=DJ 2nd UPDATE: Alltel Sees 2006 Revenue Growth Of 8%-10% >AT
(Adds executive comments starting in the fifth paragraph.)
By Roger Cheng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--
Alltel (AT) unveiled its 2006 estimate, forecasting revenue of $7.85 billion to $8.02 billion, or growth of 8% to 10% from a year ago.
In 2005, the company posted revenue of $7.27 billion. "We've changed the mix from a wireline cash flow business to a 100% wireless business," President and Chief Executive Scott Ford said during an analyst presentation Wednesday.
Alltel also said it expects operating income before taxes, depreciation and amortization of $2.72 billion to $2.82 billion. The estimate expects growth of 10% to 14% from a year ago, when it posted OBITDA of $2.49 billion.
Customer growth and an increased contribution from data and wholesale revenues are expected to drive wireless growth this year, said Chief Financial Officer Sharilyn Gasaway.
Alltel also expects to spend $1.22 billion to $1.32 billion, up 8% to 17% from a year ago, when capital expenditures amounted to $1.13 billion. Much of the investments will go towards the expansion of its next generation EV-Do, or evolution-data only, network, which Ford said should be up throughout its entire network sometime this year.
The growth rates factor in last year's acquisition of Western Wireless, and exclude Alltel's wireline assets, which the company said makes for a more accurate comparison.
The company plans to spin it off in a tax-free move and merge it with Valor Communications (VCG) in a deal announced in December.
"I believe this is the best structure of all the alternatives we had in place," Ford said, adding that he said the deal will likely close in May, and would leave the wireless assets with "virtually no debt."
While Alltel will lose synergies from the separation into two corporate staffs, Ford said that would be more than offset by the increased strategic and capital flexibility created fro the deal.
In other deals, Alltel expects to complete the divestiture of its international assets in the first quarter.
The prospect of a debt-free Alltel has many on Wall Street wondering if the company will make another deal. Ford didn't comment specifically on any potential acquisitions, but noted that other rural wireless carriers are trading at twice its valuation. For now, Alltel plans to buy back 15% to 18% of its stock.
"We will be mindful of the fact that while (its balance sheet) drives enormous flexibility, we are mindful that our goal is to drive a return," Ford said.
Alltel is open to expanding its markets, but Ford said he isn't aiming to become a national player, adding that there is a correlation between national and profitable.
Within Alltel's market, the company aims to take revenue share, he said. Outside of its region, the company hopes to drive additional returns through moves such as roaming agreements.
On the expense end, Alltel will likely see minimal near-term impact from a change in its retirement plan to a 401(k) match plan from pension benefits, Gasaway said. The benefits from the change will take a few years to appear, and is slightly dilutive this year. In addition, Alltel expects its plan to expense stock options will weigh on results by $20 million, which is reflected in the guidance, she said.
Over the long term, Alltel is exploring ways to provide video, voice and data services in the home wirelessly, Ford said. The company is exploring technology such as WiMax, but Ford added that nothing significant is likely to show up for the next five years.
Alltel, which is the fifth largest wireless carrier in the U.S., primarily targets the rural markets. Its shares are currently down 1% at $59.45.
By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com |
