Expectations High For Telecorp PCS
By Monica Alleven
Following other successful initial public offerings by carrier affiliates, TeleCorp PCS Inc. was poised for a strong Nasdaq
showing last week.
The carrier, AT&T Wireless Services' largest affiliate, didn't disappoint. In an IPO priced at $20 per share, TeleCorp's stock
quickly traded up $14, to $34 within a few hours on Tuesday morning.
Expected? Yes, but it's just the beginning. The company, which already has 100,000 subscribers, plans to use some $207
million in net proceeds from its stock sale to fund an aggressive buildout of its markets and increase capacity to meet the
remarkable demand for service.
While the IPO suggests TeleCorp is new to the public market, the company actually has been around for a whileand it's been
busy since its 1996 founding, first as a bidder in the FCC's F-Block auction of broadband PCS licenses and later as purchaser
of licenses from Digital PCS Inc. and Wireless 2000 Inc. In February, Viper Wireless Inc. was formed to participate in the
C-Block PCS license re-auction to gain additional spectrum for Tele-Corp, and in October, the company agreed to acquire
TeleCorp LMDS Inc., positioning Tele-Corp with LMDS licenses to use as back-haul for PCS network traffic in certain
markets.
Apparently, TeleCorp will need that extra capacity. The company just launched service in the first quarter of this year, and in
the third quarter saw a 69 percent subscriber increase. For the first nine months of this year, TeleCorp brought in $18.9 million
in service revenue. And that's not even counting another $18.9 million in roaming revenue. Like other carrier affiliates, roaming
revenue is a big component of TeleCorp's balance sheet. But under a reciprocal roaming agreement with AWS, the company's
largest roaming partner, the amount TeleCorp receives and pays for roaming minutes will decline for each of the next several
years.
TeleCorp CEO and co-founder Jerry Vento, who was CEO of Sprint Spectrum/American Personal Communications LP
builder of the first PCS network in the United Statessays the affiliation with AWS is far better than what Sprint PCS could
have offered through its affiliate program. AWS contributed both cash and licenses to TeleCorp, and the AT&T brand name is
a powerful one that TeleCorp uses along with the SunCom name.
Salomon Smith Barney, Lehman Brothers, Deutsche Banc Alex.Brown and Merrill Lynch & Co. were managing underwriters
for the IPO. As for the timing: "The sector fundamentals just couldn't be better," Vento says, noting that 17 million people will
buy wireless this year and minutes of use are on the rise.
Given last week's strong debut, TeleCorp couldn't have picked a better time.
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