NEW YORK-Triton PCS Inc., a startup Time Division Multiple Access carrier based in Malvern, Pa., was expected to sell privately late last week its first debt issue, which comprises $300 million in senior subordinated discount notes due 2008.
AT&T Wireless Services Inc. contributed 20 megahertz of some of its 30-megahertz personal communications services licenses to Triton in the form of common and preferred equity valued at $109 million. In exchange for the licenses, which cover 11 million people, AT&T Wireless received a 19.9-percent equity stake in Triton. The new carrier plans to build PCS networks in rural and smaller urban areas of the southeastern United States surrounding larger city networks operated by AT&T Wireless.
“By taking a minority position in the development of surrounding areas, AT&T benefits by sharing the financing burden and getting the operating losses off the balance sheet while expanding its wireless footprint,” said Robert Konefal, senior vice president, and Douglas Bontemps, senior analyst, for Moody’s Investors Service, New York. The agency assigned a low-tier, speculative-grade rating of Caa1 to the note issue.
“Given the physical properties of PCS, the company will need to build judiciously the more densely populated areas … The … territory contains certain population centers and destinations such as Myrtle Beach and Hilton Head (in South Carolina) and Richmond, Va., that are strategically important to AT&T in its effort to provide nationwide service,” Moody’s said.
Triton’s equity investors have so far made irrevocable commitments of $140 million toward base-station construction and another $35 million to purchase an operating cellular system in Myrtle Beach from Vanguard Cellular Systems Inc., according to Standard & Poor’s Corp., New York.
“Additionally, Triton has signed nonbinding letters of intent with AT&T to purchase its constructed Norfolk, Va., network and a nonconstructed Georgia area, a total of 3.7 million [population] for $137 million,” the Moody’s analysts said.
Triton’s association with AT&T is likely to accord it certain benefits, including a known brand name, roaming traffic and operational and purchasing support, said Timothy E. Caffrey, director of corporate ratings for Standard & Poor’s. A template for that collaboration predates Triton’s corporate existence. Its senior management also ran the successful but now defunct Horizon Cellular Telephone Co., whose rural system surrounded AT&T’s Pittsburgh, Pa., market.
S&P said the low-level, speculative-grade rating of CCC+ it assigned to the debt deal takes into account the large initial capital outlays needed to cover network construction and operating losses before a new carrier can develop a paying customer base.
“The company also is somewhat late to market. PCS carriers PrimeCo L.P., Powertel Inc. and BellSouth Cellular Corp. have been operating in the company’s Southeast service area since late 1996,” Caffrey said.
