Verizon Wireless Plans IPO, $3 Bln Network Investment
New York, April 4 (Bloomberg) -- Verizon Wireless, formed when Bell Atlantic Corp. and Vodafone AirTouch Plc combined their U.S. wireless assets yesterday, said it will sell shares to the public and spend $3 billion to expand its network this year.
The companies didn't say how much of Verizon Wireless would be sold or when. The announcement comes a week after AT&T Corp. said it would sell shares in its wireless group in an offering that could raise as much as $11.5 billion, making it the largest U.S. initial public offering.
``Wireless is hot, investors want wireless, and it's a way to unlock the value of the wireless operations,'' said Christopher Larsen, a wireless analyst at Prudential Securities Inc.
Bell Atlantic and Vodafone agreed to combine their U.S. wireless properties in September to get coast-to-coast coverage and cut costs. Once Bell Atlantic completes its $90 billion purchase of GTE Corp., expected this quarter, Verizon Wireless will have more than 24 million phone customers, almost 4 million paging customers and a network in 96 of the top 100 U.S. markets.
Verizon Wireless is looking to benefit from investor enthusiasm for wireless stocks. The shares of Nextel Communications Inc., another nationwide wireless-phone company, have surged more than threefold in the past year. Those of Sprint PCS, the wireless unit of Sprint Corp., have more than doubled.
``This is a sign of our determination that in this era of soaring wireless values, our leadership position is rewarded,'' Bell Atlantic Chief Executive Ivan Seidenberg said on a conference call. The company also needs a currency to make acquisitions to continue filling out its service area.
AT&T plans to sell 360 million shares of its Wireless Group at $26 to $32 each later this month. Kevin Roe, an ABN Amro Inc. analyst, said the Verizon Wireless share sale could surpass AT&T's because Verizon will have twice as many customers. He rates both Bell Atlantic and Vodafone ``buy.''
Moving Fast
Seidenberg said on the call he wants to get the initial public offering done ``as soon as possible.'' Verizon Wireless President and Chief Executive Dennis Strigl later said the share sale will happen by year's end.
A share sale gives Vodafone two things, said Prudential's Larsen. ``One is a realization of the value that they have in AirTouch through this Verizon deal ... but number two, it gives them a way to monetize their investment if they so choose.''
Bell Atlantic spokesman Susan Kraus said the company plans to sell actual shares of Verizon Wireless and not create a tracking stock.
Bell Atlantic shares rose 5/8 a 63 11/16 on the New York Stock Exchange, while AT&T fell 1 9/16 to 56 7/16. Both companies are based in New York. Also on the NYSE, Irving, Texas-based GTE rose 9/16 to 74 1/16, and Vodafone AirTouch American depositary receipts declined 1 7/16 to 52 1/4.
New Services
Verizon Wireless also said it plans to introduce the nation's first wireless two-way, short-messaging service in July, letting customers send text notes to and from mobile phones and the Internet.
The service will let users send and receive messages even while they're talking or using their cell phones to get on line, Verizon Wireless Chief Operating Officer Lowell McAdam said.
The company also plans to introduce a wireless Web gateway in the third quarter, sharing resources with Vodafone AirTouch, which plans to provide Internet access. Content will be provided by InfoSpace.com Inc., MicroStrategy Inc.'s Strategy.com and E*Trade Group Inc., McAdam said. Verizon also will begin selling nationwide prepaid digital wireless service in August, he said.
The company introduced five SingleRate service plans that eliminate extra fees for long-distance and out-of-area calls. The prices range from $35 a month for 150 minutes to $150 a month 1,500 minutes. Rival AT&T's cheapest Digital One Rate plan is $59.99 a month for 300 minutes.
``These plans will deliver to customers predictability'' across the U.S., McAdam said.
To support the new plans, Verizon said it agreed to buy one million Audiovox Corp. digital wireless phones. Motorola Inc. StarTac phones also will be available, the company said. Rebates of as much as $60 will be available to encourage customers to upgrade to the new phones.
Overlaps, Guidance
Discussions to resolve overlaps -- owning multiple wireless licenses in a single market -- continue, said Verizon Wireless Chief Financial Officer Ted Langston. Affected markets include Chicago, Houston and Seattle, he said.
Verizon Wireless expects to have 28 million customers by the end of 2000, $14.5 billion to $15 billion in revenue and $5.5 billion to $6 billion in cash flow, or earnings before interest, taxes, depreciation and amortization. Analysts use cash flow to value companies with heavy debt loads, such as those building communications networks.
On an annual basis, Verizon Wireless expects subscriber growth of 13 percent to 15 percent, revenue growth of 15 percent and cash flow growth of 20 percent, Langston said. Bell Atlantic manages the venture and owns 55 percent of it. Vodafone owns the rest.
Apr/27/2000 17:08 |
