Atlantic Tele-Network Soars on 'Transformational' Deal with Verizon

Now here is a deal the Street really likes.

Tuesday, Atlantic Tele-Network (ATNI) a company which operates a hodgepodge of telecom operations in the U.S. and the Caribbean, announced a deal to pay $200 million in cash to acquire more than 800,000 wireless subscribers from Verizon Wireless (VZ, VOD) in mostly rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. Verizon Wireless was required to divest those subs as part of the regulatory approval of Verizon’s acquisitions of Alltel.

ATNI is funding the deal with cash on hand and borrowings from an existing credit facility; the deal is subject to FCC and Justice Department approvals, but should close in the third or fourth quarter.

The deal dramatically remakes the company, which will now have more than 1 million wireless subscribers. ATNI’s previous businesses include phone companies in Guyana, Bermuda, the U.S. Virgin Islands and Turks and Caicos, as well as some smaller properties in the U.S.

Raymond James analyst Ric Prentiss asserts in a research note that the deal is “transformational” for ATNI, and stresses that it comes at an “extremely attractive price,” which he estimates to be about 2x 2010 pro forma EBIRDA. He notes that the company is paying less than $250 per sub, which compares with the $1,567 per sub AT&T paid for a previous Alltel-related divestiture to AT&T last month. He notes that the acquired properties generate 2x the consolidated revenue of current ATNI, at more than $450 million versus $207 million in 2008.

Prentiss says the transaction “will make the company one of the largest wireless carriers in the U.S.” He says there are risks to the transaction, given ATNI’s inexperience with retail operations in the U.S., but that “the bargain price ATNI is paying for these assets makes this an opportunity far outweighing the risks.”

Prentiss Wednesday upped his target on the stock to $47 from $34. His 2010 revenue forecast jumps to $805 million from $225 million; GAAP EPS jumps to $5.83, from $2.25. (Talk about an accretive deal!)

ATNI shares Wednesday have rocketed up $10.95, or 41.1%, to $37.60.

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Comments

[borolet:]

If you will notice where Verizon has sold off Alltel markets to Atlantic Tele-Network (ATN), they are each in rural areas. This was by design, as orchestrated by the FCC. These areas mostly all have a rural telephone cooperatives. The rural telephone cooperatives are protected by the government from monopoly takeovers in their areas. They also can receive gov’t subsidies to promote communications technology if and when needed.
Little does anyone know, but the Alltel stores, at least here, are secretly owned or partly owned by the rural telephone cooperatives. The reason being is that if their customers’ and many do, drop their land lines and go strictly with a cell phone then revenues are lost. The way to make that revenue back up is to have an interest in the cell phone market. Therefore the gov’t (FCC) will protect divested Alltel markets that have gone over to ATN. They will keep them competitive and as good as any national carrier to keep competition thriving. Further, the divested Alltel has better plans at better prices than Verizon or At&T. Their phones may not be quiet as good, but their plans beat anyone’s hands down.
Why else is ATN able to purchase the divested Alltel markets and yet not have enough capital to do so. They are borrowing the rest to make the deal complete pending the Dept. of Justice’s approval.
Part of the hold up on the merger is due to lawsuits. Some filed by the rural coop’s against the parent Alltel, so they can keep an interest, as well as Verizon along with ATN are in the mix. Follow these links for more info:
www.fcc.gov/transactio...

dockets.justia.com/doc.../

Also, another good link about ATN:
www.tribune242.com/bus...

Dec 06 07:38 AM