Rural telecommunications provider HickoryTech Corp. signed a definitive agreement to sell its wireless business to Western Wireless Corp. for approximately $25 million, including $12.8 million in cash and approximately 1 million HickoryTech shares currently held by Western Wireless.
HickoryTech’s wireless operations include cellular and PCS licenses covering approximately 925,000 potential customers, or 783,000 non-overlapping pops, in southern Minnesota. The licenses include the “A-side” cellular license to operate in Minnesota’s Rural Service Area 10, the Metro A-2 license surrounding the Minneapolis/St. Paul market, and two PCS licenses covering the Minnesota BTAs of Mankato-Fairmont and Rochester-Austin-Albert Lea.
HickoryTech entered the wireless space in 1998 and recently said it has invested more than $20 million in its wireless network. The company also reported a TDMA roaming agreement with AT&T Wireless Services Inc. earlier this year.
“This is a positive step for HickoryTech, both strategically and financially,” said John Duffy, president and chief executive officer of HickoryTech. “The business model in wireless has changed significantly since HickoryTech entered this business, impacted by competition, regulation, an erosion of roaming traffic and the required investment in new technology.”
HickoryTech reported $4 million in wireless revenues during the second quarter of this year, which was flat year over year despite reductions in roaming revenue.
Duffy added that the sale would allow the company to focus on its core wireline and broadband operations, as well as strengthen its balance sheet by reducing debt. The company noted it expects the sale to count as a one-time non-cash book writedown of $21 million after tax, or approximately $1.50 per share, which will be recorded in its third quarter financial results.
Western Wireless noted the operations are concentrated in the cellular markets, and it will take on the approximately 25,000 HickoryTech subscribers and expects to keep the 35 HickoryTech employees.
“We are very excited about this opportunity to expand our business in Minnesota,” said Mikal Thomsen, president of Western Wireless.
Analysts noted the deal could add approximately $5 million in domestic earnings before interest, taxes, depreciation and amortization to Western Wireless next year.
