NEW YORK-Illuminet Holdings Inc., which calls itself the largest unaffiliated Signaling System 7 network provider in the country, plans an initial public offering of 3.9 million shares priced between $14.50 and $16.50 each.
Morgan Stanley Dean Witter, New York, is lead underwriter for the proposed IPO, which Illuminet has asked the Nasdaq to list.
Proceeds will be used to fund potential acquisitions, develop new and improved services, maintain and expand Illuminet’s network, repay outstanding debt, and for general corporate purposes, according to the preliminary deal prospectus.
“The market for SS7 network access and related services is relatively new but intensely competitive … We expect competition to increase in the future,” the document said. The SS7 market “is subject to rapid technological change (and) evolving industry standards and regulatory developments.”
As of June 30, Illuminet counted among its customers: 268 independent telephone companies, 177 competitive local exchange carriers, 85 wireless carriers and 84 interexchange carriers. The company’s largest 10 customers generated about half of its nearly $72 million of revenues in fiscal year 1998, during which Illuminet reported operating income of $9.5 million and net income of $5.3 million.
Through its SS7 network, Illuminet, based in Lacey, Wash., supplies connectivity, switching and transport. SS7 capabilities also encompass intelligent network services like support for roaming between wireless carriers and local number portability. The Federal Communications Commission has mandated wireless carriers to implement local number portability in 2002.
“Intelligent network functions enable carriers to deploy advanced services on computer systems separate from the switching systems that connect their customers. The computer systems (are) accessed through the SS7 network, reducing cost and increasing the quality of customer service,” the preliminary offering statement said.
“We believe that providing carrier-class intelligent network capabilities is one of the biggest challenges facing emerging Internet protocol-based carriers. We are actively working with hardware providers, including Cisco Systems and Lucent Technologies Inc., to certify new SS7-related equipment for emerging [IP-based] carriers.”
Some of Illuminet’s largest customers also are its most significant potential competitors, although few have chosen to market their own SS7 systems to outside carriers, the red herring said.
Illuminet’s signaling services customers include AT&T Corp., MCI WorldCom Inc., Bell Atlantic Mobile, U.S. Cellular Corp. and WinStar Communications Inc. Its intelligent network services customers include Frontier Corp., Alltel Corp., BellSouth Corp., AT&T and MCI WorldCom.
“Our competitors for SS7 network access and intelligent network services include subsidiaries of AT&T, MCI WorldCom, Southern New England Telephone, Sprint (Corp.), GTE (Corp.) and regional Bell operating companies,” the IPO registration document said.
“Many of our competitors are small business units of very large companies that currently do not actively market their SS7 networks or services.”
