Friday, August 6, 2004

Wireless deal keeps network

Cincinnati Bell to buy out AT&T stake; Cingular stays

By Mike Boyer
Enquirer staff writer

Cincinnati Bell Inc. said Thursday it agreed to buy out the minority stake in its wireless operations, removing an uncertainty around the business that has a half- million customers in Cincinnati and Dayton.

The agreement with AT&T Wireless and Cingular Wireless LLC gives Cincinnati Bell the right to acquire AT&T Wireless' 19.9 percent stake in Bell's wireless operations for $83 million starting Sept. 30, 2005.

The agreement, worked out in talks since spring, eliminates a noncompete agreement in Cincinnati Bell's joint venture agreement with AT&T Wireless signed in 1998.

The provision would have prevented Cingular from continuing to offer service in the Cincinnati-Dayton market once its $41 billion acquisition of AT&T Wireless is completed by year-end.

The agreement, which takes effect if the Cingular acquisition is completed, also would reduce roaming charges for Cincinnati Bell and Cingular on each other's networks for five years.

Paul McAleese, Bell's chief marketing officer, said the agreement would give Cincinnati Bell Wireless customers access to what would be the nation's largest wireless network when the Cingular-AT&T Wireless deal is completed.

Cingular Wireless, a joint venture between SBC Communications and BellSouth, serves more than 25 million customers. It doesn't break out subscribers by individual markets. Cincinnati Bell Wireless had 494,600 subscribers in Cincinnati and Dayton at the end of June, up from 474,400 a year ago.

Michael Vanderwoude, Bell spokesman, said the roaming agreement would cut the company's annual roaming charges in half, offsetting lost roaming revenue and leaving operating income basically unchanged.

In the June quarter, Bell reported roaming revenue of $3 million and roaming expenses of $8 million.

Bell said it has completed an amendment to its credit agreement, giving it the ability to acquire wireless stake with its existing financing pact.

The $83 million price tag was well below the $120 million to $140 million previously estimated by analysts.

David Barden, analyst with Banc of America Securities, said the deal could produce 17 cents a share of additional value for Bell shareholders.

He figures Bell is acquiring the additional stake for about $790 per subscriber, well below the fair market value of $1,200 per subscriber. Based on a year-end subscriber base of 525,000 for Cincinnati Bell Wireless, the $410 per subscriber windfall means about 17 cents a share spread across Bell's 250 million shares.

While acquiring the AT&T Wireless stake would increase Bell's $2.2 billion debt, it is within the company's operating leverage, Barden said. Bell's shares closed Thursday at $3.77, down 11 cents.



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