WinStar Communications Inc. intends to acquire Milliwave L.P. and has signed definitive agreements that will allow it to manage Milliwave’s 38 GHz licenses until WinStar acquires the company next year.
New York-based WinStar is a competitive access provider that has licenses for 38 GHz spectrum in 41 of the nation’s top metropolitan statistical areas. It provides wireless fiber transmission for voice, data and video, allowing businesses to bypass the local telephone company.
WinStar will pay $125 million to buy its Washington, D.C.-based competitor, Milliwave, which also holds 38 GHz licenses in more than 80 major markets. The transaction is expected to be $40 million in cash and $85 million paid in 3.4 million shares of WinStar common stock, valued at $25 per share.
Control of Milliwave’s licenses will give WinStar a new channel in 36 existing WinStar markets, and add more than 50 new major markets to WinStar’s operating territories, including West Palm Beach and Orlando, Fla., Sacramento, Calif., and Hartford, Conn.
Former Time Warner Telecommunications executive Dennis Patrick joined Milliwave last month as chief executive officer. Following WinStar’s acquisition of Milliwave, scheduled to close in 1997, Patrick is expected to join the WinStar board of directors.
Patrick said WinStar has demonstrated the viability of using 38 GHz spectrum to reach businesses as a competitive access provider.
“After considering a number of possible partners, we chose WinStar based on its operating management, software systems, customer base and its multiple channels in major markets,” Patrick said.
Milliwave’s founder, Tom Domencich, said he sought the 38 GHz licenses two years ago with the idea of delivering broadband fiber service to buildings not served by fiber optic carriers. By combining licenses, WinStar and Milliwave will have the capacity to be “a more effective competitor against the large incumbent local telephone companies,” Domencich said.
WinStar reported a 136 percent increase in revenue for the quarter ended March 31. It was during that quarter that WinStar installed its Wireless Fiber service in New York City, and launched its competitive local exchange carrier business to originate and terminate traffic. This fall, WinStar intends to begin installing switches.
