executives say the company’s revenues are
going to take a hit in 2002, in part attributable to an early close on the
$4.7 billion acquisition of TeleCorp PCS
Four months earlier than expected, the stock and debt payment acquisition
of one of its former affiliates puts the onus of paying for the buyout
in AT&T Wireless’ lap now instead of the middle of summer.
TeleCorp is more generally known for its digital wireless phone service,
SunCom, which provides service to 14 states in the U.S. and Puerto
Rico. Before the merger, AT&T Wireless owned 23 percent of the company.
Mohan Gyani, AT&T Wireless president, said the early acquisition helps the
combined company post mid-teens services revenue growth in 2002.
Without the combined revenues of the two companies, AT&T Wireless growth
would be in the low teens, below its guidance given at fourth quarter and
“Closing the TeleCorp acquisition four months earlier than originally
planned will enable us to accelerate the integration of TeleCorp’s product
offers and operations with ours,” he said. “While we’ll have
earlier-than-planned transition costs, the good news is we’ll be better
positioned for 2003.”
The true cost of the early merger will be felt in the company’s bottom
line, however. The $2.4 billion in cash and $2.1 billion in debts will
substantially eat into AT&T Wireless’ earnings before interest, taxes,
depreciation and amortization (EBITDA), the Wall Street performance
standard for reporting profits.
Because of the buyout will drop AT&T Wireless’ EBITDA performance growth to
the low- to mid-20s, dependent on market conditions during the
year. Factors affecting market conditions include the current economic
downturn and competition from other digital wireless phone providers.
Joe McCabe, AT&T Wireless chief financial officer, said he looked at the
company’s first quarter results and determined his financial projections
put AT&T Wireless a little higher than what they are reporting, which
should give them enough room in the event of a bad year.
When I reviewed first quarter analyst expectations for mobility services
revenues and EBITDA, I found them to be on the high side by about $100
million on both,” he said. “With 10 months left in 2002, we continue to
remain confident that we have the operational plans in place to deliver the
full-year guidance updated today.”
AT&T Wireless is the third largest digital wireless phone company in the
nation, behind Verizon Wireless and Cingular Wireless. Company officials
expect to have 21.6 million wireless phone customers by the end of the year.