NEW YORK-Preferred Networks Inc., a carrier’s paging carrier headquartered in Norcross, Ga., announced April 15 an agreement to obtain between $15 million and $20 million in a private placement with five institutional investors that are its shareholders.
Proceeds of the sale of redeemable preferred stock and warrants are intended to finance the company’s buildout of wireless messaging networks in and around the 50 largest metropolitan markets. Preferred Networks now operates networks in 21 markets and has them under construction in 28 other markets.
“Companies operating in the wireless sector, and paging in particular, are today finding it very difficult to raise necessary capital in the public market,” Mark Dunaway, chief executive officer, said. “We are pleased with the strong support we are receiving from our original institutional investors and their endorsement of our outsourcing services platform.”
In its announcement, Preferred Networks did not identify the five institutional investors in its planned private placement. However, the prospectus for the company’s initial public offering in March 1996 lists five institutions as its principal stockholders: Centennial Fund IV L.P., Denver; Fleet Venture Resources Inc., Providence, R.I.; Saugatuck Capital Co., L.P. III, Stamford, Conn.; Primus Capital Fund III L.P., Cleveland; and Transit Communications U.S.A. L.P., Roswell, Ga. The sale is subject to shareholder approval and is expected to close in June, the company said.
Preferred said it provides outsourcing services to more than 1,400 companies, including nine of the 10 largest paging companies, the two largest wireless network infrastructure manufacturers, the second largest cellular products manufacturer and two regional Bell operating companies.
“As capital has become increasingly difficult for many wireless companies to obtain, we believe many [of them] will seek to shed expenses through outsourcing and (will) focus their internal resources on increasing subscriber cash flow,” Dunaway said. “Because we do not compete with our customers for subscribers, we believe PNI will be an attractive partner for a number of these companies.”
Related to its pending private placement, Preferred said it also has reduced the amount of planned capital investment required for network buildout by increasing the use of its six existing centralized switching centers-technical control centers-in order to provide network services in additional markets. Original plans called for four additional technical control centers to be constructed. However, Preferred Networks said it now plans for just one additional center, along with several remote points of presence. The latter require less capital investment while also providing high quality network services, the company said.
Capital investment and operating expenses associated with collocation and interconnection accounts are lower. Consequently, Preferred Networks said it intends to direct its network services attention primarily toward those resellers-typically the larger ones in terms of subscribers-that own paging terminals they can collocate onto a PNI facility or can interconnect to PNI via wireline telephone circuits. PNI noted, however, that collocation and interconnection arrangements also produce lower revenues per units in service.
In another cost control measure, PNI also said it will use its new product services subsidiary, EPS Wireless Inc., to expand its supply of refurbished paging units. As is commonplace in the paging industry, the company traditionally has offered new pager equipment to its customers to help them add subscribers. Buying new pagers costs PNI more than having its subsidiary recondition used units.
