NEW YORK-The story of NTELOS Inc. and Citizens Communications Inc., as told at Legg Mason Wood Walker’s recent “Future of Rural Telecommunications” conference, demonstrates the wireless opportunity’s expansion well beyond urban centers.
“We’ve done this so quietly we haven’t shown up yet on the tables listing wireless companies,” said James Quarforth, chairman and chief executive officer of NTELOS Inc., Waynesboro, Va.
“Our story over the last year has become very different because of the cumulative effects of five years of acquisitions. We are now a wireless company with wireline add-ons,” he added.
Known until late last year as CFW Communications, the company was founded in 1897 to provide landline service. Today, Legg Mason estimates at least 70 percent of the total enterprise value of NTELOS can be attributed to its wireless operations, including personal communications services, paging and wireless towers. This year, the carrier expects to earn about $205 million in revenues, of which 59 percent are from wireless communications.
Last summer, NTELOS acquired PCS licenses in Pennsylvania from AT&T Wireless Services Group and in Virginia from PrimeCo PCS. It also agreed to merge with R&B Communications Inc., Daleville, Va., like itself a member of the Virginia and West Virginia PCS alliances.
As a result of these transactions, the CDMA carrier now holds PCS licenses covering more than 11 million people and has 698 cell sites in operation. It awarded a $100 million contract in November to Lucent Technologies Inc. to expand its network in Virginia and West Virginia.
The company closed out 2000 with 168,400 PCS subscribers, 72,500 competitive local exchange carrier and incumbent LEC lines and 62,900 Internet subscribers. It focuses on marketing through its own sales channels, leading with wireless as the entree to bundled services and signing up post-paid subscribers.
“We have an unlimited usage local (wireless) plan and a 14-state regional plan, which only about 14 percent of our customers use,” Quarforth said.
On the fixed wireless side, NTELOS owns local multipoint distribution system licenses covering 1.3 million people and multipoint multichannel distribution service licenses covering 850,000 people.
“We have a large fiber-optic network so we do our own backhaul for our wireless, CLEC and ILEC services. … Because we own a CLEC, it can provision wireline, MMDS and LMDS Internet service for us.”
NTELOS, whose backers include Welsh, Carson, Anderson & Stowe and Morgan Stanley Dean Witter, has a fully funded business plan and plenty of available spectrum.
“We have about 230.5 million pops worth about $750 million for spectrum alone, which is more than the valuation of the company. … We plan to move to 2.5G in 2002, and we can get to 3G very easily,” Quarforth said.
“We are very bullish about data over the long term. When voice penetration gets to 70 percent, we think data will drive penetration beyond 100 percent.”
Citizens Communications, Stamford, Conn., began its operations in the 1930s as Citizens Utilities. It is in the process of divesting itself of its power-related holdings in order to focus on wireline communications, for now.
Leonard Tow, chairman and CEO, spent 26 years as the CEO of Century Communications Corp., the parent of Centennial Cellular Corp.
“There seems to be a universal view among the major carriers that they need to defend the urban areas. There also are opportunities in adjacent and near-adjacent territories. We are experiencing population growth in our areas three-to-10 times the national average. It’s a phenomenon this industry created-the ability to be anywhere and communicate with the world,” Tow said.
“We expect to create a wireless overlay and satellite-delivered TV to our customer base and offer these as ancillary to wireline. We want to be a one-stop-shop, the only place a customer thinks to go. That’s the best defense.”
