NEW YORK-Dublin-based Esat Telecom Group plc, a minority owner of Ireland’s second cellular carrier, is scheduled to price for sale Nov. 6 an offering of 6 million American Depository Shares, its first public equity issue.
Donaldson, Lufkin & Jenrette Securities Corp., New York, is lead underwriter of the cross-border issue, half of which will be sold in the United States and Canada and half internationally. The securities will trade on Nasdaq and on the European Association of Securities Dealers Automated Quotation System, or EASDAQ.
Each ADS will represent two shares of Esat common stock with voting rights. The anticipated price range is between $12 and $14 per ADS, according to a preliminary prospectus for the initial public offering.
Esat Telecom Group was formed in 1991 to combine holdings in two telecommunications businesses: Esat Telecommunications Ltd., a wholly owned subsidiary that provides long-distance wireline telephone service to businesses; and Esat Digifone Ltd., a 45-percent owned affiliate that operates a cellular system under a Global System for Mobile communications license.
Telenor A.S., the Norwegian state telephone company, also owns a 45-percent stake of Esat Digifone. The remaining 10 percent is owned by IIU Nominees Ltd., a wholly owned subsidiary of International Investment and Underwriting Ltd., a private equity group based in Ireland that is owned by Dermot Desmond.
Esat Digifone launched commercial service March 21 with coverage of approximately 80 percent of the population of the Republic of Ireland, and it had a combined total of 300 base stations and cell sites in operation as of Sept. 17. In its first three months of operation, the carrier acquired 45,000 subscribers for a penetration rate of about 1.3 percent and a market share of approximately 23 percent.
Most of the proceeds of the equity offering will be used to construct local, national and international infrastructure, Esat Telecom Group said.
“Esat Digifone’s strategy is to capitalize on its position by: building a high capacity, flexible network; attracting quality customers; providing superior customer service; offering services designed to meet the needs of several segments of the cellular market (and) offering customized data transmission,” the red herring said.
“Esat Digifone competes on the basis of the quality of its network and customer service, rather than competing principally on the basis of price.”
Esat’s disclosure documents state the company is optimistic about an expanding market for its services in a country where cellular subscriber growth overall has increased by 86 percent and 89 percent, respectively, during the past consecutive two years that ended June 30.
However, the parent company also cautioned that it will need additional financing next year to meet capital requirements for continued buildout of its wireline and wireless networks.
“There can be no assurance that additional financing will be available and that such capital requirements can be met,” the preliminary prospectus said. “KPMG (Ireland) has stated in its independent auditor’s report that these issues raise substantial doubt about the ability of the company to continue as a growing concern.”
In January, Esat Telecom Group placed privately a $157 million issue of 12.5 percent senior deferred coupon notes due 2007. In August, it sold another issue of $58 million of 12.5 percent senior deferred coupon notes due 2007.
“As a result of the offering of the notes and the additional notes, the company is highly leveraged,” the preliminary offering statement said.
