NEW YORK-The dominant impression today of Centennial Cellular Corp., New Canaan, Conn., is connected more to its late 1996 wireless debut in Puerto Rico than to its longstanding analog role on the U.S. mainland.
Centennial Puerto Rico Wireless Corp. is a Code Division Multiple Access personal communications carrier that had 51,000 customers and turned cash-flow positive by its first anniversary. It also recently launched its new competitive local exchange carrier service. AT&T Corp. and Sprint Corp. are two of its CLEC customers, said Rudy J. Graf, president and chief operating officer, at a recent Wall Street Forum.
But Centennial Cellular, founded in 1989, is forging ahead on the home front as well, having positioned itself in rural areas strategically situated between major urban hubs.
“We came into the game a bit too late to get licenses for the big cities, so our mission is to fill in the holes between the big cities,” said Bernard P. Gallagher, chairman and chief executive officer.
The company started with the goal of building large regional clusters in recognition of the fact that “most wireless telephony takes place within a small area,” he said.
Centennial’s longest- held cellular cluster covers a population of about 3.5 million in portions of Indiana, Michigan and Ohio, concentrating on the markets in between Chicago, Cincinnati, Detroit and Minneapolis. In Arizona, California and Nevada, its market encompasses a population of more than 1 million; in Louisiana, Mississippi and Texas, nearly 2 million, much of it between Houston and New Orleans.
In its report for the quarter ended Nov. 30, Centennial also said it plans to divest itself of minority equity interests in cellular properties covering a population of 1.1 million. Most of its minority-held properties are in northern California’s Sacramento Valley and San Francisco Bay regions, with a handful in Louisiana, Nevada and Pennsylvania.
Last year, the carrier added 76 new cell sites in its markets in the continental United States, and another 57 are under construction, Graf said.
“We are going into much smaller cell sites, to a lower-power signal system, to move from a car phone to a mobile phone network,” he said.
However, roaming also is an important factor, accounting for 30 percent of Centennial’s revenues. The analog cellular provider has made digital service available to roaming customers in most of its domestic markets, and is in the process of upgrading to digital the remainder of its network. Graf said the recent introduction of dual mode/dual band PCS-1900 and cellular 800 MHz handsets can only help expand the roaming-revenue opportunity.
To tap roaming revenues and to forestall construction of competing personal communications networks in its territory, Gallagher said Centennial has signed roaming agreements with three major players: AT&T Wireless Services Inc., PrimeCo Personal Communications L.P., and, most recently, Sprint Spectrum L.P. Centennial offered them roaming rates at about 35 cents per minute, according to security analyst reports.
“We lowered roaming charges and (we) provide call delivery within a region without a significant increase in charges. Roaming rates are similar to home rates, so that revenue is steady although per minute charges declined,” Gallagher said.
“Minutes of use increase exponentially when prices are reduced. Our usage grew at 35 percent, [as opposed to] the 15-percent growth in urban areas.”
The ongoing construction of new cell sites isn’t only to encourage but also to accommodate demand. During the fiscal year 1997, ended May 31, Centennial’s customers on average used 100 wireless minutes each month, a 30-percent increase from Fiscal 1996. For the six months ending Nov. 30, average monthly revenue per subscriber was $74 on the mainland and $98 in Puerto Rico.
Not only are people talking more, but more people are talking. During the first half of the current fiscal year, Centennial posted 268,000 subscribers, a 68-percent increase from the same period a year earlier. On the mainland, most of the new customers are first-time wireless subscribers, Graf said. In Puerto Rico, where it had 51,000 customers as of Nov. 30, about half are new to wireless.
“Puerto Rico generated positive cash flow in the fourth quarter for the first time in its history, at one year old. In the domestic cellular industry, historically [this] has taken three years,” Gallagher said.
“We’ve seen a 28-percent increase in operating cash flow from domestic cellular customers. We’ve been able to generate a high degree of domestic cash-flow margins, even while adding new markets, like Louisiana, which is about 18 months old.”
Centennial’s voting stock is 74-percent controlled by Century Communications Corp., a cable TV company whose fiber-optic lines in Puerto Rico provide back-haul for Centennial’s year-old personal communications service network there. Another 17 percent of the voting stock is owned by Citizens Utilities Co.
“We are the sixth-largest nonwireline-controlled wireless company in the United States,” said Gallagher, who also is president and chief operating officer of Century.
Centennial’s board of directors, on which both Gallagher and Graf sit, authorized the company Nov. 30 to repurchase up to 3 million shares of its Class A Common Stock. This is in addition to the 1.18 million shares of this class of its stock that it bought back in the open market during the six months preceding Nov. 30. As of Aug. 8, the company had 16.18 million shares of Class A Common Stock outstanding.
Asked if Centennial planned to transform itself into a privately held company, Gallagher answered, “It is possible, given the fact that we believe our shares are undervalued, that we could continue to buy back our stock.”
During the past year, Centennial’s stock, which trades on the Nasdaq National Market, has reached a high of $22.12 and a low of $8.62. It closed Feb. 9 at $19.87.
