NEW YORK-CommNet Cellular Inc., a Colorado-based rural cellular provider, has terminated plans announced early this year for a nationwide paging alliance with MobileMedia Corp., but it is close to reaching an agreement with a substitute, said Dan Dwyer, chief financial officer.
“We’ve come to a turn in the road,” he said. “Given the situation I’m sure you’re aware of with MobileMedia, we’ve decided to pursue an alternative nationwide paging provider.”
Dwyer declined to identify the new carrier because he said, “we have not yet inked the contract.” He termed the pending arrangement a `furthering,’ or advancement, of the kinds of terms envisioned under the earlier MobileMedia plan.
The agreement under negotiation contemplates CommNet’s use of the nationwide paging carrier’s frequency for free in its markets where the paging provider doesn’t have infrastructure. In exchange, CommNet will “build out a paging network on top of our existing infrastructure,” Dwyer said.
The nationwide paging carrier would pay CommNet a fee for its own customers when they roam into CommNet’s coverage area. Likewise, CommNet will pay the nationwide paging provider a fee when CommNet customers roam outside CommNet’s territory and use the nationwide network.
In a related development, Standard & Poor’s Corp., New York, announced Dec. 19 it had raised its ratings to B- from CCC+ on $257 million of CommNet’s outstanding debt: $177 million in senior subordinated discount notes and $80 million in subordinated notes. The outlook is stable, the rating agency said.
“Although the company’s (cellular) systems now are largely built-out, next year’s capital budget is expected to grow to $50 million [to] fund improvement in [cellular] coverage and construction of a paging network,” said the report, issued by Timothy E. Caffrey, telecommunications analyst.
“The upgrades reflect CommNet’s improved business position as well as improving cash flow coverage of still significant debt levels,” Caffrey’s report said. “Continued improvement in the core cellular business should increase internal funding of the capital program and allow the company to meet future cash interest on its outstanding debt.”
CommNet is a holding company that operates, manages and finances cellular telephone systems in the Rocky Mountain and Northern Plains states. It has “a proportional ownership interest” in cellular markets covering a population of 3.5 million, 80 percent of which is within rural service areas, S&P said. CommNet manages a cellular system covering 4.1 million pops in 55 markets covering nine states that border each other.
Although CommNet’s market penetration still is below the national average of 7.4 percent, Standard & Poor’s said the carrier’s market share rose to 5.2 percent in 1996, compared with 3.8 percent in 1995. It now has 211,300 customers.
CommNet customers spend $62 per month on average, or about $10 more monthly than the national average. Roaming in its rural service areas constitutes 26 percent of the company’s revenues, a proportion more than twice the national average.
CommNet closed its 1996 fiscal year Sept. 30 with cash flow that had nearly doubled to $38 million over Fiscal Year 1995.
