Midwest Wireless is the latest regional wireless operator to look at potential strategic alternatives for its operations. The privately held carrier serves more than 420,000 customers on its CDMA-based network in parts of Minnesota, Wisconsin and Iowa.
Midwest Wireless Chief Operating Officer Scott Bergs confirmed that the carrier has hired investment banking firm Bear, Stearns & Co Inc. to advise it on possible alternatives for the carrier, noting those alternatives could involve a potential sale or other means to fund its growing operations.
While Bergs added that Midwest Wireless still is early in the process, published reports indicated that Midwest Wireless could garner up to $1 billion if it decides on a sale, which is substantially more than the value of the regional telecommunications companies that control Midwest Wireless.
In addition to its strong customer base, Midwest also controls substantial spectrum holdings in many of its markets and recently has begun to deploy high-speed wireless data services using CDMA2000 1x EV-DO technology. Midwest Wireless also offers a fixed broadband Internet service in select locations, which the carrier said offers network speeds of up to 768 kilobits per second for $100 per month.
If the carrier decides to sell, the most likely candidates would include Verizon Wireless and Alltel Corp., both of which operate using similar network technology and use Qualcomm Inc.’s BREW platform to deliver downloadable content.
For Verizon Wireless, an acquisition of Midwest Wireless would strengthen its footprint in the upper Midwest and would complement recent deals in the area, including the acquisition of Qwest Communications International Inc.’s network assets in Minnesota and Cellular 2000 of St. Cloud, Minn.
Alltel, which closed on its $6 billion acquisition of Western Wireless Corp. last month, also would extend its operations in the area that include adjacent markets it acquired from CenturyTel Inc. in 2002, as well as its new Western Wireless operations. Alltel also is moving forward with a possible spinoff of its local wireline operations that would leave the company as a pure-play wireless operator.
Fellow regional operator U.S. Cellular Corp. could emerge as an outside candidate as it has a history of picking up spectrum in markets that strengthen its Midwest market cluster and is on the same technology path as Midwest Wireless.
In studying possible strategic alternatives, Midwest Wireless joins a growing list of regional carriers that have announced similar plans or are rumored to be open to sales.
Centennial Communications Corp. reported last month that it was “evaluating a range of possible strategic and financial alternatives,” for its operations. The company serves more than 500,000 wireless customers in six states in the Midwest and Southeast and owns wireless and cable operations in the Caribbean.
Leap Wireless International Inc. also has been tipped by industry analysts as a potential acquisition target for larger CDMA-based operators, including Verizon Wireless.
Merrill Lynch released a report last month noting that CDMA-based regional operators appeared to be faring slightly better in the market than their GSM-based counterparts. The investment research firm partially attributed the CDMA advantage to a possible “halo effect” of nationwide operator Verizon Wireless’ perceived superior network quality and the continued TDMA-to-GSM migration issues impacting many operators.
While Midwest Wireless’ future may be uncertain, the carrier continues to press ahead with its current operations. Midwest Wireless announced last week that it has signed two more small operators to its BREW-hosting service, which now serves 13 operators. The newest BREW hosting tenants comprise Pacific Telecom, which offers service in the Northern Marianas Islands, and Carolina West Wireless, which serves more than 47,000 customers in northwestern North Carolina.
They join Alaska Communications Systems Group Inc., Appalachian Wireless, Bermuda Cellular, Bluegrass Cellular, Cellcom, Eloqui Wireless, Golden State Cellular, Guamcell Communications, Illinois Valley Cellular, Pioneer/Enid Cellular and Rural Cellular Corp.
Midwest launched the BREW hosting service in June 2004 as a way to leverage the knowledge it has gained since implementing the Qualcomm platform on its own network in mid-2003.
Midwest has noted that the BREW hosting model allows it to offer a single standard catalog of applications and content to every hosted operator and then add specific content to target each operator’s customer base. The carrier added that the hosting provides it with a larger subscriber base that it can use to receive better pricing for applications from developers.
