danger,” he said. “If AT&T decides to change from TDMA to something else, you have to build it yourself. I do not believe PCS is ever going to be a strong competitor to cellular nor has it ever been.”
Price predicts that at some point in the next decade, cellular operators will hold 60 percent to 70 percent of the wireless market.
“We’ve been opposed in our market by Powertel,” Price said. “They’ve had no effect on us. There is no reason to believe Tritel or Triton PCS or any others are going to do anything.”
Price disclosed that the company was bidding for rural cellular operator Triton South, which has seven rural service areas that abut Price Communications’ properties in Georgia, Alabama and Florida. Price Communications’ bid is estimated at about $407 million, which could be funded through $200 million in cash, a private convertible offering or a bank loan.
