A long list of investors led by J.P. Morgan Capital Corp., FirstCall Telephone Corp. and the management team from former operator Triton Cellular Partners have formed a new wireless carrier.
BGV PCS Acquisition Co. L.L.C. has acquired PCS licenses in Chicago and Cincinnati from Verizon Wireless, which had to divest the properties to comply with the Federal Communications Commission’s spectrum-cap rules. Verizon was created through the combination of U.S. wireless operations from Bell Atlantic Corp., GTE Corp. and Vodafone AirTouch plc. The purchase price was not disclosed.
The new company, which will launch a brand next year, has more than $900 million in equity committed. BGV will use this capital, along with committed debt facilities of $1.45 billion arranged by Deutsche Bank Securities Inc., to fund an accelerated network capital expenditure plan and provide capital for further acquisitions of other wireless properties.
J.P. Morgan Capital’s investment was its largest yet in wireless. Other investors include Arlington Capital Partners, The Carlyle Group, First Union Capital Partners, Green Leaf Ridge Co., Odyssey Investment Partners L.L.C., Berkshire Partners L.L.C., CIVC Partners L.L.C., Duff, Ackerman, Goodrich & Associates L.P. and Columbia Capital Partners III L.L.C.
“This reflects the bullishness in the wireless industry,” said James Akerhielm, BGV’s president and chief executive officer and former president and CEO of Triton Cellular, which Rural Cellular Corp. purchased in April. “All of our investors believe there is growth remaining in the wireless industry, especially domestically. Western Europe is seeing voice penetration so much further ahead than the U.S., and data services are starting to be realized.”
Akerhielm said the company already has brokered favorable roaming agreements with Verizon Wireless so that it can offer nationwide and super regional pricing plans. Acquisitions likely will center around adding to the Chicago and Cincinnati market for a contiguous footprint. The carrier has more than $200 million in equity specifically dedicated to acquisitions. Though it doesn’t qualify as a designated entity, Akerhielm said the carrier’s management is considering a partnership arrangement that would allow it access to all the C- and F-block licenses the FCC is re-auctioning in November.”We see a path to 1 million pops,” said Akerhielm.
The CEO declined to comment on BGV’s marketing strategy, but bucked the notion that carriers need to have a nationwide footprint to compete. “I think the benefit of a nationwide footprint is important to some customer segments, but I don’t think it’s important to all,” he said. “In competitive markets especially, there’s an opportunity for a customer segmentation play.”
BGV bought the former PrimeCo Personal Communications L.P. Chicago market and GTE’s PCS market in Cincinnati. It will continue using CDMA technology in those markets and will build out CDMA in acquired markets.
Verizon continues to operate through the previous GTE Wireless network that was Ameritech Cellular in Chicago. In Cincinnati, Verizon Wireless operates the former AirTouch Cellular system.
BGV’s transaction also is the largest-ever minority equity investment in a telecom acquisition, supported by well in excess of $100 million in minority private equity and almost triple the previous percentage level of the minority investment made in GTE’s buy of Am-eritech wireless properties last year.
