Who's Buying What

By John Schwartz

Reports of Sprint's and MCI/WorldCom's purchases of wireless cable companies have poured onto the internet regularly since late March.  It is likely that circumstances will have changed by the time this newsletter reaches you.  But here's the scorecard as of late March.  None of the deals have closed yet, and there are various conditions to be fulfilled in order for them to do so. 

1.  MCI/WorldCom has bought a controlling interest in CAI Wireless.  It has contracted to buy the rest at $28/share, an offer which it raised from $24/share to match a competing bid.  CAI owns 94% of CS Wireless, so control over CAI also means control over CS.  The purchase contract has not been filed with the Securities and Exchange Commission, but other filings by CAI confirm that the deal has taken place.   Including the book value of debt to be assumed, and deducting the cash on hand at CAI and CS, the $28/share figure values the company at about $935 million---although WorldCom will pay considerably less, due to the fact that it bought most of the securities in March, when wireless cable stock and bond prices were much lower.  Combined, the two companies have about 25 million service area  households.  This values the company at $37.40 per service area household ("per pop").   

2.  Sprint has contracted to buy People's Choice TV,  and already has closed the purchase of major blocks of preferred and common stock.  The sales agreement has been filed with the Securities and Exchange Commission.  Sprint raised its initial offer from $8 to $10 per share.  The methodology described above produces a company valuation of about $410 million, most of which constitutes assumption of debt.  PCTV has 10,159,000 "estimated households within signal area," according to its latest 10-K filing at the SEC.  That comes to $40+ per pop. 

3.  Sprint has contracted to purchase American Telecasting.  The purchase agreement has been filed with the Securities and Exchange Commission. Sprint has contracted to pay $6.50 per share, which values the company at about $407 million (calculated as described above).  According to an ATI SEC filing, "[a]s of December 31, 1998, the Company had approximately 10.1 million Estimated Households in Service Areas in its markets," which values the company at just over $40 per pop.  

4.  A Sprint press release reported that Sprint has contracted to buy wireless cable operations which are owned by Videotron USA and Transworld Communications, the latter of which went into bankruptcy in late 1997.  The
systems are located in such areas as the San Francisco Bay and Tampa. According to the Sprint release, the "transactions will give Sprint high-speed wireless access to almost 6.4 million homes..." and the combined
purchase price is approximately $210 million.  Much less information is available about this purchase than the others, as nothing is on file at the Securities and Exchange Commission.  It is not clear, for instance, if Sprint agreed to assume debt, or if the 6.4 million household figure refers to line-of-sight homes or service area homes.   If the deal involves acquiring no significant cash and assuming no debt, the purchase price
amounts to about $33 per pop. 

5.  A recent Wireless One SEC filing indicated that MCI WorldCom has purchased Wireless One debt, including both bonds and a comparatively recent secured note issued by an interim lender.  Wireless One is currently
operating under Chapter 11 bankruptcy protection.  This leads one to wonder if WorldCom is seeking to gain control over Wireless One.  Recently, Wireless One withdrew its "pre-packaged" bankruptcy proposal, citing
increases in wireless cable values as the reason.  It is possible that quite a chess game is being played out behind the scenes. 

6.  News reports, apparently originating with the CNBC cable network, have indicated that MCI/WorldCom has agreed to buy Prime One Cable's wireless operations in Southern California, which cover Los Angeles, Orange County, and San Bernadino/Riverside.  One article  quoted MCI as refusing to confirm the reports, and accounts have differed as to the amount of the purchase price. 

This site powered by Contentor.