THE COMPANIES STAR, PT-1 AND NEWCO
STAR is an emerging multinational carrier focused primarily on the
international long distance telecommunications market. STAR offers highly
reliable, low cost switched voice services on a wholesale basis, primarily to
U.S.-based long distance carriers. STAR provides international long distance
service to approximately 220 foreign countries through a flexible network
comprised of various foreign termination relationships, international gateway
switches, leased and owned transmission facilities and resale arrangements with
long distance providers. STAR has grown its revenues rapidly by capitalizing on
the deregulation of international telecommunications markets, combining
sophisticated information systems with flexible routing and leveraging
management's industry expertise. STAR has increased its revenues and net income
from $58.9 million and $3.7 million, respectively, in 1995 to $404.6 million and
$5.8 million, respectively, in 1997.
STAR markets its services to large global carriers seeking lower rates as
well as to small and medium-sized long distance companies that do not have the
critical mass to invest in their own international transmission facilities or to
obtain volume discounts from the larger facilities-based carriers. During the
fourth quarter of 1997, STAR provided switched international long distance
services to 105 customers and currently provides these services to nine of the
top forty global carriers. STAR has also recently focused on building a customer
base overseas, particularly in Europe, and has opened offices in Dusseldorf,
Frankfurt, Hamburg and Munich, Germany and London, England. In addition, STAR
has begun to market its international long distance services directly to certain
commercial customers in the U.S. and overseas.
STAR currently operates international gateway switching facilities in New
York, Los Angeles, Dallas and Miami; London, England; and Dusseldorf, Frankfurt,
Hamburg and Munich, Germany. In early 1999, STAR plans to put into service
switches in Atlanta, Chicago and Seattle; Paris, France; Geneva, Switzerland;
and Vienna, Austria. STAR's switching facilities are linked to a proprietary
reporting system, which STAR believes provides it with a competitive advantage
by permitting management on a real-time basis to determine the most
cost-effective termination alternatives, monitor customer usage and manage gross
margins by route. STAR holds ownership positions in a number of digital undersea
fiber optic cables, including TPC-5, Gemini and AC-1, has recently entered into
a commitment to acquire transmission capacity on the Qwest domestic Macro
Capacity(SM) Fiber Network, which is expected to serve over 130 cities in the
U.S., and has plans to continue to acquire transmission capacity on additional
undersea fiber optic cable systems.
STAR was incorporated in Nevada in September 1993 as STAR Vending, Inc. and
was reincorporated in Delaware as STAR Telecommunications, Inc. in April 1997.
IIWII Corp. ("Newco"), which is a wholly-owned subsidiary of STAR, was
incorporated in Delaware on July 15, 1997 for the purpose of effecting the
Merger. Newco has no material assets and has not engaged in any activities
except in connection with such proposed Merger.
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STAR's and Newco's executive offices are located at 223 East De La Guerra
Street, Santa Barbara, California 93101. Its telephone number at that location
is (805) 899-1962. PT-1
PT-1 is a provider of international long distance services to retail
customers and telecommunications carriers. PT-1 provides retail
telecommunications services primarily by marketing prepaid telephone calling
cards ("Prepaid Cards"), principally under the PT-1 brand name, through an
extensive network of distributors who directly and indirectly sell PT-1's
Prepaid Cards to retail outlets throughout the United States. PT-1 targets
retail markets with substantial international long distance calling
requirements, and believes that its Prepaid Cards provide consumers with a
convenient, attractively priced alternative to traditional presubscribed long
distance services. PT-1 sells its Prepaid Cards exclusively to distributors, and
it does not maintain any sales or marketing relationship with the retail outlets
that carry PT-1's Prepaid Cards. During March 1998, PT-1 began to market both
"dial around" and presubscribed long distance service to retail customers in
certain target markets that also have substantial international long distance
calling needs. Over the past several months, PT-1 has also increased the amount
of resources devoted to obtaining commercial retail customers with significant
international long distance requirements. For the fiscal year ended March 31,
1998, PT-1 generated revenues and net income of $431.5 million and $11.6
million, respectively.
PT-1 was founded in April 1995 to capitalize on the growing market for
international long distance services. PT-1 initially entered the retail
international long distance market through the distribution of Prepaid Cards
targeted at ethnic communities. After building significant international
traffic, in 1996 PT-1 began to negotiate reduced transmission rates based upon
volume with underlying carriers and began to invest in switching equipment and
lease transmission capacity to further reduce its cost of service as a
percentage of revenues. In August 1996, PT-1 began to leverage its significant
volume of international traffic by selling international long distance services
on a wholesale basis to other carriers. For the fiscal year ended March 31,
1998, revenues from retail sales and from wholesale sales were $356.3 million
and $75.2 million, respectively.
PT-1 believes its competitive strengths are its (i) established Prepaid Card
brand names, (ii) extensive distribution infrastructure, (iii) substantial
experience in identifying, targeting and marketing to communities and markets
with significant international long distance usage, (iv) position as a leading
provider of telecommunications traffic to various international destinations and
(v) efficient telecommunications network. PT-1 believes that its competitive
strengths will enable it to continue to profitably increase its retail customer
base and its traffic volume and negotiate lower telecommunications costs.
PT-1's retail customers can use its Prepaid Cards at any touch tone
telephone by dialing an access number, followed by a personal identification
number (a "PIN") assigned to each Prepaid Card and the telephone number the
customer wishes to reach. PT-1's switches complete the call, and its debit card
platform ("Debit Card Platform") reduces the Prepaid Card balance during the
call. PT-1 offers Prepaid Cards that can be used to access PT-1's network by
dialing an 800 number or, in specific metropolitan markets, local area calling
cards ("LAC Cards") that only require a local call. PT-1 believes that customers
typically use its Prepaid Cards as their primary means of making long distance
calls due to, among other things, (i) attractive rates, (ii) reliable service,
(iii) the ease of monitoring and budgeting their long distance spending, (iv)
the appealing variety of Prepaid Cards offered by PT-1 to different market
segments and (v) the inability of certain PT-1 customers, many of whom are
recent immigrants to the United States, to establish credit with the major
facilities-based long distance carriers.
PT-1 was incorporated on April 21, 1995 under the name PhoneTime, Inc. In
August 1997, it changed its name to PT-1 Communications, Inc. PT-1's principal
executive offices are located at 30-50 Whitestone Expressway, Flushing, New York
11354, and its telephone number at that location is (718) 939-9000. |
