NEW YORK-Omnipoint Corp. raised $250 million in gross proceeds in its sale of 10-year senior notes Thursday to help finance the buildout of its personal communications services network in the New York City area.
Donaldson, Lufkin & Jenrette Securities Corp., New York, lead managed the private placement of notes priced to yield 11.625 percent. Net proceeds to the company are expected to be nearly $190 million.
Moody’s Investors Service Inc., New York, gave the debt securities a speculative grade rating of B2, citing high capital expenditures needed to build the PCS network and a period of three to five years before “meaningful cash flows” are generated.
Although Moody’s said Omnipoint’s balance sheet is above average in quality for companies in similar stages of development, it also noted that the balance sheet would be “increasingly stressed” by the drawdown of up to $750 million in vendor financing to build the PCS network.
Factors working in Omnipoint’s favor, according to the rating agency, include the likelihood that it will be first to market in its coverage area. Although questions remain about, “the broad scale operability of its hybrid GSM-CDMA IS-661 technology,” Moody’s said Omnipoint’s, “primary interface standard-upbanded GSM (PCS 1900)-leads other digital protocols (Code Division Multiple Access and Time Division Multiple Access) in terms of actual customer usage, handset availability and service feature offerings at this juncture.”
Global System for Mobile Communications is the dominant European standard. It also is in use by Sprint Spectrum’s PCS venture in the Baltimore/Washington, D.C. area. Intercel Inc., Western Wireless Corp. and Microcell Telecommunications Inc. also have selected GSM.
In Omnipoint’s primary coverage areas, its leading competitors have selected TDMA or CDMA including: AT&T Wireless Services; Nynex-Bell Atlantic Corp.; Sprint Spectrum, as well as other PCS spectrum licensees or resellers of services by NextWave Telecom Inc.
