<PAGE> 1
Filed by Alamosa Holdings, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company:
Alamosa PCS Holdings, Inc.
Commission File No. 005-58523
The following communications contain forward-looking statements that are subject
to various risks and uncertainties. Such forward looking statements are made
pursuant to the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995 and are made based on management's current expectations or
beliefs as well as assumptions made by, and information currently available to,
management. A variety of factors could cause actual results to differ materially
from those anticipated in Alamosa's forward-looking statements, including the
following factors: failure to satisfy the conditions to closing the acquisitions
or financings described in the following communications; costs related to the
acquisitions; the risk that the acquisitions will not be integrated
successfully; delays in network construction and launch; increases in network
construction costs; Alamosa's dependence on its affiliation with Sprint PCS;
shifts in populations or network focus; changes or advances in technology;
changes in Sprint's national service plans or fee structure with Alamosa; change
in population; increased competition in Alamosa's markets; and adverse changes
in financial position, condition or results of operations. For a detailed
discussion of cautionary statements and factors that could cause actual results
to differ from Alamosa's forward-looking statements, please refer to Alamosa's
filings with the Securities and Exchange Commission, especially in the "risk
factors" sections of Alamosa' Prospectuses filed on February 4, 2000, its Form
10-K for the year ended December 31, 1999 and in subsequent filings with the
Securities and Exchange Commission.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND
PROXY STATEMENT/PROSPECTUS TO BE FILED BY ALAMOSA PCS HOLDINGS, INC. AND ALAMOSA
HOLDINGS, INC. WITH THE SECURITIES AND EXCHANGE COMMISSION REGARDING THE
BUSINESS COMBINATION TRANSACTIONS REFERENCED IN THE FOLLOWING INFORMATION WHEN
IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
Additionally, a detailed list of names, affiliations and interests of
participants in the solicitation can be found in the proxy statement/prospectus,
when available. Investors and security holders may obtain a free copy of the
registration statement and proxy statement/prospectus (when available) and other
documents filed by Alamosa PCS Holdings, Inc. and Alamosa Holdings, Inc. at the
Securities and Exchange Commission's web site at www.sec.gov. The registration
statement and proxy statement/prospectus and such other documents may also be
obtained free of charge by directing such request to Alamosa PCS Holdings, Inc.,
Attn: Chief Financial Officer, 4403 Brownfield Highway, Lubbock, Texas 79407.
On July 31, 2000, Alamosa PCS Holdings, Inc. announced that it signed
definitive agreements to merge two Sprint PCS affiliates, Roberts Wireless
Communications, LLC and Washington Oregon Wireless, LLC into its operations.
THE FOLLOWING IS A TRANSCRIPTION OF A CONFERENCE CALL BY
ALAMOSA PCS HOLDINGS, INC. ON AUGUST 1, 2000.
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ALAMOSA PCS HOLDINGS, INC.
MODERATOR: KEN DENNARD
AUGUST 1, 2000
8:30 A.M. CT
Operator: Good day, and welcome to today's Alamosa PCS conference call.
Today's call is being recorded.
At this time for opening remarks and introductions, I would like to
turn the conference over to Mr. Ken Dennard, managing partner of
Easterly Investor Relations. Please go ahead, sir.
Ken Dennard: Thank you, Audrey, and good morning, everyone. Thanks for
joining us on today's Alamosa conference call to review yesterday's
announcement. Also, I want to welcome our Internet participants, and
folks we're going to be doing some fun things with the slide show on
the Internet.
But before I turn the call over to management, I've got a few small
housekeeping details to go through. You should have received a fax
and/or an e-mail of the release yesterday afternoon. But occasionally
there are technical difficulties experienced during these broadcasts.
You should have also received on your e-mail, folks that are on the
e-mail list could've - should have gotten a PowerPoint presentation
of the slides that you'll see on the Webcast today. If you didn't get
any of that stuff give us a call at 713-529-6600 and we'll get it out
right to you. Also if you - if you want to be on the permanent e-mail
list and fax list, just relay that information to us.
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As you know, management today is going to discuss certain subjects
that will contain forward-looking information including known events
and developments that may have an impact on the company's future
operating results. We caution that the actual results could differ
materially from those that management might be describing in today's
discussions. Additional detailed information concerning the number of
factors that could cause actual results to differ materially from
today's information is readily available in the company's SEC filings
under the heading risk factors.
Also in the invitation you received there is information to view a
company - the accompanying slide show presentation go to
www.easterlyir.com, and then there's two buttons there on the main
page that you can watch the slide show only while you're listening to
the audio portion. And for those that are totally Internet today you
can listen to the Webcast and view the slide show at the same time by
choosing the other button on our page there. Again that's
easterlyir.com. And then the accompanying slides, David will walk you
through during the presentation.
Additionally if you want to listen to a replay of today's call, it
will be available via Webcast on the same site. Or you can call us
for a replay feature number that's different - with a different
access code and a different password.
Now without further ado, here's David Sharbutt, Alamosa's Chairman
and Chief Executive Officer. David?
David Sharbutt: Thank you, Ken. And welcome, everyone. Thank you for joining
us very much. I have with me this morning Jerry Brantley, our Chief
Operating Officer and Kendall Cowan, Chief Financial Officer. If you
plan to follow the slide show you might want to go ahead and load
those slides. It takes a little while to get those queued up.
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We're pleased to announce the signing of definitive agreements to merge two
Sprint PCS affiliates, Roberts Wireless Communications and
Washington Oregon Wireless into our operations. The transaction is
to be structured as tax free merger that combines these two valuable
Sprint PCS network partners with Alamosa PCS Holdings. The combined
transactions will result in a new entity, which will be called
Alamosa Holdings Inc., and are expected to close by December 31st,
2000.
With this transaction, Alamosa will become the nation's largest
Sprint PCS network partner increasing its licensed pops by 47 percent
from eight and a half million residents up to 12.5 million residents.
We really look forward to expanding our operations in these highly
attractive markets. The Roberts brothers manage one of the most
attractive footprints in the Sprint PCS network partners program and
have achieved excellent penetration within these markets that they've
launched today.
Washington Oregon Wireless provides an opportunity for us to expand
our footprint to the rapidly growing markets on the West coast with
excellent roaming revenue from key travel quarters within Washington
and Oregon. We expect these transactions to product significant value
for our shareholders as we expand our market presence in these
attractive footprints gaining scale economies and strengthen our
relationship with Sprint PCS.
If you'll turn to slide number three if you have access to that it
gives a summary to the transaction. The purchase price based on
yesterday's close is $473.5 million. That's $16 1/2 million in cash,
19.55 million shares of Alamosa Holdings stock. In the transaction we
will assume debt in the two entities of $66 million as of June 30th.
In the process, we acquire four million pops - WOW has about 1.5
million pops, Roberts 2.5 million. We'll treat the transaction as
purchase accounting. It will be structured as a tax free
reorganization. The governance of the Corporation remains the same. I
will remain as the Chairman and CEO. We will add two new seats to the
Board of Directors pending shareholder vote, and that will be Michael
and Steve Roberts.
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Remaining in the key management positions Jerry Brantley will remain
as president and chief operating officer. Kendall Cowan remains as
the chief financial officer. If you remember last week we announced
two more senior staff members that we've added. Loyd Rinehart has
been added as Senior Vice President of Corporate Finance. Tony
Sabatino has been named Senior Vice President of Engineering and
Network Operations. So our senior management team stays in place. And
we're excited about the overall transaction.
When you look at the revised footprint as we add these properties,
and this is on slide four for those that are watching the slide show,
you'll notice that all the properties that Alamosa operates have a
key element and that is we border on very key Sprint PCS cities. And
we anticipate not only roaming travel traffic from Sprint PCS but
also the advantage of marketing overlap as they continue to market in
the marketplace.
When you look at specifically at Washington Oregon Wireless, they have major
markets that include Wenatchee and Yakima, Washington, Medford-Grants
Pass, Oregon that represent about 700,000 pops. The total population
is 1.5 million licensed pops. It's adjacent to Portland and to
Seattle. Those markets have a combined pops of 5.1 million. So it's
nice to have a large market adjacent to us. The network will include
about 990 highway miles including portions of I-5, I-82, 84, and 90.
We're in the launch mode. We expect to launch seven markets this fall
in - just in the next couple of months. All 10 markets will be
launched before the first half of 2000 is complete.
Roberts Wireless covers nearly all of Missouri except for Kansas City
and St. Louis. The major markets include Springfield, Joplin, and St.
Joe, Missouri. Those three represent 1.1 million licensed pops.
There's a total of two and a half million licensed pops: It has the
key quarters between Kansas City and St. Louis. Those two markets are
4.8 million pops that Sprint covers
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adjacent to us. Presently the network operating for Roberts Wireless
covers about 300,000 pops. In the area there's 1260 highway miles
including major interstates of I-70, I-44, I-55. At the end of the
second quarter, Roberts Wireless had 12,200 subscribers with four
launched markets. We anticipate launching all 14 markets by year's
end.
With that I'm going to turn to Kendall and ask him to go over some of
the pro forma metrics and forward-looking information.
Kendall Cowan: Thanks, David.
And thanks to everyone for joining us this morning. Obviously we're
very excited. On page ... or on slide seven you'll see some pro forma
statistics where we have taken Alamosa, Roberts, and WOW to try to
give you a high level overview of where we standing today. Then I'll
talk a little bit about the financing commitment we've got and also
about some guidance going forward.
You'll notice on the market information that Alamosa when fully built
out, as we told you in the past, would have 43 markets. Roberts, as
David just mentioned, will have 14. WOW will have 10 for a total of
67. The licensed pops as previously mentioned will be about 12 1/2
million total pops. Covered pops upon full build out will be about
8.8 million by the end of 2001. Our subscribers at June 30th on a
combined basis was just under 82,000 subscribers as well as yet to
launch. Also, you can see that Roberts has a little over 12,000 at
June 30.
If you look at the second quarter financial information, our combined
revenues were $20 million, 17.2 million for Alamosa, 2.8 million for
Roberts. Pre-marketing EBITDA we are positive on a combined basis.
EBITDA is about a negative 10.7 million. ARPU with roaming you can
see is $83 for us as well as Roberts. As we see, Roberts is a very
strong roaming market as well. Diluted shares outstanding will be
about 83.1 million upon completion of the transaction, which we
anticipate late this year.
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I'd like to turn for just a moment to the financing commitment that
we have from Citicorp. We have a $200 million facility that has been
committed by Citicorp. It's fully committed. It's at market terms and
it provides us with excess funds over our expected capital needs to
not only complete the build outs, fund the operating losses, but also
to take out the existing financing that both Roberts and WOW have in
place. We're very excited about that and I think it shows an element
of confidence between Citicorp and Salomon Smith Barney as to the
direction we're headed.
As to- as to some guidance going forward, we have indicated that our
covered pops will be approximately 8.8 million at the end of 2001. At
the end of 2000, there should be approximately 7.3 million for the
three companies combined. Looking on out to 2002, with the growth it
would be about 9.3 million. Regarding end of year subscribers we have
on a previous phone call ... we gave you a guidance on Alamosa from
130 to 140,000 by the end of 2000. We're increasing that by 25 to
30,000 for Roberts and WOW. So on a combined basis we'd be in the 155
to 170,000 range by the end of the year.
Penetration we think by the end of 2002 we'll be in the mid to high
six percent range for penetration. And cap ex on a covered pop basis
I think if you're modeling you can expect that WOW would be very
similar to that of Alamosa. And if you're - when modeling Roberts
it's a little bit more efficient build out, you can probably model it
at less per cap - covered pop on a cap ex basis.
We think that the ARPU with the roaming - we think that Alamosa and
Roberts have both demonstrated strong ARPU with roaming. We
anticipate that to continue. WOW, it's a little early to tell since
we haven't gotten those market launched - those markets launched at
this point in time.
And with that, David, I'll turn it back to you.
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David Sharbutt: OK, thank you, Kendall.
I thought I'd just talk a little bit about the strategy that we have
in looking at these mergers. First of all I want to make sure we
emphasize that our primary focus remains on execution of our plan.
What that means today is we have a lot of markets in build out. And
we intend to stay on schedule with those and stay focused on meeting
our schedules for those. At the same time we continue to sell phones
at a rapid rate within our markets.
As we look at acquisitions we're taking a selective approach to
acquisitions and trying to focus on those footprints that we find to
be attractive. At the same time, those that we can make a transaction
that's accretive to our existing shareholders. We want to leverage
the strength of the existing Alamosa management team as we continue
to expand that and strengthen it, apply Alamosa's operating
philosophies to these new areas. We think there are several benefits
that we see through these consolidations. First of all we see
accretive growth as we go forward. We're going to continue to expand
into attractive footprints. We think as Kendall said we have - we
have an attractive financing package in place. And we think we'll
continue to be able to leverage our access to capital as we - as we
go through these consolidations.
Those of you that have followed Alamosa you know that we use a very
strong decentralized management model. We think our management model
in conjunction with the advantages of the Sprint PCS affiliate
program facilitates continuing expansion into non-contiguous foot-
prints. And we think that it's been effective in our previous
operations. And we believe it will be fairly straight forward in
integration into our existing operations for these new areas. We
think as we continue to increase scale and scope that that will
strengthen our relationships with Sprint PCS.
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The last slide in the grouping that you have in the slide show really
just breaks down by BTA the population and I'm not going to go
through those. But those of you that want to get some details that
list - the various BTAs and markets within Roberts Wireless and
WOW.
With that, I'll open it up for - to entertain any questions.
Operator: Thank you. The question and answer session will be conducted
electronically today. If you have a question please press star one on
your touch-tone telephone. We will proceed in the order that you
signal and we will take as many questions as time permits. Once again
press star one if you have a question.
And the first question will come from Perry Walters with Robinson
Humphrey.
Perry Walters: Good morning guys, a couple of quick questions. First can you
comment on the population density of both Roberts and WOW? And second
if you could give us the ARPU for Roberts without roaming please.
David Sharbutt: OK. Yeah, I don't have the population density numbers with me.
I think in particular in the case of WOW it's very much like some of
the southwest areas that we operate, in that if you use a population
density over the entire area you find that it's very, very low. The
other side of that though is that people live in communities that are
very compact and fairly easily to cover. So the actual population
coverage is fairly straight forward. It's just that there's a lot of
open areas that probably will never be covered because there's no
roads nor people in those areas.
As far as the ARPU without roaming, Kendall, do you have those
numbers?
Kendall Cowan: Yes, we're in - they're in the mid-50s as far as Roberts is
concerned without roaming.
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Perry Walters: OK. And I understand a fair response on the first part of the
question. Any idea of the - the pops you plan to cover, what the
population density might be and maybe compare that to your existing
property?
David Sharbutt: Yeah. I think that overall you can kind of categorize it that
WOW is similar to some of the areas that we serve in the southwest,
in particular in Arizona and New Mexico, in population density and in
the - the coverage we expect to have there. On the other hand,
Roberts is much more dense, has a lot more traffic on the corridors
that pass through. And so it probably compares more favorably with
some of the better areas that we - that we serve.
Ken Dennard: Audrey?
Operator: And moving on to the next question will come from John Bensche with
Lehman Brothers.
John Bensche: Good morning, congratulations gentleman. Excellent transaction.
I have two questions, what megahertz are on these two properties? I
didn't see that in the press release. And secondly more strategic in
terms of creating value, David, we had talked about maybe bringing
inside some functions that maybe you've outsourced to Sprint while
you were smaller as you increased the size of the company here. Would
the likelihood increase that you'd do that earlier?
David Sharbutt: OK. Yeah, thank you John. The - I meant to mention that earlier
I'm glad you brought it up. In each of these markets both in WOW and
in Roberts, we have 30 megahertz available to us in all of the
markets in both companies.
As far as those functions, this has not really changed our stance on
any functions that we might procure - that we presently procure from
Sprint PCS. Again as we move down the road we'll continue to look at
that. It does - we do see a lot of efficiencies as we look at out
network operations and some of the other things that we do just
because of scope and scale.
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If you remember we - we named Tony Sabatino as our senior vice
president of engineering and network operations. Tony has strong
credentials, has tremendous experience in building out CDMA networks
on behalf of Sprint PCS. And we think that that's an example of the
kind of scope and scale benefit that we get that as we get larger we
have more needs that we can hire people with that extra piece. And in
fact have to hire people with that extra piece to support our
network.
John Bensche: One last question, what is the cumulative cap ex that's been
invested in these two markets?
David Sharbutt: Just a second, John. Kendall is looking that up.
Kendall Cowan: John, to date we've got probably about 100 million between the
two properties.
John Bensche: So about 25 - all right. Thank you.
Operator: Robin Lochner with Deutsche Bank has the next question.
Robin Lochner: Hi, good morning and congratulations. Does Sprint PCS need to
approve this deal? And if so, have they given the approval? And also
because deals like this would appear to make sense, can we assume
that there'll be additional M&A transactions involving some of the
other small Sprint affiliates you know that may have difficulty
getting public financing?
David Sharbutt: OK. Thank you, Robin. The first question Sprint PCS consent, the
contract requires consent of Sprint PCS on change of control. We have
received consent from Sprint PCS on both of these transactions.
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As far as the second question, I think we discussed in previous calls
that there's a tremendous amount of activity among all the affiliates
of all sizes trying to, I think, rationalize their size and determine
the right operating size. There is pressure on some of the smaller
affiliates as far as addressing the capital markets. So I guess that
- my guess is there will be additional consolidations.
Robin Lochner: I mean, is it fair to assume that Sprint, the parent
organization, is actually encouraging that in order to get the build
out of all the affiliates done at a more speedy pace?
David Sharbutt: No that's - I wouldn't characterize it that way. I think they
probably are somewhat neutral in that. I think they understand that
there probably are some benefits to them in some of the
consolidations because it's just less entities they have to manage.
At the same time, I think they are committed to making the program
work as it's been designed. So I would characterize them as somewhat
neutral on that, at least from my experience.
Robin Lochner: OK. Thank you very much.
Operator: And now we'll move on to Art Poole with Raymond James.
Art Poole: Hi, Art Poole. Just a follow up I guess on Perry's question. Have you
got, I guess, kind of a rule of thumb for - I realize that in these
markets - particularly the WOW markets - you know, the populations
are clustered. But for some of these other areas is there a rule of
thumb in terms of population density that you just aren't going to
build? You know the difference between the total covered - total and
covered pops. You know, what's the population density at which it
just doesn't make sense in your mind for PCS?
David Sharbutt: Yes. And I don't if I have - I mean there are several rules of
thumb but here's what - what drives those things as much as
population density. You know if we can find a community
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where we can serve 10,000 pops probably a little less than that with
a base station then that's fairly attractive. But probably what
drives it more than is, is identifying those quarters where people
are driving in their cars that are likely to have Sprint phones. And
also identifying markets where people that are in larger markets want
to travel to and will buy - make your buying decision based on that.
And I'll use an example, just because I'm not as familiar with the
details, I guess, in real small markets in WOW or Roberts. But within
our existing markets we are building some very small markets today,
based on the fact that customers in some of our larger markets like
El Paso and Albuquerque have told us they'll make their buying
decision based on whether we have coverage in that small market. It
usually might be a resort area or a place that people travel a lot on
business. So it's hard to characterize those as just as pops covered
in an area. Because if there's a - if there's a corridor, we may be
building out a corridor which causes us to cover a small town. As we
build out markets and we get into the marketing process we find that
there are small towns near there that are required for marketing
purposes.
So the market - I guess the build out kind of follows the trend of
not where people live, but where they are. So it's a combination of
traffic density and population.
Art Poole: OK, thanks.
Operator: And we'll move on to Bill Benton with William Blair.
Bill Benton: Hi guys, congratulations. Just a couple of quick questions. Are
there really any approve - I know you said shareholder vote. Any
approvals required here? And in terms of the closing I presume
December 31st may be conservative.
<PAGE> 14
And as far as maybe the transition or the integration here I'm
presuming these are pretty easy integration's. I think they're both
type II affiliates, is that correct?
David Sharbutt: Yeah, both of these companies are tied to affiliates. Both of
them are in the very formative stages. So we believe that the actual
integration is fairly straightforward. Jerry Brantley has developed a
merger integration team that helps bring the - the Alamosa's culture
into those organizations. In the case of Roberts, we are presently
providing management services to Roberts Wireless under a contract
and will until we close. We actually have been doing that for a few
weeks now.
In the case of WOW, we're providing advisement services. We have to
have approval from the Justice Department before we can actually
manage those properties. So we are advising them today. When we get
final regulatory approval from the Department of Justice we'll have a
management agreement in place where we manage those properties prior
to the close.
So I think the combination of them being attached to an affiliate,
them being in the very formative stages makes a great time for those
companies to join us. And I think we've been working with the
existing personnel there and chewing on some of our processes and
procedures and trying to integrate them into our way of doing it. So
we're pretty excited about that process and how that's going at this
point.
Bill Benton: OK, can you just also kind of indicate when these - when Roberts
actually launched service. And then talk about the number of
operational competitors for each that are operational, on average, in
each of the two companies currently.
David Sharbutt: I'm not sure if I have that data. Jerry, do you have some
information on that?
<PAGE> 15
Jerry Brantley: I don't have the specific number of competitors in those
markets, but they pretty well mirror, I think, what we have; in terms
of probably on average about three competitors per market in both
Roberts and WOW.
David Sharbutt: As far as Roberts' launch, they purchased last year some
existing sites in Columbia, along the I-70 corridor between Kansas
City and St. Louis. Earlier this year, they launched St. Joseph's,
which is north of Kansas City, and the Sedalia area, which is a lake
of the Ozarks. So they've not had a long operating history but
they've been very successful in the market place. As I said, we -
actually the three largest markets in their service area have not
launched and we have those scheduled to launch in the fourth quarter.
Bill Benton: Great. OK, well thanks a lot, guys. I appreciate it.
Operator: And now we'll hear from Robert Kricheff with CS First Boston.
Robert Kricheff: Good morning, guys. I was just wondering, could you guys make
clear - you said you're forming Alamosa Holding Company. Does that
mean that the bonds and the bank loans and everything will all be the
same credit or is this new credit line going to be a separate credit
or are we all - you know, what's sort of the credit obligation
structure?
Kendall Cowan: This is Kendall. The existing debt facilities we have in place
will remain in place. The new commitment from Citicorp and Salomon
Smith Barney will be in a separate entity that will be a subsidiary
of the new holding company that we'll put in place and will be a
separate financing commitment.
Robert Kricheff: So from the bond-holders' point of view, the new subsidiary
where I send the new assets will be a subsidiary of the issuing
entity?
<PAGE> 16
Kendall Cowan: Now, when you say the bond-holders, are you talking about our
existing senior discount notes?
Robert Kricheff: Yes.
Kendall Cowan: Yes, it will be in a separate entity from the senior discount
notes.
Robert Kricheff: OK, which will be owned by a holding company and not owned by
Alamosa PCS as all?
Kendall Cowan: That is correct.
Robert Kricheff: OK.
Operator: Alaric Hu with TDS Securities.
Alaric Hu: Thank you. A quick question on the - did you say it's $200 million
but the actual incremental debt is going to be the 200 less repayment
of the 66 million debt and the 12 - the 60 million in cash or so?
Kendall Cowan: That is correct.
Alaric Hu: OK, so assuming pro forma the capital required for op ex and cap ex
on the new properties the total debt to equity on the transactions is
about 34 percent.
Kendall Cowan: That's pretty close, yes.
Alaric Hu: OK. And then separately, in terms of the development of properties
here, obviously everything is sort of early stage. But do you foresee
a period where properties flopping may become more
<PAGE> 17
efficient? And can you give us some more detail on the level of
maturity of the surrounding Sprint markets and any affiliates that
you're abutting as a result of this transaction?
David Sharbutt: You know I guess no one knows where all of this leads among the
Sprint affiliates because we - all of them are independently owned
and operated today. So no one knows who is trading and consolidating.
Generally you would expect a small Sprint affiliate would not be
interested in trading their territory because generally they're owned
by real Telcos in the area. So they're probably not interested in
swapping anything. I think among larger affiliates you might see some
of that in the future.
As far as the maturity of the market that surrounds us if you go back
to page four you can see that the Sprint markets that surround us are
all fairly well built out. If you look at - up in the northwest,
Seattle and Portland have fairly extensive networks. They have
planned tremendous expansions and areas adjacent to us. Spokane is
operated by UbiquiTel. And they're in operation today and have some
expansions planned around that.
Down in the southwest, we surround Phoenix and Tucson with a fairly
extensive network. We're turning up the rest of Arizona this year and
early next year. We also abut against Denver and Colorado Springs,
Dallas, San Antonio, which are very well built out. We're adjacent to
Southwest PCS, which is kind of between Roberts Wireless territory
and the existing established territory of Alamosa and PCS. And they
have a very extensive network that ties in those areas.
In our upper Midwest area, the Wisconsin area, of course we have
Minneapolis. The Milwaukee, Madison, Chicago, Sprint has built out
that network. And continues to expand it as a very expansive network
of contiguous area. We think that that's going to be a great area for
us. Tying into that then with the new Roberts area, Kansas City and
St. Louis have very extensive networks that surround them. We'll be
adjacent to Illinois PCS north of us, who have plans to build out a
fairly extensive network.
<PAGE> 18
So we think that we - on all sides of us, we have neighbors who have
built and will continue to build out very extensive networks that
continue to (feed) our systems.
Alaric Hu: Thank you, congratulations.
David Sharbutt: Than you.
Operator: Next question will come from Chris Testa with Goldman Sachs.
Chris Testa: Hi, I was just curious whether or not these properties were
auctioned. Or did the seller come directly - sellers come directly to
you. Can you just give us a sense of how this - how this happened?
David Sharbutt: Yes. This was not an auction. I am assuming that the owners of
these properties talk to other entities in the process as they made
the decision as to what to do. Actually it was more a strategic move.
Michael and Steve Roberts are in the business - are in many
businesses. Again their discussions with Alamosa and I think were
also probably in discussion with all of their neighbors about how to
operate the business.
Chris Testa: Right.
David Sharbutt: They decided that there was a great strategic alliance to be
made between them and Alamosa PCS and made their decision based on
that. I think Washington Oregon Wireless was very similar to that.
They were at a formative stage. They realized that they needed to
build out their management staff and the infrastructure to operate.
And this was one of those key times that they need to make a decision
to continue to build that out or to seek out a partner. And they came
to us to discuss that. And I'm assuming they also were talking to
others but they decided
<PAGE> 19
that the Alamosa management team and them in combination with us that
we could build great value for their shareholders.
Chris Testa: OK, great, thanks.
Operator: We'll now hear from Mike Rollins with Salomon Smith Barney.
Mike Rollins: Hi, congratulations guys.
David Sharbutt: Thank you, Mike.
Mike Rollins: Just a couple of questions, first could you just clarify, Kendall,
when you gave the penetration guidance I think of mid to high six
percent by year end '02. Was that on covered pops or total pops?
Kendall Cowan: (Michael), that was on covered pops.
Mike Rollins: OK. And the other two questions I had was, first, does your
roaming rate change through these transactions or do they all remain
at the Sprint designated rate? And then secondly if you could talk a
little bit about your approached distribution in these markets. Will
they be any different? Will there be a great emphasis indirect over
direct et cetera?
Kendall Cowan: (Michael), this is Kendall again. As far as the roaming is
concerned we still have the same reciprocal roaming rate that we have
between Alamosa and Sprint in these markets as well. And I think
Jerry is going to try to address the distribution mix.
Jerry Brantley: Yes, good morning, (Michael). Distribution - we will continue to
have an aggressive distribution policy as we do in our company. These
are all very good markets. We're already
<PAGE> 20
beginning to - to get the distribution lined up. We'll still have the
national retail distribution through Sprint PCS, plus our retail
stores, which we're in the process of putting together now. And also
probably a lot of local distribution. Again we try to target one door
for every 10,000 covered pops in our markets so that's what we go
over. And that's what well be doing with these markets also.
Mike Rollins: OK, thanks a lot.
Operator: And we'll move on to Drew Hanson with DLJ.
Drew Hanson: Sure, good morning. I wondered if you could speak maybe a little
bit about the - there's obviously some differences in valuations that
you paid on the two properties outside, I guess, (maturity) of
Roberts in terms of its markets and subscribers. Maybe you could
speak a little bit about differences if you could on the valuations
for the two different companies. And then secondly in regards to
additional acquisitions, your issue, because of the limitations due
to you forming the separate subsidiary, is that due to, I'm not sure,
the Nortel security - Nortel credit facility that you cannot do or
would not do future, you know, acquisitions within the actual PCS
holdings ((inaudible))?
David Sharbutt: Let me address the latter question first and that is the
transaction. Actually, the transaction that's being done is a - under
the IRS Code is a 351 transaction and it really, the purpose of it is
to restructure the company in such a way that all the companies come
together, these two entities, these two LLCs are taxed as
partnerships (today). By going through a 351 transaction, we can
maintain a tax deferral for the owners of those LLC interests, so
it's driven by that more than any other item.
The debt structure of the Nortel loan nor the bonds, neither one, are
triggered by the transaction because this becomes a sister-holding
company to those entities. As far as valuations, in
<PAGE> 21
Alamosa we go through a process of trying to determine what we
believe the intrinsic value of the service area and the management
structure in place would be and determine what we wanted to pay based
on that.
Our direction from our board of directors is that when we make a
transaction, it has to be accretive to our shareholders, it has to be
structured in such a way that we can continue to grow shareholder
value not only to existing shareholders, but for the shareholders
that we're bringing in. So we really go through just an analytical
process to determine a range and then negotiate from that.
I think as you look at these numbers that are disclosed here you can
see that in general the territory covered by Roberts Wireless
probably was valued somewhat higher and that's because of the
population density and because of the location between Kansas City
and St. Louis because of the build out costs and various things. And
actually was valued - had a value that is, as I've said earlier,
comparable to the best areas within Alamosa.
Washington Oregon Wireless was valued similar to the way we valued
some of our Southwest properties and again based on intrinsic value
and in general you'll see that it was discounted - it was discounted
more than the Roberts Wireless transaction. Each of these
transactions alone is accretive to our existing shareholders and
taken together are also accretive to the existing shareholders.
Drew Hanson: Just as a follow-up, has the vested capital for both of these
companies to date is that pretty much equivalent to the long-term
debt that you're assuming?
Kendall Cowan: I think if your question is, have they put in that amount of
capital, the answer would be no. But in terms of the committed
financing facilities and the capital they've committed towards it,
<PAGE> 22
it's pretty close to that. The facility we got Citicorp actually
gives us an over funded plan so it's actually a little more than what
they had committed in the process.
Drew Hanson: OK, thank you very much.
Operator: We'll now move on to George Goudelias with JP Morgan.
George Goudelias: Good morning. A few questions, one, with your expanded
footprint, do you expect to run these properties out of your existing
call centers or will you be building new call centers closer to the
new footprint? Second, if you could just quantify any synergies that
you've identified up to date. And third, on your second quarter
conference call, you had mentioned that you had a liquidity cushion
of roughly $125 million. If we assume 75 percent pops coverage by the
end of 2002, where's your liquidity cushion on a pro forma basis?
Thanks.
David Sharbutt: OK, let me address the first question first. Our call center
operations we subscribe to Sprint PCS for those and so we're tied
into their national network of 13 call centers across the United
States. So this doesn't really impact that as we look at going
forward. As far as the liquidity cushion, Kendall, do you want to
address where we are on that?
Kendall Cowan: Yes, George, the - in the previous conference call we had talked
about our capital plan being over funded to the tune of 130 million
or so. Actually, since this new facility, once these companies
combined, also results in our over funding, our over funding will
actually be north of or higher than 130 million, and obviously we're
very pleased with that.
George Goudelias: OK, and on these synergies, any numbers you can point to?
Kendall Cowan: We have not actually identified a lot of synergies in terms of
dollars. Obviously the management structure will be affected somewhat
by these combinations of these three entities.
<PAGE> 23
But because of the way we operate under the Sprint back-office
operations, a bunch of these synergies and cost efficiencies that we
would look to in a combination is already there, but there will be
some. Right now we don't think those dollars are significant.
George Goudelias: OK, thank you.
Operator: The next question will come from Justin Slatky with CS First Boston.
Justin Slatky: Good morning. I have a question back on the corporate structure.
I'm looking at a slide here that shows a $45 million investment from
Alamosa PCS Holdings into the new entity. Is that structured as an
equity investment or could you just give us a little information on
that?
Kendall Cowan: Justin, we've actually got the flexibility to do that as either
an equity investment or a loan to give us flexibility to use those
funds later, if we have an opportunity to do so.
Justin Slatky: So you haven't decided yet whether you're going to loan them. Is
that something that happens upon closing?
Kendall Cowan: Yes.
Justin Slatky: And is that when you'll decide whether it's a loan or equity
investment?
Kendall Cowan: Yes. Citicorp has given us the flexibility to make that decision
at that point in time.
Justin Slatky: And just another quick follow-up, the Nortel facility, can that
only be used on the old Alamosa Holdings' properties or can that be
used for the entire company now?
<PAGE> 24
Kendall Cowan: No, the old Nortel facility is only for the original Alamosa
Holdings entity with the 8.4 million POPs.
Justin Slatky: Great, thanks a lot.
Kendall Cowan: You bet.
Operator: And now before we move on, as a reminder press star one if you have a
question. And now we'll take a follow-up from Bill Benton.
Bill Benton: Hey, just a quick one. If you could just talk a little bit about
the process, clearly you guys were able to close a couple of these
things. I don't think they're at any loss for interest from other
affiliates and so I'm wondering what kind of competitive advantages
you guys are kind of bringing to the table in terms of getting any of
the affiliates to your side?
David Sharbutt: Yes, I think, Bill, if you remember, Alamosa was named the 1999
Sprint affiliate of the year and that was really based on some of the
operating efficiencies that we brought, not only in launching markets
but in the way we set up our marketing organization, distribute
product, but also in the decentralized management structure that
allows us to push responsibility down through the organization, make
decisions quickly and continue to execute very well in the
marketplace.
I think it has - shareholders of other entities look at this, they
have to question, when they're going in with someone, who is going to
create the most value for their shareholders on a future basis. And I
think that as we talked to the owners of these two entities, they
decided that a combination with Alamosa would do that, give them the
potential to create the greatest shareholder value on a future basis.
So not only do they get the liquidity of a public currency, but they
also can experience the upside as Alamosa continues to operate into
growth.
<PAGE> 25
So, I mean we really - our intention is to bring these owners in as
our partners. All of them have taken a big stake in Alamosa. Some of
them will be involved in board positions and management in the case
of the - Michael and Steve Roberts. We plan on them contributing to
our success as we go forward. But I think as each affiliate looks at
it they have to decide where their future lies and determine what
they're going to do and I think a lot of companies are trying to make
those kind of decisions now in various forms.
Bill Benton: OK. Great, thanks.
Operator: And there appear to be no further questions at this time. Mr. Dennard,
I'd like to turn the call back to you.
Ken Dennard: Thank you, Audrey. And again, if you do need the instant replay
number, give us a holler at 713-529-6600, or it will be about an hour
it takes the replay to get set up as well as the archive on the Web
site. The slides will be up there for some period of time so on
easterlyir.com.
And with that, David, I'll just pass it back for a couple of final
comments, and then we'll get back to work.
David Sharbutt: OK, thank you, Ken. We appreciate you taking time out on short
notice to join us for this conference call. As you can see, we're
excited about this transaction. We believe that these properties and
the management teams and the owners involved in these companies all
make great partners for Alamosa PCS.
Alamosa's a value-based company. We think we offer the employees that
are joining us great opportunities to grow with us. We think the
shareholders that join us have an opportunity for
<PAGE> 26
continued equity growth. I can speak for the senior management team
and for the entire management team of Alamosa PCS, we are really
focused on continuing to execute our plan.
As I said, we're in the midst of a lot of market build outs and
market launches right now. We're looking forward to an exciting third
and fourth quarter of this year as we continue to launch our core
markets and as we take on the responsibility of integrating these two
fine companies into our organization.
So I think as you continue to watch Alamosa PCS, we think we have a
tremendously bright future ahead of us. Thank you very much.
END
