By Ryan Naraine
One day after winning court approval to acquire the assets of bankrupt Winstar Communications for a mere $43 million, New Jersey-based telco provider IDT Corp. said the deal would significantly narrow the gap with its main competitors.
“The only thing we didn’t have was the last mile, said IDT boss Howard Jonas. “But with this deal, we now own the last mile. Now it’s just us and the monopolies.”
In a conference call with reporters, Jonas said the Winstar deal would allow IDT to route telephone calls on broadband fixed wireless networks in approximately 60 U.S cities and 15 markets internationally.
Sounding downright giddy about the deal, Jonas described the $42.5 million sale price (it includes $30 million in cash and $12.5 million in IDT stock) as “unbelievable.”
“We did great on this deal. We paid next to nothing for (Winstar’s) assets, which were valued at $5 billion. In the end, we got the assets for about three-quarters of a cent on the dollar. And, more importantly, the (owed) phone companies got nada, zero,” Jonas said.
When Winstar filed for bankruptcy in April of this year, it listed debts of $4 billion.
As part of the purchase, IDT also agreed to give 5 percent of the equity of the new Winstar operations to a group of Winstar creditors. IDT Corporation retains the remaining 95 percent of the equity.
Jonas disclosed that the deal almost got derailed at the last minute when telco creditors started haggling over termination payments. While IDT will assume certain Winstar debts (IDT plans to inject $60 million in working capital), the phone companies that leased conventional fixed lines to Winstar are most likely left holding the bag.
“They (the phone companies) are compelled by court order to keep providing service to us for about four months and this purchase has had almost no effect on IDT. We made as much while negotiating the purchase than (what) the purchase cost us,” he told reporters.
“This is going to be the century of competition. We are now up against a bunch of monopolies. They have certain advantages going into the game. But I won’t bet on the monopolies anymore,” Jonas added.
Verizon Communications , WorldCom Inc. and Williams Communications have not been paid by Winstar for several weeks and were among the most vocal in the negotiations to secure termination payments in the IDT sale.
Winstar’s legal team had asked the bankruptcy court for permission to liquidate the assets by arguing that the $43 million bid from IDT was a lowball offer but the judge ordered Winstar to continue servicing its 30,000 customers.
The acquisition gives IDT access to more than 4,500 wired buildings and bandwidth in most major city and Jonas said the immediate plan is to make Winstar a profitable subsidiary within a year.
It also gives IDT access to wireless data transmission capabilities, which transmits signals over radio waves. Through leases with buildings and municipalities, Winstar places antennae at various locations in order to operate its network.
Separately, IDT announced that Charles Garner, CEO of its ventures unit, would serve as Winstar’s interim CEO and Moshe Kaganoff would be interim President.
Jonas said IDT would reorganize into three divisions to concentrate on offering telephone call routing, cable telephony, Voice-over Internet Protocol (Vo-IP), and radio/television entertainment for the business market.
