Dear Investor to Investor readers:
We are getting quite a bit of coverage on the IXC/DCTC press release. Here is
another from Reuters which explains a little bit more of the deal.
Kathy Knight-McConnell
Investor to Investor
imall.com
DCI Telecommunications agrees to swap
NEW YORK, Dec 7 (Reuters) - Telecom provider IXC Telecommunications Inc.
(Nasdaq:IIXC - news) said Monday it agreed to swap managing control of a
defaulting customer for a 13 percent stake in DCI Telecommunications Inc. (OTC
BB:DCTC - news).
Under terms of the agreement, Texas-based IXC will acquire $16 million worth
of stock, or 4.25 million shares, of the smaller telecommunications company.
DCI, in exchange, will take on management of a debit-card provider that owes
about $18 million.
DCI also agreed to a 5-year commitment to lease specific IXC facilities to
support its expanding long-distance and prepaid phone card business.
''The arrangement with DCI is significant for both companies,'' John Fleming,
president of IXC's international business, said in a statement.
''For DCI, IXC's contribution provides the network and collocation
capabilities to significantly expand its international operations,'' he said.
''For IXC, it represents an expanding international presence and the first
time all its operating affiliates have come together under one customer
contract.''
IXC said it expects to take a one-time charge of $14 million in the fourth
quarter related to the default. In November, the company set fourth quarter
forecasts lower citing an 18 percent increase in expenses quarter to quarter.
Connecticut-based DCI called the deal an alliance that would support dramatic
growth in its worldwide traffic.
The company said it plans infrastructure improvements totaling about $30
million that include collocation of a major switch at IXC's New York
facilities and switch installation in the United Kingdom, Spain and Italy.
DCI will lease lines from IXC to carry its traffic, including one between
Madrid and London and two from London to the United States. The existing
switch in London will be moved to an IXC facility in Italy and linked directly
to London via DCI's dedicated connection.
This also gives DCI the needed capacity to ramp up traffic at a much quicker
pace, the company said.
DCI said it expects the switching equipment and dedicated lines to be in place
by March 1.
Officials were not available to comment on whether charges related to the deal
would be recorded in the next quarter.
In November, DCI said it would merge with Wavetech International (Nasdaq:ITEL
- news) in a stock swap. The combined assets will total about $23 million with
net tangible assets in excess of $4 million, DCI had said.
IXC shares were at $25.375 in Monday morning trade, down from Friday's close
of $26.50. Shares hit a 52-week high of $62 and a low of $16.50.
Shares of DCI were at $3.09, down from the open price of 4. The year high was
$4.3125 and the low was $0.67.
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