<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
(AMENDMENT NO. 3)
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
CONTEL CELLULAR INC.
(Name of Issuer)
GTE CORPORATION
CONTEL CORPORATION
CONTEL CELLULAR ACQUISITION CORPORATION
CONTEL CELLULAR INC.
(Name of Person(s) Filing Statement)
CLASS A COMMON STOCK, $1.00 PAR VALUE
(Title of Class of Securities)
------------------------
210904108
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C>
MARIANNE DROST, ESQ. LAURA E. BINION, ESQ.
GTE CORPORATION CONTEL CELLULAR INC.
ONE STAMFORD FORUM 245 PERIMETER CENTER PARKWAY
STAMFORD, CONNECTICUT 06904 ATLANTA, GEORGIA 30346
(203) 965-2000 (404) 804-3400
</TABLE>
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
Copies to:
JEFFREY J. ROSEN, ESQ.
O'MELVENY & MYERS
555 13TH STREET, N.W., SUITE 500 WEST
WASHINGTON, D.C. 20004-1109
(202) 383-5300
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- --------------------------------------------------------------------------------
<PAGE> 2
This Amendment No. 3 amends the Rule 13e-3 Transaction Statement (the
"Statement") filed jointly on January 30, 1995 by GTE Corporation, a New York
corporation ("GTE"), Contel Corporation, a Delaware corporation that has adopted
a plan of liquidation and is a wholly owned subsidiary of GTE ("Contel"), Contel
Cellular Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Contel ("CCI Acquisition"), and Contel Cellular Inc., a Delaware
corporation (the "Company"), which relates to the proposed merger (the "Merger")
of CCI Acquisition with and into the Company. In the Merger, (i) each
outstanding share of Class A Common Stock, par value $1.00 per share, of the
Company (each a "Class A Share") (other than Class A Shares as to which
appraisal rights have been properly exercised under the General Corporation Law
of the State of Delaware) will be converted into the right to receive $25.50 in
cash, without interest, subject to applicable back-up withholding taxes, (ii)
each Class A Share held by the Company and each outstanding share of the common
stock of CCI Acquisition will be cancelled, and no payment will be made with
respect thereto and (iii) each outstanding share of Class B Common Stock, par
value $1.00 per share, of the Company will remain outstanding. Capitalized terms
not otherwise defined herein shall have the meanings set forth in the Statement.
Information contained in the Statement is hereby amended by the filing of a
definitive Information Statement on Schedule 14C as a new Exhibit (d)(6) to the
Statement (the "Definitive Information Statement"). The information contained in
the Definitive Information Statement restates the information contained in the
Statement that was incorporated from the preliminary Information Statements
filed as Exhibits (d)(1), (d)(4) and (d)(5) to the Statement. The following
Cross Reference Sheet shows the location in the Definitive Information Statement
of items required by Schedule 13E-3. Information contained in such Definitive
Information Statement is incorporated herein by this reference, as indicated in
the Cross Reference Sheet.
CROSS REFERENCE SHEET
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) Cover Page.
(b) Cover Page; "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE
COMPANY".
(c) "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY".
(d) "MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY".
(e) Not applicable.
(f) Not applicable.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed jointly by the Company, as the issuer of
the class of equity securities which is the subject of the Rule 13e-3
transaction, and GTE, Contel and CCI Acquisition, as affiliates of the Company
as defined in Rule 13e-3(a)(1).
(a) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC."
(b) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC."
1
<PAGE> 3
(c) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC."
(d) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC."
(e) Not applicable.
(f) Not applicable.
(g) "EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC."
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) "RELATED PARTY TRANSACTIONS -- Arrangements and Transactions with
Contel and GTE".
(a)(2) "SPECIAL FACTORS -- Background of the Merger"; "BUSINESS OF THE
COMPANY -- The Company's Cellular Operations -- Cellular Exchange
Transaction"; "RELATED PARTY TRANSACTIONS -- Arrangements and
Transactions with Contel and GTE -- Cellular Exchange Transaction".
(b) Not applicable.
Item 4. Terms of the Transaction.
(a) Cover Page, "SPECIAL FACTORS -- Introduction; The Merger"; "THE MERGER
AGREE-MENT".
(b) "RELATED PARTY TRANSACTIONS -- Payments to Optionholders"; "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Directors and
Executive Officers of the Company".
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL
FACTORS -- Plans for the Company; Certain Effects of the
Merger -- Plans for the Company".
(b) Not applicable.
(c) "RELATED PARTY TRANSACTIONS -- Transition Arrangements".
(d) None.
(e) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL
FACTORS -- Plans for the Company; Certain Effects of the
Merger -- Plans for the Company".
(f) "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the
Merger -- Deregistration and Delisting".
(g) "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the
Merger -- Deregistration and Delisting".
Item 6. Source and Amount of Funds or Other Consideration.
(a) "SPECIAL FACTORS -- Merger Consideration".
2
<PAGE> 4
(b) It is estimated that the expenses incurred in connection with the
Merger through the closing of the Merger will be approximately as set
forth below (all of which are payable by GTE or the Company):
<TABLE>
<S> <C>
Investment banking fees and expenses.......................... $1,850,000.00
Legal fees and expenses....................................... $ 705,000.00
Depositary fees and expenses.................................. $ 12,000.00
Filing fees................................................... $ 50,851.86
Printing and mailing fees..................................... $ 290,000.00
Miscellaneous................................................. $ 115,000.00
-------------
$3,022,851.86
============
</TABLE>
(c) "SPECIAL FACTORS -- Merger Consideration".
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) "SPECIAL FACTORS -- Background of the Merger"; "SPECIAL
FACTORS -- Plans for the Company; Certain Effects of the
Merger -- Plans for the Company".
(b) "SPECIAL FACTORS -- Background of the Merger".
(c) "SPECIAL FACTORS -- Background of the Merger -- GTE's Determination to
Proceed and Discussions Regarding Structure".
(d) "SPECIAL FACTORS -- Introduction; The Merger"; "SPECIAL
FACTORS -- Background of the Merger -- Purpose of the Merger"; "SPECIAL
FACTORS -- Merger Consideration"; "SPECIAL FACTORS -- Accounting
Treatment of the Merger"; "SPECIAL FACTORS -- Certain Federal Income
Tax Consequences of the Merger"; "SPECIAL FACTORS -- Plans for the
Company; Certain Effects of the Merger".
Item 8. Fairness of the Transaction.
(a) "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger"; "SPECIAL FACTORS -- Determination of
the Fairness of the Merger by GTE, Contel and CCI Acquisition".
(b) "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger"; "SPECIAL FACTORS -- Opinion of
Financial Advisor to the Special Committee"; "SPECIAL
FACTORS -- Determination of the Fairness of the Merger by GTE, Contel
and CCI Acquisition".
(c) Cover Page; "SPECIAL FACTORS -- Written Consent"; "SPECIAL
FACTORS -- Determination of the Special Committee and the Board;
Fairness of the Merger".
(d) "SPECIAL FACTORS -- Background of the Merger -- Special Committee;
Negotiations with GTE Financial Advisors"; "SPECIAL
FACTORS -- Determination of the Special Committee and the Board;
Fairness of the Merger".
(e) "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger".
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger"; "SPECIAL FACTORS -- Opinion of
Financial Advisor to the Special Committee"; "SPECIAL
FACTORS -- Opinions of Financial Advisors to GTE".
3
<PAGE> 5
(b) "SPECIAL FACTORS -- Background of the Merger -- Special Committee;
Negotiations with GTE Financial Advisors"; "SPECIAL FACTORS -- Opinion
of Financial Advisor to the Special Committee"; "SPECIAL
FACTORS -- Opinions of Financial Advisors to GTE"; "RELATED PARTY
TRANSACTIONS -- Relationship between GTE Director and PaineWebber".
(c) "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special
Committee"; "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE".
Item 10. Interest in Securities of the Issuer.
(a) "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Directors and Executive Officers of the Company";
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Directors and Executive Officers of GTE, Contel and CCI
Acquisition".
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings With Respect to the Issuer's
Securities.
"THE MERGER AGREEMENT"; "RELATED PARTY TRANSACTIONS -- Payments to
Optionholders".
Item 12. Present Intention and Recommendation of Certain Persons With Regard to
the Transaction.
(a) "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Directors and Executive Officers of the Company".
(b) "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger".
Item 13. Other Provisions of the Transaction.
(a) "DISSENTERS' RIGHTS OF APPRAISAL".
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) "SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY"; "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE".
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) Not applicable.
(b) Not applicable.
Item 16. Additional Information.
(a) "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY".
Item 17. Material To Be Filed As Exhibits.
(a) Not applicable.
*(b)(1) Opinion of Lazard Freres & Co. dated December 30, 1994 included as
Exhibit B to the Second Revised Preliminary Information Statement
filed as Exhibit (d)(5) hereto.
4
<PAGE> 6
*(b)(2) Contel Cellular Inc. Valuation Analysis prepared by Lazard Freres &
Co. dated December 22, 1994.
*(b)(3) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
December 27, 1994 included as Exhibit C-1 to the Preliminary
Information Statement filed as Exhibit (d)(1) hereto.
*(b)(4) Opinion of PaineWebber Incorporated dated December 27, 1994 included
as Exhibit C-2 to the Preliminary Information Statement filed as
Exhibit (d)(1) hereto.
*(b)(5) Contel Cellular Inc. Preliminary Valuation Analysis prepared by
Lazard Freres & Co. dated November 7, 1994.
(b)(6) Contel Cellular Inc. Draft Preliminary Analysis prepared by the GTE
Financial Advisors.
*(c)(1) Agreement and Plan of Merger dated as of December 27, 1994, as
amended, included as Exhibit A to the Second Revised Preliminary
Information Statement filed as Exhibit (d)(5) hereto.
(c)(2) Letter Agreement dated April 21, 1995 issued by the Company to the
holders of Options to acquire Class A Shares.
*(d)(1) Preliminary Information Statement on Schedule 14C relating to the
merger of Contel Cellular Acquisition Corporation with and into
Contel Cellular Inc.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Class Action to be sent to Class A Stockholders.
*(d)(4) Revised Preliminary Information Statement on Schedule 14C relating to
the merger of Contel Cellular Acquisition Corporation with and into
Contel Cellular Inc.
*(d)(5) Second Revised Preliminary Information Statement on Schedule 14C
relating to the merger of Contel Cellular Acquisition Corporation
with and into Contel Cellular Inc.
(d)(6) Definitive Information Statement on Schedule 14C relating to the
merger of Contel Cellular Acquisition Corporation with and into
Contel Cellular Inc.
*(e)(1) Delaware General Corporation Law Section 262 included as Exhibit D to
the Second Revised Preliminary Information Statement filed as Exhibit
(d)(5) hereto.
(f) Not applicable.
- ---------------
* Previously filed.
5
<PAGE> 7
SIGNATURE
After due inquiry and to the best of the knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Date: April 21, 1995 GTE CORPORATION
By: /s/ MARIANNE DROST
----------------------
Title: Secretary
CONTEL CORPORATION
By: /s/ MARIANNE DROST
------------------------
Title: Secretary
CONTEL CELLULAR ACQUISITION
CORPORATION
By: /s/ MARIANNE DROST
-----------------------
Title: Secretary
CONTEL CELLULAR INC.
By: /s/ THEODORE J. CARRIER
---------------------------
Title: Treasurer and Chief
Financial Officer
6
<PAGE> 8
EXHIBIT INDEX
--------------
Exhibit
No. Description
------ -----------
(a) Not applicable.
*(b)(1) Opinion of Lazard Freres & Co. dated December 30, 1994 included as
Exhibit B to the Second Revised Preliminary Information Statement
filed as Exhibit (d)(5) hereto.
*(b)(2) Contel Cellular Inc. Valuation Analysis prepared by Lazard Freres &
Co. dated December 22, 1994.
*(b)(3) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
December 27, 1994 included as Exhibit C-1 to the Preliminary
Information Statement filed as Exhibit (d)(1) hereto.
*(b)(4) Opinion of PaineWebber Incorporated dated December 27, 1994 included
as Exhibit C-2 to the Preliminary Information Statement filed as
Exhibit (d)(1) hereto.
*(b)(5) Contel Cellular Inc. Preliminary Valuation Analysis prepared by
Lazard Freres & Co. dated November 7, 1994.
(b)(6) Contel Cellular Inc. Draft Preliminary Analysis prepared by the GTE
Financial Advisors.
*(c)(1) Agreement and Plan of Merger dated as of December 27, 1994, as
amended, included as Exhibit A to the Second Revised Preliminary
Information Statement filed as Exhibit (d)(5) hereto.
(c)(2) Letter Agreement dated April 21, 1995 issued by the Company to the
holders of Options to acquire Class A Shares.
*(d)(1) Preliminary Information Statement on Schedule 14C relating to the
merger of Contel Cellular Acquisition Corporation with and into
Contel Cellular Inc.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Class Action to be sent to Class A Stockholders.
*(d)(4) Revised Preliminary Information Statement on Schedule 14C relating
to the merger of Contel Cellular Acquisition Corporation with and
into Contel Cellular Inc.
*(d)(5) Second Revised Preliminary Information Statement on Schedule 14C
relating to the merger of Contel Cellular Acquisition Corporation
with and into Contel Cellular Inc.
(d)(6) Definitive Information Statement on Schedule 14C relating to the
merger of Contel Cellular Acquisition Corporation with and into
Contel Cellular Inc.
*(e)(1) Delaware General Corporation Law Section 262 included as Exhibit D
to the Second Revised Preliminary Information Statement filed as
Exhibit (d)(5) hereto.
(f) Not applicable.
- ---------------
* Previously filed.
<PAGE> 1
Project Forest Background Analysis
- --------------------------------------------------
1) DCF Valuation
2) POP-based Valuation
3) Summary Data Points in Determining Private Market Value
4) Relevant Issues Relating to Acorn Valuation
5) Demographics of Acorn Markets
6) Comparable Analysis
a) Public Comparables
b) Acquisition Comparables
7) Premium in Minority Squeeze-Outs
8) Stock Price Performance
<PAGE> 2
DRAFT
CONTEL CELLULAR INC.
DISCOUNTED CASH FLOW ANALYSIS TO 1/1/95(a)
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<TABLE>
<CAPTION>
Projected
-------------------------------------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1995 1996 1997 1998 1999
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS
EBITDA (Consolidated Ops.) & Other Income / (Expense) $652.9
Net Income Attributable to Minority Interest (b) 16.4
Equity in Uncon. Subs (b)(c) 25.0
FREE CASH FLOW ($99.6) $122.1 $254.1 $336.9 $399.3
======== ======= ======== ======== =======
<CAPTION>
Present Value of Terminal Value
NPV of as a Multiple of 1999 EBITDA
Discount Free Cash Flow -------------------------------
Rate 1995-1999 10.0x 11.0x 12.0x
-------- -------------- -------- -------- --------
<C> <C> <C> <C> <C>
12.0% $666.6 $3,704.5 $4,074.9 $4,445.4
13.0% 645.1 3,543.5 3,897.8 4,252.1
14.0% 624.5 3,390.7 3,729.8 4,068.9
15.0% 604.7 3,245.9 3,570.4 3,895.0
<CAPTION>
Incremental Present Value Adjustment for
Equity Investments & Minority Interest (Net)
Discount -------------------------------------------
Rate 18.0x 20.0x 22.0x
-------- ------- ------- -------
<C> <C> <C> <C>
12.0% $88.0 $97.8 $107.6
13.0% 84.2 93.5 102.9
14.0% 80.6 89.5 98.5
15.0% 77.1 85.7 94.3
<CAPTION>
Total Firm Value
Discount Mexican ---------------------------------------
Rate Properties(e) 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x
-------- ------------- ----------- ----------- -----------
<C> <C> <C> <C> <C>
12.0% $20.0 $4,479.1 $4,859.4 $5,239.6
13.0% 20.0 4,292.8 4,656.5 5,020.2
14.0% 20.0 4,115.8 4,463.8 4,811.9
15.0% 20.0 3,947.7 4,280.8 4,614.0
<CAPTION>
Implied Equity Value
Discount Total ----------------------------------------
Rate Debt(d) 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x
-------- -------- ----------- ----------- -----------
<C> <C> <C> <C> <C>
12.0% $2,114.5 $2,364.6 $2,744.9 $3,125.1
13.0% 2,114.5 2,178.3 2,542.0 2,905.7
14.0% 2,114.5 2,001.3 2,349.3 2,697.4
15.0% 2,114.5 1,833.2 2,166.3 2,499.5
<CAPTION>
---------------------------------------
Implied Equity Value per Share
Discount ---------------------------------------
Rate 10.0x/18.0x 11.0x/20.0x 12.0x/22.0x
-------- ----------- ----------- -----------
<C> <C> <C> <C>
12.0% $23.66 $27.46 $31.27
13.0% 21.79 25.43 29.07
14.0% 20.02 23.51 26.99
15.0% 18.34 21.67 25.01
---------------------------------------
</TABLE>
(a) Based on a mid-year discounting of Free Cash Flow and year-end 1999
discounting of Exit Value.
(b) Taxed at assumed 40% rate.
(c) Discounted by 30% due to minority position.
(d) Estimated balance at 1/1/95. (Current net debt balance as of 6/30/94 is
$2,021.9 mm.)
(e) Estimated; Represents $48 per net POP.
Page 1 of 8
<PAGE> 3
DRAFT
<TABLE>
CONTEL CELLULAR INC.
DISCOUNTED CASH FLOW ANALYSIS / ASSUMPTIONS
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<CAPTION>
----------------------------------
Valuation Assumptions
----------------------------------
Total Debt (1/1/95) $2,114.5
Shares Outstanding (mm) 99.95
POP Growth Rate: 1.5%
Tax Rate: 40.0%
----------------------------------
Historical Outlook
---------------- -------
Dec 31 Dec 31 Dec 31
1992 1993 1994
------ ------ -------
<S> <C> <C> <C>
OPERATING ASSUMPTIONS
EBITDA Margin 17.4% 23.0% 28.7%
Consolidated Subscribers (thousands) 328 521 775
Consolidated POPs (mm) 16.2 16.7 16.6
Penetration 2.0% 3.1% 4.7%
Avg MOU's / Customer / Month -- 129 136
Svc Rev / Sub / Month $78.4 $71.7 $68.7
Churn 2.3% 2.0% 2.0%
Cost per Gross Add $430.4 $432.2 $375.9
INCOME STATEMENT
Total Revenues (Incl. Equip Revenue & Data) 287.0 374.0 550.8
EBITDA 49.8 86.1 158.2
Depreciation & Amortization (95.7) (108.2) (126.3)
------ ------ ------
EBIT (45.8) (22.1) 32.0
Minority Interest (pre-tax) 2.4 0.8 (6.5)
Other Income / (Expense) 56.0 44.2 101.6
Equity in Income of Uncnsl. Subs. (pre-tax) 29.0 37.4 50.9
Interest Expense (148.1) (162.9) (178.1)
------ ------ ------
Pre-Tax Income (106.5) (102.6) (0.0)
Income Tax (33.5) (27.7) 11.9
------ ------ ------
Net Income ($73.1) ($74.9) ($11.9)
FREE CASH FLOW
EBITDA (Consolidated Ops.) -- 86.1 158.2
Other Income / (Expense) -- 44.2 101.6
Dividend Related to Minority Interest -- 0.0 (1.2)
Cash Dividends from Uncnsl. Subs., net -- 1.9 22.1
Income Tax Expense (Net of Intr. Exp. Ded.) -- (37.4) (83.1)
Deferred Income Taxes -- 31.6 30.0
Capital Expenditures -- (152.1) (246.2)
Purchase of Cellular Interests -- 0.0 (125.8)
Working Capital -- 87.7 (13.8)
Other Sources / (Uses) -- 7.4 13.9
----------------------------------------------------------------------------
Free Cash Flow -- $69.4 ($144.1)
----------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Terminal Valuation Calculation (1999)
--------------------------------------------------------
EBITDA (Consolidated Ops.) (a) $652.9
Net Income Attributable to Minority Interest (b) 16.4
Equity in Uncon. Subs (b) 35.7
Discount for Uncon. Subs 30.0% (10.7)
--------------------------------------------------------
Projected
----------------------------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1995 1996 1997 1998 1999
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
OPERATING ASSUMPTIONS
EBITDA Margin 37.2% 41.6% 44.5% 44.5% 48.7%
Consolidated Subscribers (thousands) 1,057 1,345 1,612 1,898 2,089
Consolidated POPs (mm) 16.9 17.1 17.4 17.6 17.9
Penetration 6.3% 7.9% 9.3% 10.8% 11.7%
Avg MOU's / Customer / Month 124 116 118 124 124
Svc Rev / Sub/ Month $63.1 $57.3 $53.9 $51.4 $50.1
Churn 2.1% 1.9% 2.0% 2.3% 2.4%
Cost per Gross Add $347.2 $346.5 $335.0 $324.8 $319.4
INCOME STATEMENT
Total Revenues (Incl. Equip Revenue & Data) 720.3 882.4 1,043.3 1,212.2 1,351.5
EBITDA 268.2 366.7 464.0 539.8 658.4
Depreciation & Amortization (152.4) (181.0) (201.4) (215.1) (227.6)
------ ------ ------- ------- -------
EBIT 115.9 185.7 262.6 324.7 430.8
Minority Interest (pre-tax) (9.1) (13.2) (17.6) (21.1) (27.3)
Other Income / (Expense) (5.2) (5.2) (5.2) (5.4) (5.6)
Equity in Income of Uncnsl. Subs. (pre-tax) 58.1 58.4 58.8 59.1 59.5
Interest Expense (204.6) (212.5) (217.1) (206.6) (189.9)
------ ------ ------- ------- -------
Pre-Tax Income (44.9) 13.2 81.5 150.8 267.6
Income Tax (8.6) 14.0 41.6 69.3 114.5
------ ------ ------- ------- -------
Net Income ($36.3) ($0.7) $39.9 $81.5 $153.1
FREE CASH FLOW
EBITDA (Consolidated Ops.) 268.2 366.7 464.0 539.8 658.4
Other Income / (Expense) (5.2) (5.2) (5.2) (5.4) (5.6)
Dividend Related to Minority Interest (3.0) (4.0) (5.0) (7.0) (10.0)
Cash Dividends from Uncnsl. Subs., net 20.1 47.7 50.0 58.1 53.5
Income Tax Expense (Net of Intr. Exp. Ded.) (73.3) (98.9) (128.4) (151.9) (190.4)
Deferred Income Taxes 40.9 44.4 46.8 48.2 49.7
Capital Expenditures (297.6) (220.2) (157.6) (135.5) (145.0)
Purchase of Cellular Interests (46.0) 0.0 0.0 0.0 0.0
Working Capital (28.0) (31.0) (37.7) (43.2) (49.6)
Other Sources / (Uses) 24.2 22.6 27.1 33.9 38.3
-----------------------------------------------------------------------------------------------------
Free Cash Flow ($99.6) $122.1 $254.1 $336.9 $399.3
-----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes Other Income / (Expense).
(b) Based on a 40.0% tax rate.
Page 2 of 8
<PAGE> 5
DRAFT
<TABLE>
CONTEL CELLULAR INC.
DETAILS REGARDING REVENUE PROJECTIONS
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<CAPTION>
Historical Outlook
------------------ -------
Dec 31 Dec 31 Dec 31
1992 1993 1994
------ ------ -------
<S> <C> <C> <C>
REVENUE
Access Revenue (Incl Promo Revenues) $85.6 $110.7 $178.2
Airtime Revenue (Incl Promo Revenues) 106.8 145.7 210.4
Roaming Revenue 45.2 59.9 77.5
Data Revenue 0.0 0.0 0.0
Less: Promotions Revenues 0.0 24.9 28.1
Other Revenue 23.3 27.8 46.4
Total Revenues (Excl. Equip & Promotions Revenue) (a) $260.9 $369.0 $540.7
Equipment Sales & Rental 26.1 29.9 38.2
Add-back of Promotions Revenues 0.0 (24.9) (28.1)
Total Revenues (Incl. Equip & Promo Revenue) (b) $287.0 $374.0 $550.8
AS A % OF TOTAL REVENUES
Access Revenue (Incl Promos) 29.8% 29.6% 32.4%
Airtime Revenue (Incl Promos) 37.2% 39.0% 38.2%
Roaming Revenue 15.8% 16.0% 14.1%
Data Revenue 0.0% 0.0% 0.0%
Equipment Sales & Rental 9.1% 8.0% 6.9%
Promotions Revenues 0.0% -6.7% -5.1%
Other Revenue 8.1% 7.4% 8.4%
------ ------ ------
Total Revenues (Incl. Equip Revenue) 100.0% 93.3% 94.9%
REVENUE GROWTH RATES
Access Revenue (Incl Promos) -- 29.4% 61.0%
Airtime Revenue (Incl Promos) -- 36.4% 44.4%
Roaming Revenue -- 32.4% 29.4%
Data Revenue -- -- --
Equipment Sales -- 14.5% 27.7%
Promotions Revenues -- -- NM
Other Revenue -- 19.4% 66.7%
Total Revenues (Incl. Equip Revenue) -- 30.3% 47.3%
REVENUES / SUBSCRIBER / MONTH
Access Cost / Avg Customer / Month -- $26.01 $26.25
Airtime Rate per Minute of Use -- $0.26 $0.22
Composite Access & Airtime Rate per Minute of Use -- $0.42 $0.39
- --------------------------------------------------------------------------------------------------
OPERATING MARGINS
Gross Margin 42.4% 45.9% 47.7%
EBITDA / Total Revenues 17.4% 23.0% 28.7%
EBIT / Total Revenues NM NM 5.8%
Net Income / Total Revenues NM NM NM
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Projected
------------------------------------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1995 1996 1997 1998 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Access Revenue (Incl Promo Revenues) $254.4 $336.0 $412.7 $488.5 $552.9
Airtime Revenue (Incl Promo Revenues) 269.2 319.9 353.9 386.4 423.3
Roaming Revenue 85.6 91.2 94.1 97.2 98.6
Data Revenue 1.8 11.6 31.7 52.2 70.5
Less: Promotions Revenues 29.2 31.6 33.4 39.2 36.8
Other Revenue 68.1 72.1 92.1 115.8 136.8
Total Revenues (Excl. Equip & Promotions Revenue) (a) $708.3 $862.4 $1,017.8 $1,179.4 $1,319.0
Equipment Sales & Rental 41.2 51.6 58.9 72.1 69.3
Add-back of Promotions Revenues (29.2) (31.6) (33.4) (39.2) (36.8)
Total Revenues (Incl. Equip & Promo Revenue) (b) $720.3 $882.4 $1,043.3 $1,212.2 $1,351.5
AS A % OF TOTAL REVENUES
Access Revenue (Incl Promos) 35.3% 38.1% 39.6% 40.3% 40.9%
Airtime Revenue (Incl Promos) 37.4% 36.2% 33.9% 31.9% 31.3%
Roaming Revenue 11.9% 10.3% 9.0% 8.0% 7.3%
Data Revenue 0.3% 1.3% 3.0% 4.3% 5.2%
Equipment Sales & Rental 5.7% 5.8% 5.6% 5.9% 5.1%
Promotions Revenues -4.1% -3.6% -3.2% -3.2% -2.7%
Other Revenue 9.5% 8.2% 8.8% 9.5% 10.1%
------ ------ -------- -------- --------
Total Revenues (Incl. Equip Revenue) 95.9% 96.4% 96.8% 96.8% 97.3%
REVENUE GROWTH RATES
Access Revenue (Incl Promos) 42.7% 32.1% 22.8% 18.4% 13.2%
Airtime Revenue (Incl Promos) 27.9% 18.8% 10.6% 9.2% 9.5%
Roaming Revenue 10.5% 6.5% 3.2% 3.3% 1.5%
Data Revenue -- 539.8% 173.9% 64.9% 34.9%
Equipment Sales 7.7% 25.4% 14.1% 22.4% -3.8%
Promotions Revenues NM NM NM NM NM
Other Revenue 46.9% 5.9% 27.6% 25.7% 18.1%
Total Revenues (Incl. Equip Revenue) 30.8% 22.5% 18.2% 16.2% 11.5%
REVENUES / SUBSCRIBER / MONTH
Access Cost / Avg Customer / Month $25.75 $25.37 $24.93 $24.70 $24.27
Airtime Rate per Minute of Use $0.21 $0.20 $0.17 $0.15 $0.14
Composite Access & Airtime Rate per Minute of Use $0.40 $0.40 $0.38 $0.34 $0.33
- -----------------------------------------------------------------------------------------------------------------------
OPERATING MARGINS
Gross Margin 52.5% 53.8% 54.1% 54.3% 57.0%
EBITDA / Total Revenues 37.2% 41.6% 44.5% 44.5% 48.7%
EBIT / Total Revenues 16.1% 21.0% 25.2% 26.8% 31.9%
Net Income / Total Revenues NM NM 3.8% 6.7% 11.3%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(a) Reflects revenues generated from total minutes used.
(b) Reflects revenues generated from equipment sales & rental and from total
minutes paid for. (i.e. the total is adjusted downward to reflect those
minutes paid for by the Company)
Page 3 of 8
<PAGE> 7
DRAFT
CONTEL CELLULAR INC.
DETAILS REGARDING CASH EXPENSE PROJECTIONS
- -------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<TABLE>
<CAPTION>
Historical Outlook
----------------- -------
Dec 31 Dec 31 Dec 31
1992 1993 1994
------ ------ -------
<S> <C> <C> <C>
CASH EXPENSES
Customer Acquisition Costs (Incl Promos & Equip Revenues) $76.4 $125.2 $155.4
Add-back of Equipment Revenues (a) 26.1 30.1 40.2
Less: Promo Revenues 0.0 (22.1) (23.5)
Less: Depreciation Rental Equipment 0.0 0.0 (0.9)
------ ------ -------
Total Customer - Cash Acquisition Costs Incl Promos & Excl Equip Rev 102.5 133.2 171.1
RETENTION COSTS (INCL PROMOS) 0.0 4.4 10.4
Add-back of Equipment Revenues 0.0 (0.2) (1.9)
Less: Promo Revenues 0.0 (2.8) (4.6)
------ ------ -------
Total Cash Retention Costs (Incl Promos & Excl Equip Rev) 0.0 1.4 3.9
COSTS OF SERVICE 44.6 44.7 69.0
Equipment Revenues 0.0 0.0 (0.0)
Less: Depreciation & Amortization (0.9) (0.9) (0.1)
------ ------ -------
Total Cash Costs of Service (Excl. Equip Rev ) 43.7 43.8 68.9
SYSTEMS COSTS 82.6 107.8 147.6
Less: Depreciation & Amortization (48.5) (61.7) (84.6)
------ ------ -------
Total Cash Systems Costs 34.1 46.1 63.0
REGION ADMIN EXPENSES 22.0 22.2 38.2
Less: Regional Depreciation (0.9) (1.0) (1.8)
------ ------ -------
Total Region Admin Cash Expenses 21.2 21.3 36.4
HEADQUARTERS EXPENSES 39.9 45.2 50.3
Less: HQ Depreciation (4.1) (3.1) (1.1)
------ ------ -------
Total Headquarters Cash Expenses 35.7 42.1 49.3
TOTAL DEPRECIATION (54.4) (66.6) (88.5)
- ---------------------------------------------------------------------------------------------------------------
Total Cash Expenses (Incl Equipment Revenues) $211.0 $258.0 $354.3
Equipment Revenue 26.1 29.9 38.2
------ ------ ------
Total Cash Expenses (Excl Equipment Revenues) $237.2 $287.9 $392.5
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
AS A % OF TOTAL CASH EXPENSES (EXCL EQUIPMENT REVENUES)
Total Customer Acquisition Costs (Incl Promos & Excl Equip Rev) 43.2% 46.3% 43.6%
Total Retention Costs (Incl Promos & Excl Equip Rev) 0.0% 0.5% 1.0%
Total Costs of Service (Excl. Equip Rev) 18.4% 15.2% 17.5%
Total Systems Costs 14.4% 16.0% 16.1%
Total Region Admin Expenses 8.9% 7.4% 9.3%
Total Headquarters Expenses 15.1% 14.6% 12.5%
----- ----- -----
Total Cash Expenses Excl Equipment Revenues 100.0% 100.0% 100.0%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CUSTOMER ACQUISITION COSTS
Total Customer Acquisition Costs (Incl Promos & Equip Rev) ($mm) $76.4 $125.2 $155.4
Net Loss on Equipment per Gross Add (Incl Depreciation) 68 68 76
Commissions per Gross Add 113 106 71
Other Sales Costs per Gross Add 189 140 138
Other Acquisition Costs per Gross Add 60 118 92
------ ------ ------
Total Acquisition Costs per Gross Add (Incl Depreciation) $430 $432 $376
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TOTAL CASH COSTS & EXPENSES PLUS DEPRECIATION & AMORTIZATION
Cost of Services $44.6 $44.7 $69.0
Cost of Equipment Sales 38.3 49.8 71.5
Systems Costs 82.6 107.8 147.6
Selling, General & Administrative (b) 167.4 193.8 230.7
------ ------ ------
Total Expenses Excl Equip & Promo Revenues $332.8 $396.1 $518.8
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
OPERATING MARGINS
Gross Margin 42.4% 45.9% 47.7%
Cost of Services & Equipment Sales / Total Revenues 28.9% 25.3% 25.5%
Systems Costs / Total Revenues 28.8% 28.8% 26.8%
S,G&A / Total Revenues 58.3% 51.8% 41.9%
----- ----- -----
Operating Expenses / Total Revenues 116.0% 105.9% 94.2%
EBITDA / Total Revenues 17.4% 23.0% 28.7%
EBIT / Total Revenues NM NM 5.8%
Net Income / Total Revenues NM NM NM
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Projected
------------------------------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH EXPENSES
Customer Acquisition Costs (Incl Promos & Equip Revenues) $173.7 $194.1 $208.2 $245.2 $239.0
Add-back of Equipment Revenues (a) 41.2 51.6 58.9 72.1 69.3
Less: Promo Revenues (24.7) (27.0) (29.1) (34.7) (33.8)
Less: Depreciation Rental Equipment (7.4) (11.4) (16.0) (20.0) (22.7)
------ ------- ------- ------- -------
Total Customer - Cash Acquisition Costs Incl Promos & Excl Equip Rev 182.7 207.4 222.1 262.7 251.8
RETENTION COSTS (INCL PROMOS) 11.5 14.4 15.5 20.2 14.1
Add-back of Equipment Revenues 0.0 0.0 0.0 0.0 0.0
Less: Promo Revenues (4.5) (4.6) (4.3) (4.6) (3.0)
------ ------- ------- ------- -------
Total Cash Retention Costs (Incl Promos & Excl Equip Rev) 7.0 9.8 11.2 15.7 11.0
COSTS OF SERVICE 96.3 102.0 127.2 154.2 173.0
Equipment Revenues 0.0 0.0 0.0 0.0 0.0
Less: Depreciation & Amortization 0.0 0.0 0.0 0.0 0.0
------ ------- ------- ------- -------
Total Cash Costs of Service (Excl. Equip Rev ) 96.3 102.0 127.2 154.2 173.0
SYSTEMS COSTS 184.9 230.4 263.3 288.6 309.8
Less: Depreciation & Amortization (101.7) (125.7) (141.1) (150.6) (159.9)
------ ------- ------- ------- -------
Total Cash Systems Costs 83.2 104.7 122.2 138.1 149.9
REGION ADMIN EXPENSES 31.5 39.3 42.1 45.1 47.7
Less: Regional Depreciation (1.7) (2.1) (2.4) (2.6) (2.9)
------ ------- ------- ------- -------
Total Region Admin Cash Expenses 29.8 37.1 39.7 42.4 44.8
HEADQUARTERS EXPENSES 54.1 56.0 58.5 61.3 64.5
Less: HQ Depreciation (1.0) (1.4) (1.6) (1.8) (2.0)
------ ------- ------- ------- -------
Total Headquarters Cash Expenses 53.1 54.6 56.9 59.5 62.5
TOTAL DEPRECIATION (111.9) (140.5) (161.0) (175.0) (187.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Cash Expenses (Incl Equipment Revenues) $410.9 $464.1 $520.4 $600.3 $623.7
Equipment Revenue 41.2 51.6 58.9 72.1 69.3
------ ------ ------ ------ ------
Total Cash Expenses (Excl Equipment Revenues) $452.1 $515.8 $579.3 $672.5 $693.0
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
AS A % OF TOTAL CASH EXPENSES (EXCL EQUIPMENT REVENUES)
Total Customer Acquisition Costs (Incl Promos & Excl Equip Rev) 40.4% 40.2% 38.3% 39.1% 36.3%
Total Retention Costs (Incl Promos & Excl Equip Rev) 1.5% 1.9% 1.9% 2.3% 1.6%
Total Costs of Service (Excl. Equip Rev) 21.3% 19.8% 21.9% 22.9% 25.0%
Total Systems Costs 18.4% 20.3% 21.1% 20.5% 21.6%
Total Region Admin Expenses 6.6% 7.2% 6.9% 6.3% 6.5%
Total Headquarters Expenses 11.8% 10.6% 9.8% 8.8% 9.0%
----- ----- ----- ----- -----
Total Cash Expenses Excl Equipment Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CUSTOMER ACQUISITION COSTS
Total Customer Acquisition Costs (Incl Promos & Equip Rev) ($mm) $173.7 $194.1 $208.2 $245.2 $239.0
Net Loss on Equipment per Gross Add (Incl Depreciation) 49 59 69 68 66
Commissions per Gross Add 71 79 61 36 23
Other Sales Costs per Gross Add 135 117 112 112 116
Other Acquisition Costs per Gross Add 92 92 93 108 115
------ ------ ------ ------ ------
Total Acquisition Costs per Gross Add (Incl Depreciation) $347 $347 $335 $325 $319
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CASH COSTS & EXPENSES PLUS DEPRECIATION & AMORTIZATION
Cost of Services $96.3 $102.0 $127.2 $154.2 $173.0
Cost of Equipment Sales 60.7 75.2 88.8 111.0 98.1
Systems Costs 184.9 230.4 263.3 288.6 309.8
Selling, General & Administrative (b) 262.5 289.1 301.4 333.8 339.8
------ ------ ------ ------ ------
Total Expenses Excl Equip & Promo Revenues $604.4 $696.8 $780.7 $887.5 $920.7
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING MARGINS
Gross Margin 52.5% 53.8% 54.1% 54.3% 57.0%
Cost of Services & Equipment Sales / Total Revenues 21.8% 20.1% 20.7% 21.9% 20.1%
Systems Costs / Total Revenues 25.7% 26.1% 25.2% 23.8% 22.9%
S, G&A / Total Revenues 36.4% 32.8% 28.9% 27.5% 25.1%
---- ---- ---- ---- ----
Operating Expenses / Total Revenues 83.9% 79.0% 74.8% 73.2% 68.1%
EBITDA / Total Revenues 37.2% 41.6% 44.5% 44.5% 48.7%
EBIT / Total Revenues 16.1% 21.0% 25.2% 26.8% 31.9%
Net Income / Total Revenues NM NM 3.8% 6.7% 11.3%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
(a) Customer Acquisition Costs have been netted for equipment revenue; hence,
cash costs requires add-back of revenues.
(b) S,G&A includes: (1) headquarters expenses, (2) region admin expenses, (3)
retention costs, (4) customer acquisition costs excluding equip costs, (5)
some depreciation & amortization and (6) back out of promo revenues.
Page 4 of 8
<PAGE> 8
DRAFT
CONTEL CELLULAR INC.
DETAILS REGARDING CAPITAL EXPENDITURE PROJECTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Outlook Projected
---------- ------- -----------------------
Dec 31 Dec 31 Dec 31 Dec 31
1993 1994 1995 1996
---------- ------- -------- --------
<S> <C> <C> <C> <C>
NETWORK EXPENDITURES
Infrastructure
Number of Cells 449 679 860 923
Incremental New Cells NA 214 181 63
Cost per Incremental Cell NA $369,173 $501,806 $528,991
Number of Voice Path Channels - Analog 10,822 16,926 24,380 24,458
Incremental New Voice Paths - Analog NA 5,804 7,454 78
Cost per Incremental Voice Path Channel - Analog NA $5,146 $9,628 $31,921
Number of Voice Path Channels - Digital 0 0 0 6,372
Incremental New Voice Paths - Digital NA 0 0 6,372
Cost per Incremental Voice Path Channel - Digital NA $0 $0 $6,098
Number of Switches 29 30 32 45
Incremental New Switches NA 1 2 13
Total cost of Incremental Switches (a) NA $600,000 $1,350,000 $3,484,880
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES ($mm)
Cell Sites (Coverage Cells) $0.0 $79.0 $90.8 $33.3
Voice Paths - Analog 0.0 29.9 71.8 2.5
Voice Paths - Digital 0.0 0.0 0.0 38.9
Switches 0.0 33.9 19.9 36.1
Microwave 0.0 21.4 20.2 6.8
Other Network Costs 0.0 51.0 46.6 64.2
Tele-GO 0.0 6.0 6.9 3.9
Capitalized Engineering 7.7 8.1 12.0 12.7
Other 144.4 17.0 29.5 21.8
------ ------ ------ ------
Total Capital Expenditures $152.1 $246.2 $297.6 $220.2
- -----------------------------------------------------------------------------------------------------------------------------------
AS A % OF CAPITAL EXPENDITURES
Cell Sites (Coverage Cells) 0.0% 32.1% 30.5% 15.1%
Voice Paths - Analog 0.0% 12.1% 24.1% 1.1%
Voice Paths - Digital 0.0% 0.0% 0.0% 17.6%
Switches 0.0% 13.8% 6.7% 16.4%
Microwave 0.0% 8.7% 6.8% 3.1%
Other Network Costs 0.0% 20.7% 15.7% 29.2%
Non-Network Costs (Tele-GO, Capitalized Engineering & Other) 94.9% 6.9% 9.9% 9.9%
------ ------ ------ ------
Total Capital Expenditures 94.9% 94.3% 93.6% 92.5%
<CAPTION>
Projected
------------------------------------------------
Dec 31 Dec 31 Dec 31
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
NETWORK EXPENDITURES
INFRASTRUCTURE
Number of Cells 945 960 969
Incremental New Cells 22 15 9
Cost per Incremental Cell $519,421 $503,037 $582,048
Number of Voice Path Channels - Analog 24,535 24,616 24,704
Incremental New Voice Paths - Analog 77 81 88
Cost per Incremental Voice Path Channel - Analog $10,404 $11,732 $11,732
Number of Voice Path Channels - Digital 11,942 17,147 20,119
Incremental New Voice Paths - Digital 5,570 5,205 2,972
Cost per Incremental Voice Path Channel - Digital $6,064 $5,598 $5,822
Number of Switches 47 49 49
Incremental New Switches 2 2 0
Total cost of Incremental Switches (a) $2,694,882 $2,640,985 $0
- --------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES ($mm)
Cell Sites (Coverage Cells) $11.4 $7.5 $5.2
Voice Paths - Analog 0.8 1.0 1.0
Voice Paths - Digital 33.8 29.1 17.3
Switches 20.4 18.3 8.6
Microwave 2.2 1.4 0.6
Other Network Costs 36.7 20.6 55.8
Tele-GO 10.4 17.9 18.8
Capitalized Engineering 13.4 14.1 15.0
Other 28.6 25.5 22.5
------ ------ ------
Total Capital Expenditures $157.6 $135.5 $145.0
- --------------------------------------------------------------------------------------------------------------------
AS A % OF CAPITAL EXPENDITURES
Cell Sites (Coverage Cells) 7.3% 5.6% 3.6%
Voice Paths - Analog 0.5% 0.7% 0.7%
Voice Paths - Digital 21.4% 21.5% 11.9%
Switches 13.0% 13.5% 5.9%
Microwave 1.4% 1.1% 0.4%
Other Network Costs 23.3% 15.2% 38.5%
Non-Network Costs (Tele-GO, Capitalized Engineering & Other) 18.1% 18.9% 15.5%
------ ------ ------
Total Capital Expenditures 84.9% 76.4% 76.7%
</TABLE>
- -------------------------------
(a) Detail Breakdown of Cost per Incremental Switch:
<TABLE>
<CAPTION>
Year # of Switches Cost per Switch Year # of Switches Cost per Switch
---- ------------- --------------- ---- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1995 1 $600,000 1997 2 $2,694,882
1 $750,000
1996 1 $2,749,880 1998 2 $2,640,985
12 $735,000
</TABLE>
Page 5 of 8
<PAGE> 9
<TABLE>
DRAFT
CONTEL CELLULAR INC.
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<CAPTION>
Historical Outlook Projected
-------------------- ------- --------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Access Revenue (Incl Promos) $85.6 $110.7 $178.2 $254.4 $336.0 $412.7
Airtime Revenue (Incl Promos) 106.8 145.7 210.4 269.2 319.9 353.9
Roaming Revenue 45.2 59.9 77.5 85.6 91.2 94.1
Other Network Features 8.3 13.0 25.1 40.5 58.4 75.8
Toll Revenue 12.1 12.3 18.0 20.1 0.0 0.0
------ ------ ------ ------ ------ --------
Service Revenue Excl Data 258.0 341.5 509.3 669.9 805.5 936.5
Data Revenue 0.0 0.0 0.0 1.8 11.6 31.7
------ ------ ------ ------ ------ --------
Service Revenue Incl Data 258.0 341.5 509.3 671.7 817.1 968.1
Promotions 0.0 24.9 28.1 29.2 31.6 33.4
------ ------ ------ ------ ------ --------
Service Revenue Excl Promos 258.0 366.4 537.5 700.8 848.7 1,001.6
Other Revenues 2.8 2.5 3.2 7.5 13.8 16.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total Revenues (Excl. Equip Revenue) $260.9 $369.0 $540.7 $708.3 $862.4 $1,017.8
- -----------------------------------------------------------------------------------------------------------------------------------
Customer Acquisition Costs
Equipment Revenues (26.1) (29.5) (39.7) (35.5) (43.3) (47.6)
Equipment Costs 38.3 49.8 70.3 58.4 73.0 85.6
------ ------ ------ ------ ------ --------
Net Loss 12.1 20.3 30.6 22.9 29.8 38.0
Equipment Rental Revenues 0.0 (0.6) (0.5) (5.6) (8.4) (11.3)
Depreciation-Rental Equipment 0.0 0.0 0.9 7.4 11.4 16.0
Other Equipment Rental Costs 0.0 0.0 0.3 0.0 0.0 0.0
------ ------ ------ ------ ------ --------
Net Rental Loss 0.0 (0.5) 0.7 1.8 3.0 4.6
Commissions 20.1 30.8 29.1 35.6 44.4 37.9
Advertising 10.6 12.1 14.4 17.7 20.8 24.7
Sales - Direct 24.9 31.7 45.3 55.7 53.5 57.5
- Indirect 3.1 2.6 3.2 2.9 3.0 2.9
- Stores 5.5 6.2 8.4 8.9 9.1 9.2
Other Acquisition Costs 0.0 0.0 0.1 3.6 3.6 4.2
------ ------ ------ ------ ------ --------
Total Acquisition Costs Excl Promos 76.4 103.1 131.9 149.0 167.1 179.1
Promotions - Revenues 0.0 22.1 23.5 24.7 27.0 29.1
Total Acquisition Costs Incl Promos 76.4 125.2 155.4 173.7 194.1 208.2
Customer Retention Costs
Equipment Revenues (Excl Product Co.) 0.0 0.2 1.9 0.0 0.0 0.0
Equipment Costs (Excl Product Co.) 0.0 0.0 0.9 2.3 2.2 3.2
------ ------ ------ ------ ------ --------
Net Margin 0.0 0.2 2.9 2.3 2.2 3.2
Retention - Marketing 0.0 1.4 2.9 2.3 3.6 4.5
Customer Services - Customer Loyalty Only 0.0 0.0 0.0 0.0 0.0 0.0
Other Retention Costs 0.0 0.0 0.1 2.4 4.0 3.5
------ ------ ------ ------ ------ --------
Total Retention Costs Excl Promos 0.0 1.6 5.8 7.0 9.8 11.2
Promotions - Revenues 0.0 2.8 4.6 4.5 4.6 4.3
------ ------ ------ ------ ------ --------
Total Retention Costs Incl Promos 0.0 4.4 10.4 11.5 14.4 15.5
Other Costs of Service
Operating Tax 3.0 1.7 2.0 2.9 3.6 4.4
Customer Services (Excl Customer Loyalty) 7.0 7.3 11.8 17.8 24.1 30.1
Financial Services 0.0 2.9 4.8 7.2 8.2 10.2
Toll Cost of Sales 5.4 6.4 9.7 9.7 0.0 0.0
Customer Base Support 9.4 11.3 15.4 20.2 23.6 28.1
Roamer Administration 11.3 5.5 8.1 9.4 11.2 13.7
Bad Debt Expense 7.5 6.3 13.0 16.1 19.6 23.5
Depreciation & Amortization 0.9 0.9 0.1 0.0 0.0 0.0
Other Cost of service 0.0 2.3 4.0 13.1 11.7 17.0
------ ------ ------ ------ ------ --------
Total Cost of Service 44.6 44.7 69.0 96.3 102.0 127.2
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Dec 31 Dec 31
1998 1999
-------- --------
<S> <C> <C>
REVENUE
Access Revenue (Incl Promos) $488.5 $552.9
Airtime Revenue (Incl Promos) 386.4 423.3
Roaming Revenue 97.2 98.6
Other Network Features 95.0 112.0
Toll Revenue 0.0 0.0
-------- --------
Service Revenue Excl Data 1,067.1 1,186.9
Data Revenue 52.2 70.5
-------- --------
Service Revenue Incl Data 1,119.4 1,257.4
Promotions 39.2 36.8
-------- --------
Service Revenue Excl Promos 1,158.6 1,294.2
Other Revenues 20.8 24.7
- ------------------------------------------------------------------------------
Total Revenues (Excl. Equip Revenue) $1,179.4 $1,319.0
- ------------------------------------------------------------------------------
Customer Acquisition Costs
Equipment Revenues (57.1) (52.9)
Equipment Costs 103.6 95.7
-------- --------
Net Loss 46.5 42.8
Equipment Rental Revenues (15.0) (16.5)
Depreciation-Rental Equipment 20.0 22.7
Other Equipment Rental Costs 0.0 0.0
-------- --------
Net Rental Loss 5.0 6.2
Commissions 27.5 17.2
Advertising 40.1 44.9
Sales - Direct 72.8 75.6
- Indirect 2.6 2.1
- Stores 9.2 9.2
Other Acquisition Costs 6.9 7.1
-------- --------
Total Acquisition Costs Excl Promos 210.5 205.2
Promotions - Revenues 34.7 33.8
Total Acquisition Costs Incl Promos 245.2 239.0
Customer Retention Costs
Equipment Revenues (Excl Product Co.) 0.0 0.0
Equipment Costs (Excl Product Co.) 7.4 2.4
-------- --------
Net Margin 7.4 2.4
Retention - Marketing 5.3 6.0
Customer Services - Customer Loyalty Only 0.0 0.0
Other Retention Costs 3.0 2.7
-------- --------
Total Retention Costs Excl Promos 15.7 11.0
Promotions - Revenues 4.6 3.0
-------- --------
Total Retention Costs Incl Promos 20.2 14.1
Other Costs of Service
Operating Tax 5.1 5.9
Customer Services (Excl Customer Loyalty) 36.1 41.3
Financial Services 11.8 12.3
Toll Cost of Sales 0.0 0.0
Customer Base Support 33.7 34.7
Roamer Administration 15.4 18.1
Bad Debt Expense 29.8 33.4
Depreciation & Amortization 0.0 0.0
Other Cost of service 22.2 27.3
-------- --------
Total Cost of Service 154.2 173.0
</TABLE>
Page 6 of 8
<PAGE> 11
<TABLE>
DRAFT
CONTEL CELLULAR INC.
CONSOLIDATED STATEMENT OF OPERATIONS (CON'T)
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<CAPTION>
Historical Outlook Projected
-------------------- ------- --------------------------------
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Systems Costs
Systems Operations 9.6 12.0 15.2 17.6 20.7 22.7
Facilities 12.1 15.3 23.6 34.3 42.3 50.6
Maintenance / Repair 3.9 4.7 7.6 12.2 14.9 18.1
Property Taxes 6.2 11.5 12.6 14.7 22.3 25.9
Leases 2.2 2.6 3.9 4.3 4.5 4.9
Depreciation & Amortization 48.5 61.7 84.6 101.7 125.7 141.1
------ ------ ------ ------ -------- --------
Total Systems Costs 82.6 107.8 147.6 184.9 230.4 263.3
Region Expenses
Engineering 5.2 7.0 7.7 10.6 11.5 12.2
Capitalized Engineering (4.9) (6.7) (6.8) (9.3) (10.1) (10.8)
Marketing 2.9 5.2 5.6 4.7 5.4 5.8
G & A 17.9 15.7 29.9 23.8 30.3 32.5
Regional Depreciation 0.9 1.0 1.8 1.7 2.1 2.4
------ ------ ------ ------ -------- --------
Total Regional Administration Expense 22.0 22.2 38.176 31.5 39.3 42.1
Headquarters Expenses
Engineering 3.6 3.9 6.0 7.5 7.5 7.6
Capitalized Engineering (2.0) (1.1) (1.3) (2.6) (2.6) (2.6)
Marketing 2.3 4.5 3.3 5.4 5.8 6.3
G & A 31.8 34.7 41.2 42.8 43.9 45.6
HQ Depreciation 4.1 3.1 1.1 1.0 1.4 1.6
------ ------ ------ ------ -------- --------
Total Headquarters Expenses 39.9 45.2 50.324 54.1 56.0 58.5
- ----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (a) $265.4 $349.4 $470.9 $552.0 $636.3 $714.8
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income / (Loss) Before Amortization ($4.6) $19.5 $69.8 $156.3 $226.1 $303.0
Amortization of Franchise / Customers 37.0 36.6 30.6 34.4 34.4 34.3
Amortization of Goodwill 4.2 5.0 7.3 6.1 6.1 6.1
Operating Income / (Loss) ($45.8) ($22.1) $32.0 $115.9 $185.7 $262.6
Partnership Invest Income / (Loss) 29.0 37.4 50.9 58.1 58.4 58.8
Other Income / (Expense) 56.0 44.2 101.6 (5.2) (5.2) (5.2)
Interest Expenses 150.7 165.4 180.6 206.6 214.3 218.7
I.D.C. (2.6) (2.5) (2.5) (2.0) (1.8) (1.6)
------ ------ ------ ------ -------- --------
Net Interest 148.1 162.9 178.1 204.6 212.5 217.1
Partnership / Corp. Income / (Loss) (108.9) (103.5) 6.5 (35.8) 26.4 99.1
Partnership Minority Interest - Income / (Loss) 2.4 0.8 (6.5) (9.1) (13.2) (17.6)
------ ------ ------ ------ -------- --------
Pretax Income / (Loss) (106.5) (102.6) (0.0) (44.9) 13.2 81.5
State Income Taxes - Exp / (Cr.) 1.2 1.9 9.5 6.1 9.3 15.0
Fed Income Taxes - Exp / (Cr.) (34.7) (29.6) 2.4 (14.7) 4.7 26.6
------ ------ ------ ------ -------- --------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME ($73.1) ($74.9) ($11.9) ($36.3) ($0.7) $39.9
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total Revenues (Incl Equip) $287.0 $374.0 $550.8 $720.3 $882.4 $1,043.3
Total Operating Exp (Excl Equip Rev & Promos) 332.8 396.1 518.8 604.4 696.8 780.7
Operating Cash Flow 49.8 86.1 158.2 268.2 366.7 464.0
Operating Cash Flow Margin (% of Svc Rev Incl Promos) 19.3% 25.2% 31.1% 39.9% 44.9% 47.9%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation & Amortization
Depreciation - Network 48.5 61.7 84.6 101.7 125.7 141.1
Depreciation - Other 5.9 4.9 3.9 10.2 14.9 20.0
Amortization of Cust Purchase - Franchise 37.0 36.6 30.6 34.4 34.4 34.3
Amortization of Goodwill 4.2 5.0 7.3 6.1 6.1 6.1
------ ------ ------ ------ -------- --------
Total D&A $95.7 $108.2 $126.3 $152.4 $181.0 $201.4
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dec 31 Dec 31
1998 1999
-------- --------
<S> <C> <C>
Systems Costs
Systems Operations 23.7 24.7
Facilities 61.3 68.3
Maintenance / Repair 19.5 20.7
Property Taxes 28.4 30.8
Leases 5.1 5.4
Depreciation & Amortization 150.6 159.9
-------- --------
Total Systems Costs 288.6 309.8
Region Expenses
Engineering 12.7 13.4
Capitalized Engineering (11.2) (11.8)
Marketing 6.2 6.6
G & A 34.7 36.6
Regional Depreciation 2.6 2.9
-------- --------
Total Regional Administration Expense 45.1 47.7
Headquarters Expenses
Engineering 8.4 9.4
Capitalized Engineering (2.9) (3.2)
Marketing 6.7 7.0
G & A 47.3 49.3
HQ Depreciation 1.8 2.0
-------- --------
Total Headquarters Expenses 61.3 64.5
- -------------------------------------------------------------------------------
Total Operating Expenses (a) $814.6 $848.1
- -------------------------------------------------------------------------------
Operating Income / (Loss) Before Amortization $364.8 $470.9
Amortization of Franchise / Customers 34.0 34.0
Amortization of Goodwill 6.1 6.1
Operating Income / (Loss) $324.7 $430.8
Partnership Invest Income / (Loss) 59.1 59.5
Other Income / (Expense) (5.4) (5.6)
Interest Expenses 207.6 190.9
I.D.C. (1.0) (1.0)
-------- --------
Net Interest 206.6 189.9
Partnership / Corp. Income / (Loss) 171.9 294.9
Partnership Minority Interest - Income / (Loss) (21.1) (27.3)
-------- --------
Pretax Income / (Loss) 150.8 267.6
State Income Taxes - Exp / (Cr.) 20.5 27.1
Fed Income Taxes - Exp / (Cr.) 48.8 87.4
-------- --------
- -------------------------------------------------------------------------------
NET INCOME $81.5 $153.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Revenues (Incl Equip) $1,212.2 $1,351.5
Total Operating Exp (Excl Equip Rev & Promos) 887.5 920.7
Operating Cash Flow 539.8 658.4
Operating Cash Flow Margin (% of Svc Rev Incl Promos) 48.2% 52.4%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Depreciation & Amortization
Depreciation - Network 150.6 159.9
Depreciation - Other 24.4 27.6
Amortization of Cust Purchase - Franchise 34.0 34.0
Amortization of Goodwill 6.1 6.1
-------- --------
Total D&A $215.1 $227.6
- -------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
(a) Netted for equipment revenues, excludes amortization and includes
promotional costs.
Page 7 of 8
<PAGE> 12
DRAFT
CONTEL CELLULAR INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
(dollars in millions except per share data and as otherwise stated)
<TABLE>
<CAPTION>
HISTORICAL OUTLOOK PROJECTED
---------- -------- ----------------------------------------------------
DEC 31 DEC 31 DEC 31 DEC 31 DEC 31 Dec 31 Dec 31
CASH FLOW FROM OPERATING ACTIVITIES 1993 1994 1995 1996 1997 1998 1999
---------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income ($74.9) ($11.9) ($36.3) ($0.7) $39.9 $81.5 $153.1
Total Depreciation 66.6 88.5 111.9 140.5 161.0 175.0 187.5
Total Amortization 41.6 37.8 40.5 40.5 40.4 40.1 40.1
Deferred Income Taxes 31.6 30.0 40.9 44.4 46.8 48.2 49.7
Provision for Losses on A/R (WC) 6.3 13.0 16.1 19.6 23.5 29.8 33.4
Gain on Sale of Investment , net 0.0 (112.6) 46.0 0.0 0.0 0.0 0.0
Income from Unconsolidated Partnerships (37.4) (50.9) (58.1) (58.4) (58.8) (59.1) (59.5)
Distribution from Unconsolidated Partnerships 13.3 25.9 30.1 57.7 61.5 70.5 65.6
Contributions to Limited Partnerships (5.0) (7.1) (6.2) (8.4) (10.0) (10.3) (9.1)
Contributions to Unconsolidated RSA's (6.4) 3.3 (3.8) (1.6) (1.5) (2.1) (3.0)
Minority Interest in Net Income (0.8) 6.5 9.1 13.2 17.6 21.1 27.3
Distributions to Minority Partners 0.0 (1.2) (3.0) (4.0) (5.0) (7.0) (10.0)
Interest Capitalized (IDC) (2.5) (2.5) (2.0) (1.8) (1.6) (1.0) (1.0)
Other Deferrals (Def Charges / Credits) 5.0 0.0 2.3 3.0 3.6 4.1 4.9
Other, net (Other Assets / Other) (3.9) 0.9 5.8 0.0 0.0 0.0 0.0
Change in Accounts Receivable (12.8) (26.2) (38.2) (39.1) (43.4) (50.2) (51.3)
Change in Inventory (3.6) 0.0 2.3 (1.8) (1.6) (2.7) 1.5
Change in Other Current Assets (1.9) (2.7) (0.8) (0.1) (0.1) (0.1) (0.1)
Change in Accrued Taxes 17.7 36.6 (19.6) 7.8 5.1 4.2 6.0
Change in Other Current Liabilities 88.4 (21.4) 28.3 2.1 2.4 5.5 (5.9)
------- ------- ------- ------- ------- ------- -------
Cash Flow from Operating Activity $121.2 $5.9 $165.3 $213.0 $279.8 $347.5 $429.3
CASH FLOW FROM INVESTING ACTIVITY
Capital Expenditures (165.1) (246.2) (297.6) (220.2) (157.6) (135.5) (145.0)
Capital Expenditures - Mega 13.0 0.0 0.0 0.0 0.0 0.0 0.0
Purchase of Cellular Interest 0.0 (125.8) (46.0) 0.0 0.0 0.0 0.0
Proceeds from Sale of Investment, Gross 0.0 159.0 0.0 0.0 0.0 0.0 0.0
Other, net (22.6) 0.0 (46.0) 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Cash Flow From Investing Activity ($174.7) ($213.0) ($389.6) ($220.2) ($157.6) ($135.5) ($145.0)
</TABLE>
Page 8 of 8
<PAGE> 13
DRAFT
10 YEAR DCF
- --------------------------------------------------------------------------------
Summary Valuation (a)
Assuming Purchase 1/1/95, Exit 12/31/04
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA (Consolidated Ops.) &
Other Income / (Expense) $710
Net Income Attributable to Minority
Interest (b) $ 17
Equity in Income of Uncnsl. Subs. (b) (c) $ 32
Free Cash Flow ($100) $122 $254 $337 $399 $365 $370 $396 $423 $467
</TABLE>
Present Value of Consolidated Operations -- Free Cash Flows
<TABLE>
<CAPTION>
12% 13% 14% 15%
------ ------ ------ ------
<S> <C> <C> <C>
$1,529 $1,452 $1,381 $1,314
</TABLE>
Present Value of Consolidated Operations -- Terminal Value
<TABLE>
<CAPTION>
12% 13% 14% 15%
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
10 X $2,286 $2,092 $1,915 $1,755
EBITDA Multiple -- Consolidated Operations 11 X 2,515 2,301 2,107 1,931
12 X 2,743 2,510 2,298 2,106
</TABLE>
Incremental Present Value Adjustment
For Equity Investments and Minority Interests (Net)
<TABLE>
<CAPTION>
12% 13% 14% 15%
------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
16 X $ 80 $ 73 $ 67 $ 61
P/E Multiple -- Equity and Minority Interests 18 X 90 82 75 69
20 X 100 92 84 77
</TABLE>
Mexican Interests
<TABLE>
<S> <C> <C> <C> <C>
10% Interest in 4.185 million gross POPs (d) $20 $20 $20 $20
</TABLE>
<TABLE>
<CAPTION>
Total Firm Value
-------------------------------------------------------------------------------------
12% 13% 14% 15%
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
10X/16X $3,915 $3,637 $3,383 $3,151
EBITDA Multiple / P/E Multiple 11X/18X 4,153 3,856 3,583 3,334
12X/20X 4,392 4,074 3,783 3,517
Implied Equity Value Per Share
12% 13% 14% 15%
------ ------ ------ ------
10X/16X $18.01 $15.24 $12.69 $10.37
EBITDA Multiple / P/E Multiple 11X/18X 20.40 17.42 14.69 12.20
12X/20X 22.79 19.60 16.69 14.03
-------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------------------------------------
(a) Based on mid-year discounting of Free Cash Flow and year-end 2004
discounting of Exit Value.
(b) Taxed at assumed 40% rate.
(c) Discounted by 30% due to minority position.
(d) Value represents $48 per net POP.
(e) Based on 99.95 million shares and net debt of $2,114 million.
<PAGE> 14
DRAFT
10 YEAR DCF
- --------------------------------------------------------------------------------
Assumptions
<TABLE>
<CAPTION>
VALUATION ASSUMPTIONS TERMINAL VALUE CALCULATION (2004) -----
Net Debt (1/1/95): $2,114 EBITDA (Consolidated Ops.) (a) $710
Common Shares Outstanding: 99.95 Net Income Attributable to Minority Intr. (b) 17
Equity in Income of Uncnsl. Subs. (b) 46
Discount for Unc. Ops. (30%) (14)
-----
1995 1996 1997 1998 1999 2000 2001 2002
------ ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING ASSUMPTIONS
EBITDA Margin 37.9% 42.5% 45.6% 45.8% 49.9% 48.8% 48.7% 49.3%
Consolidated Subscribers (thousands) 1,057 1,345 1,612 1,898 2,089 2,160 2,231 2,276
Consolidated POPs 16.9 17.1 17.4 17.6 17.9 18.2 18.4 18.7
Penetration 6.3% 7.9% 9.3% 10.8% 11.7% 11.9% 12.1% 12.2%
Rev / Sub/ Month $63 $57 $54 $51 $50 $48 $47 $45
Churn 2.1% 1.9% 2.0% 2.3% 2.4% 2.0% 1.8% 1.7%
Cost per Gross Add $293 $298 $282 $269 $265 N/A N/A N/A
INCOME STATEMENT
Total Revenues $708 $862 $1,018 $1,179 $1,319 $1,364 $1,382 $1,380
EBITDA (Consolidated Ops.) $268 $367 $464 $540 $658 $665 $673 $681
Depreciation and Amortization (152) (181) (201) (215) (228) (233) (248) (270)
----- ----- ------ ------ ------ ------ ------ ------
EBIT (Consolidated Ops.) 116 186 263 325 431 432 425 411
Minority Interest (pre-tax) (9) (13) (18) (21) (27) (30) (30) (29)
Other Income / (Expense) (5) (5) (5) (5) (6) (6) (7) (7)
Equity in Income of Uncnsl. Subs. (pre-tax) 58 58 59 59 59 62 66 69
Interest Expense (205) (212) (217) (207) (190) (161) (130) (91)
----- ----- ------ ------ ------ ------ ------ ------
Pre-tax Income (44) 13 82 151 268 297 324 353
Income Tax 9 (14) (42) (69) (114) (116) (126) (138)
----- ----- ------ ------ ------ ------ ------ ------
Net Income ($36) ($1) $40 $81 $153 $181 $198 $215
FREE CASH FLOW
EBITDA (Consolidated Ops.) $268 $367 $464 $540 $658 $665 $673 $681
Other Income / (Expense) ($5) ($5) ($5) ($5) ($6) ($6) ($7) ($7)
Minority Interest (3) (4) (5) (7) (10) (15) (18) (20)
Cash Dividends from Uncnsl. Subs., net 20 48 50 58 54 32 39 45
Income Tax Expense (Net of Intr. Exp. Ded.) (73) (99) (128) (152) (190) (180) (178) (174)
Deferred Income Taxes 41 44 47 48 50 9 10 12
Capital Expenditures (298) (220) (158) (135) (145) (123) (135) (127)
Purchase of Cellular Interest (46) 0 0 0 0 0 0 0
Working Capital (28) (31) (38) (43) (50) (17) (14) (14)
Other Sources / (Uses) 24 23 27 34 38 0 0 0
- --------------------------------------------------------------------------------------------------------------------------
Free Cash Flow ($100) $122 $254 $337 $399 $365 $370 $396
- --------------------------------------------------------------------------------------------------------------------------
SELECTED STATISTICS
Revenue Growth 21.8% 18.0% 15.9% 11.8% 3.4% 1.3% -0.2%
EBITDA Growth 36.7% 26.5% 16.3% 22.0% 1.0% 1.2% 1.2%
Free Cash Flow Growth 108.1% 32.6% 18.5% -8.7% 1.5% 6.9%
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
2003 2004
------ ------
<S> <C> <C>
OPERATING ASSUMPTIONS
EBITDA Margin 49.7% 49.7%
Consolidated Subscribers (thousands) 2,321 2,368
Consolidated POPs 19.0 19.3
Penetration 12.2% 12.3%
Rev / Sub/ Month $45 $45
Churn 1.6% 1.5%
Cost per Gross Add N/A N/A
INCOME STATEMENT
Total Revenues $1,412 $1,447
EBITDA (Consolidated Ops.) $702 $719
Depreciation and Amortization (294) (315)
------ ------
EBIT (Consolidated Ops.) 408 404
Minority Interest (pre-tax) (29) (28)
Other Income / (Expense) (8) (9)
Equity in Income of Uncnsl. Subs. (pre-tax) 73 77
Interest Expense (52) (8)
------ ------
Pre-tax Income 392 436
Income Tax (153) (170)
------ ------
Net Income $239 $266
FREE CASH FLOW
EBITDA (Consolidated Ops.) $702 $719
Other Income / (Expense) ($8) ($9)
Minority Interest (24) (30)
Cash Dividends from Uncnsl. Subs., net 52 59
Income Tax Expense (Net of Intr. Exp. Ded.) (174) (173)
Deferred Income Taxes 15 16
Capital Expenditures (126) (100)
Purchase of Cellular Interest 0 0
Working Capital (14) (15)
Other Sources / (Uses) 0 0
- --------------------------------------------------------------------
Free Cash Flow $423 $467
- --------------------------------------------------------------------
SELECTED STATISTICS
Revenue Growth 2.3% 2.4%
EBITDA Growth 3.1% 2.4%
Free Cash Flow Growth 7.0% 10.3%
</TABLE>
- --------------------------------------------------------
(a) Includes Other Income / (Expense).
(b) Based on 40% tax rate.
<PAGE> 16
<TABLE>
<CAPTION>
CONTEL CELLULAR INC.
Summary POP Valuation
Value per Controlled POP CCI POPs(thousands)
------------------------ -----------------------------
Non-
Rank Low High Controlled Controlled(a)
--------------- --- ---- ---------- -------------
<S> <C> <C> <C> <C> <C>
MSAs 1 to 25 $250 $350 0 4,319
MSAs 26 to 75 175 250 6,208 911
MSAs 76 to 125 150 200 4,909 552
MSAs 126 to 175 125 175 949 85
MSAs 176 to 225 125 150 299 2
MSAs 226 to 275 125 150 452 19
MSAs 276+ 75 125 227 0
------ -----
Total MSAs 13,044 5,887
RSAs 90 90 3,396 1,214(b)
------ -----
Total POPs 16,440 7,102
</TABLE>
<TABLE>
<CAPTION>
Total Value(millions)
---------------------------------------------------
Rank Low Mid High
--------------- ------- ------- ------
<S> <C> <C> <C> <C>
MSAs 1 to 25 $756 $907 $1,058
MSAs 26 to 75 1,198 1,455 1,711
MSAs 76 to 125 794 927 1,059
MSAs 126 to 175 126 151 177
MSAs 176 to 225 38 41 45
MSAs 226 to 275 58 64 70
MSAs 276+ 17 23 28
------- ------- -------
Total MSAs $2,987 $3,567 $4,148
RSAs 382 382 382
------- ------- -------
Total POPs $3,369 $3,950 $4,530
Mexico (10% interest in 4.185
million gross POPs)(c) $20 $20 $20
Net Debt as of 12/31/94(d) ($2,114) ($2,114) ($2,114)
------- ------- -------
Equity Value Per Share(e)
$12.76 $18.57 $24.38
======= ======= =======
</TABLE>
- ---------------------------------------------------------------------
(a) Non-Controlled POPs valued at a 30% discount to Controlled POPs.
(b) Includes Managed Non-Controlled RSA Interests.
(c) Value represents $48 per net POP.
(d) Net debt is based on projected notes payable to affiliates of $277.7
million and other long-term debt of $1,836.8 million. As of June 30,
1994, the net debt was $2,021.9 million. The increase during the second
half of 1994 includes additional acquisitions of cellular interests of
$104.1 million.
(e) Based on 99.95 million shares.
<PAGE> 17
CONTEL CELLULAR INC.
Controlled MSA Interests
<TABLE>
<CAPTION>
COMPANY 1993 COMPANY NET
MSA PERCENTAGE ESTIMATED POPULATION
MARKET RANK OWNERSHIP POPULATION EQUIVALENTS
- ------ ---- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Memphis, TN 36 100.00% 1,012,008 1,012,008
Louisville, KY 37 100.00% 920,274 920,274
Birmingham, AL 41 100.00% 892,251 892,251
Norfolk, VA 43 95.01% 1,002,659 952,626
Nashville, TN 46 100.00% 1,028,771 1,028,771
Richmond, VA 59 95.01% 777,882 739,066
Fresno, CA 74 92.00% 720,296 662,672
Knoxville, TN 79 94.12% 530,666 499,463
El Paso, TX 81 100.00% 637,347 637,347
Mobile, AL 83 100.00% 500,537 500,537
Johnson City, TN 85 100.00% 448,163 448,163
Chattanooga, TN 88 100.00% 443,405 443,405
Bakersfield, CA 97 92.00% 602,298 554,114
Davenport, IA 98 100.00% 359,895 359,895
Newport News, VA 104 95.01% 461,126 438,116
Huntsville, AL 115 100.00% 385,000 385,000
Lexington, KY 116 100.00% 361,754 361,754
Evansville, IN 119 88.87% 316,107 280,924
Pensacola, FL 127 100.00% 367,503 367,503
Rockford, IL 131 59.00% 296,872 175,154
Visalia, CA 150 92.00% 339,854 312,666
Roanoke, VA 157 40.00% 235,092 94,037
Clarksville, TN 209 100.00% 171,204 171,204
Tuscaloosa, AL 222 80.71% 158,062 127,580
Florence, AL 226 91.09% 135,917 123,807
Petersburg, VA 235 95.01% 128,356 121,951
Anniston, AL 249 100.00% 115,576 115,576
Gadaden, AL 272 90.00% 100,376 90,338
Las Cruces, NM 285 100.00% 148,349 148,349
Owensboro, KY 293 88.87% 88,897 79,003
----------
Total 13,043,554
</TABLE>
<PAGE> 18
CONTEL CELLULAR INC.
Non-Controlled MSA Interests
<TABLE>
<CAPTION>
COMPANY 1993 COMPANY NET
MSA PERCENTAGE ESTIMATED POPULATION
MARKET RANK OWNERSHIP POPULATION EQUIVALENTS
- ------ ---- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Los Angeles, CA 2 11.20% 14,588,139 1,633,872
San Francisco, CA 7 11.25% 3,796,944 427,278
Washington, DC 8 35.27% 3,761,200 1,326,575
Houston, TX 10 4.40% 3,811,914 167,724
Minneapolis, MN 15 30.00% 2,543,746 763,124
San Jose, CA 27 11.25% 1,535,755 172,772
San Antonio, TX 33 30.00% 1,359,688 407,906
Sacramento, CA 35 0.98% 1,474,137 14,417
Jacksonville, FL 51 14.24% 987,873 140,673
Greensville, SC 67 10.83% 665,263 72,048
Oxnard, CA 73 11.20% 693,427 77,664
Austin, TX 75 3.00% 850,163 25,505
Albuquerque, NM 86 49.00% 575,082 281,790
Beaumont, TX 101 4.40% 377,191 16,596
Stockton, CA 107 0.98% 513,887 5,026
Vallejo, CA 111 11.25% 489,403 55,058
Santa Rosa, CA 123 11.25% 408,734 45,983
Santa Barbara, CA 124 39.00% 379,225 147,898
Salina, CA 126 11.25% 371,326 41,774
Modesto, CA 142 0.98% 410,727 4,017
Galveston, TX 170 4.40% 231,790 10,199
Reno, NV 171 0.98% 276,787 2,713
Santa Cruz, CA 174 11.25% 230,629 25,946
Chico, CA 215 0.98% 194,127 1,899
Anderson, SC 227 10.83% 147,443 15,968
Redding, CA 254 0.98% 165,008 1,614
Uba City, CA 274 0.98% 132,827 1,299
---------
Total 5,887,338
</TABLE>
<PAGE> 19
CONTEL CELLULAR INC.
Controlled RSA Interests
<TABLE>
<CAPTION>
COMPANY 1993 COMPANY NET
PERCENTAGE ESTIMATED POPULATION
MARKET OWNERSHIP POPULATION EQUIVALENTS
- ------ ---------- ---------- -----------
<S> <C> <C> <C>
Alabama 1 100.00% 130,000 130,000
California 6 100.00% 28,461 28,461
California 7 100.00% 124,168 124,168
California 9 100.00% 139,220 139,220
Kentucky 2 100.00% 126,486 126,486
Kentucky 7 100.00% 163,006 163,006
Kentucky 11 100.00% 168,570 168,570
Tennessee 1 100.00% 293,481 293,481
Tennessee 2 100.00% 155,849 155,849
Tennessee 3 100.00% 323,052 323,052
Tennessee 5 100.00% 329,525 329,525
Tennessee 6 100.00% 152,984 152,984
Tennessee 7 100.00% 242,747 242,747
Tennessee 9 100.00% 64,034 64,034
Virginia 7 100.00% 38,037 38,037
Virginia 8 95.01% 82,763 78,633
Virginia 9 95.01% 84,841 80,607
Virginia 11 95.01% 107,777 102,399
Virginia 12 95.01% 32,445 30,826
California 12 92.00% 108,282 99,619
Illinois 1 91.50% 313,287 286,658
Virginia 5 77.00% 62,339 48,001
Texas 10 75.00% 29,089 21,817
New Mexico 6-1 71.43% 59,821 42,730
Virginia 3 51.00% 181,166 92,395
Virginia 4 51.00% 64,675 32,984
---------
Total 3,396,289
</TABLE>
<PAGE> 20
CONTEL CELLULAR INC.
Managed Non-Controlled RSA Interests
<TABLE>
<CAPTION>
COMPANY 1993 COMPANY NET
PERCENTAGE ESTIMATED POPULATION
MARKET OWNERSHIP POPULATION EQUIVALENTS
- ------ ---------- ---------- -----------
<S> <C> <C> <C>
Kentucky 1 50.00% 184,760 92,380
New Mexico 3 50.00% 76,635 38,318
New Mexico 5 43.00% 55,076 23,683
Iowa 4 38.10% 155,247 59,149
Indiana 7 38.09% 218,704 83,313
Indiana 8 38.09% 249,245 94,947
Indiana 9 38.09% 140,985 53,707
California 4 20.83% 333,324 69,431
Iowa 5 14.29% 108,129 15,452
-------
Total 530,380
</TABLE>
<PAGE> 21
CONTEL CELLULAR INC.
Non-Controlled RSA Interests
<TABLE>
<CAPTION>
COMPANY 1993 COMPANY NET
PERCENTAGE ESTIMATED POPULATION
MARKET OWNERSHIP POPULATION EQUIVALENTS
- ------ ---------- ---------- -----------
<S> <C> <C> <C>
New Mexico 1 44.44% 245,584 109,138
Illinois 8 41.13% 330,684 136,010
Illinois 9 41.13% 152,441 62,699
Illinois 2 40.00% 144,909 57,964
California 5 39.00% 222,879 86,923
California 3 27.73% 139,271 38,620
Alabama 1 33.33% 164,672 54,891
California 1 16.67% 209,466 34,918
New Mexico 6-II 12.50% 119,673 14,959
Illinois 3 11.77% 203,742 23,980
Virginia 6 10.00% 208,667 20,867
Minnesota 1 6.60% 50,623 3,341
Minnesota 2 6.60% 62,163 4,103
Minnesota 3 6.60% 57,287 3,781
Minnesota 5 6.60% 202,723 13,380
Minnesota 6 6.60% 241,382 15,931
Virginia 10 1.00% 225,479 2,255
Pennsylvania 3 0.10% 95,651 96
Pennsylvania 4 0.10% 96,721 97
-------
Total 683,953
</TABLE>
<PAGE> 22
CONTEL CELLULAR INC.
Adjustments to August 31, 1994 Summary of Interests in MSAs and RSAs
Divestiture of all interest in:
Binghamton, NY
Burlington, VT
Elmira, NY
Vermont RSAs 1 and 2
North Carolina RSA 1
New Hampshire RSA 2
New York RSA 2 and 3
Acquisition of interests in:
Huntsville, AL with net POPs of 515,000 (assumed to give control)
-- Assumed 385,000 POPs in MSA 115 and 130,000 in Alabama RSA 2
Does not include California RSA 4 acquisition since expenditures for this
acquisition are not expected until 1995.
<PAGE> 23
SUMMARY DATA POINTS IN DETERMINING PRIVATE MARKET VALUE RANGES
<TABLE>
<CAPTION>
----------------------------------------------------------------------
VALUE RANGES UTILIZED:
----------------------------------------------------------------------
Value per POP CCI POPs (thousands)
---------------- --------------------
MSA Rank Low High Control Minority
---------- --- ---- ------- --------
<S> <C> <C> <C> <C>
1 to 25 $250 $350 0 4,319
26 to 75 175 250 6,208 911
76 to 125 150 200 4,909 552
126 to 175 125 175 949 85
176 to 225 125 150 299 2
226 to 275 125 150 452 19
276+ 75 125 227 0
------ -----
Total MSA 13,044 5,888
RSAs 90 90 3,396 1,214
------ -----
Total POPs 16,440 7,102
</TABLE>
Ranges were derived using subjective determination of value by Merrill Lynch and
PaineWebber (including research analyst data), with such subjective valuation
reflective of recent data points related to value.
The boxes on the right hand side of this sheet represent empirical evidence
related to private market values.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
GENERAL M&A DATA POINTS (a)
- ----------------------------------------------------------------------------------------------
Target Market Cap/
Acquiror MSA POP (d) Markets - Total POPs
- ---------- ----------- --------------------
<S> <C> <C>
DC / Baltimore of SBC Comm. $321 Upper Tier (MSAs #10 and #16)
CGE
LIN Broadcasting $348 Upper Tier (98% in top 10 markets)
(Trading Value)(c)
McCaw Cellular $330 Upper & Middle Tier
(AT&T) (78% in top 75 MSA rank)
Cellular Communications $315 Upper & Middle Tier
(Trading Value)(c) (78% in top 75 MSA rank)
Dallas - GTE $285 Upper Tier (MSA #9)
Southwestern Bell
Associated Communications $189 Middle Tier
Southwestern Bell (97% in top 75 MSA rank)
C-Tec $167 Middle Tier
Crown (40% in 26-75 MSA rank; 43% RSAs)
Celutel Inc. $132 Lower Tier (56% in 76-125 MSA rank,
Century Telephone 44% in MSA ranks of 126 and above)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
GTE/CCI M&A DATA POINTS(b)
- --------------------------------------------------------------------------
Market Cap/ Percent Ownership/
Market POP Acquired or Sold
- ------ ----------- ------------------
<S> <C> <C>
MSAs:
Manchester, NH. MSA 133 $187 60% - Sold
Fort Smith, AR. MSA 166 $194 60% - Sold
Fayetteville, AR. MSA 182 $183 90% - Sold
Burlington, NC. MSA 280 $113 100% - Acquired
RSAs:
Alaska -RSA 316 $102 50% - Sold
California - RSA 339 $180 79% - Acquired
Oregon - RSA 610 $103 67% - Sold
Tennessee - RSA 644 $67 100% - Acquired
Tennessee - RSA 645 $62 51% - Acquired
Tennessee - RSA 648 $118 100% - Acquired
Tennessee - RSA 651 $130 100% - Acquired
</TABLE>
- ----------------------------------------------------------------
(a) Represent M&A transactions over the last two years.
(b) Selected GTE/CCI M&A transactions, with data provided by GTE.
(c) Subject to a private market value guarantee.
(d) RSAs valued at $90 per POP.
<PAGE> 24
SUMMARY DATA POINTS IN DETERMINING PRIVATE MARKET VALUE RANGES
- --------------------------------------------------------------------------------
Ranges were derived using subjective determinations of value by
Merrill Lynch and PaineWebber (including input from research analysts),
with such subjective valuation reflective of recent data
points related to value.
<TABLE>
<CAPTION>
REPRESENTATIVE TRANSACTIONS
--------------------------------------------------------------------------------------
Celutel Inc. Associated Communications
--------------------------------------- ------------------------------------------
Value per POP POPs (thousands) Implied Value (MM$) POPs (thousands) Implied Value (MM$)
------------- ------------------ ------------------- ------------------- -------------------
MSA Rank Low High Control Mnrty.(a) Low High Control Mnrty.(a) Low High
---------- ---- ---- ------- --------- ---- ---- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 25 $250 $350 0 0 $0 $0 0 900 $157 $220
26 to 75 175 250 0 0 0 0 2,584 0 452 646
76 to 125 150 200 625 0 94 125 0 0 0 0
126 to 175 125 175 211 0 26 37 0 0 0 0
176 to 225 125 150 180 0 22 27 0 0 0 0
226 to 275 125 150 95 0 12 14 120 0 15 18
276+ 75 125 0 0 0 0 0 0 0 0
RSAs 90 90 0 0 0 0 0 0 0 0
---- ---- ---- ----
Total Implied Value $154 $203 $625 $884
Actual Transaction Value $147 $680
</TABLE>
<TABLE>
<CAPTION>
MobileNet / CCI Acquisitions and Dispositions C-TEC
--------------------------------------------- ---------------------------------------
Value per POP POPs (thousands) Implied Value (MM$) POPs (thousands) Implied Value (MM$)
------------- ------------------ ------------------------- ------------------ -------------------
MSA Rank Low High Control Mnrty.(a) Low High Control Mnrty.(a) Low High
---------- ---- ---- ------- --------- ---- ---- ------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 25 $250 $350 0 344 $60 $84 0 0 $0 $0
26 to 75 175 250 0 134 16 23 513 27 93 133
76 to 125 150 200 0 174 18 24 0 32 3 4
126 to 175 125 175 335 145 55 76 0 0 0 0
176 to 225 125 150 193 5 25 29 0 0 0 0
226 to 275 125 150 0 0 0 0 124 0 15 19
276+ 75 125 100 10 8 13 86 0 6 11
RSAs 90 90 1,259 817 165 165 558 19 51 51
---- ---- ---- ----
Total Implied Value $347 $416 $170 $218
Actual Transaction Value $403 $183
</TABLE>
- --------------------------------------------------------------------
(a) Minority POPs are valued at a 30% discount to Control POPs.
<PAGE> 25
CELLULAR TRANSACTION ANALYSIS
WASHINGTON, DC AND BALTIMORE AREA PROPERTIES OF SBC COMMUNICATIONS
Provides useful data point for valuation of Upper Tier MSAs.
<TABLE>
<CAPTION>
TRANSACTION NET TV PER TV PER
DATE ACQUIROR VALUE POPs POP MSA POP(a)
- --------- ---------------------------------- ----------- ------- ------ -----------
<S> <C> <C> <C> <C> <C>
COMPAGNIE GENERALE DES EAUX
10/11/94 (INDIRECTLY) $215 725,282 $296 $323
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE
OF
MSA NET TOTAL NET
RANK MARKET OWNERSHIP POPs POPs
- ------ ---------------------------------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
10 Washington, DC 10.0% 391,334
16 Baltimore 10.0% 250,574
-------
SUBTOTAL MSA RANK 1-26 POPs 641,907
TOTAL MSA POPs 641,907 88.5%
Virginia RSA 10 10.0% 23,337
Virginia RSA 11 10.0% 25,314
Virginia RSA 12 10.0% 17,770
West Virginia RSA 4 10.0% 16,954
-------
TOTAL RSA POPs 83,375 11.5%
TOTAL POPs 725,282
</TABLE>
- ---------------
(a) Assumes $90 per RSA POP.
<PAGE> 26
CELLULAR TRANSACTION ANALYSIS
LIN BROADCASTING CORPORATION(a)
Provides useful data point for valuation of Upper Tier MSAs. Although LIN
Broadcasting information is based on public multiples,
such valuation should reflect private market valuation
as a result of McCaw's buyout option.
<TABLE>
<CAPTION>
PRICE PER SHARES OUTSTANDING MARKET MARKET CAP MARKET CAP
DATE SHARE (IN MILLIONS) CAPITALIZATION PER POP PER MSA POP(a)
- ------- --------- -------------------------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
8/19/94 $129.00 52.4 $9,689 $344 $348
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
MSA RANK MARKET OWNERSHIP NET POPs TOTAL NET POPs
<S> <C> <C> <C> <C>
1 New York 98.33% 14,690,045
2 Los Angeles 39.97% 5,830,879
4 Philadelphia 49.99% 2,447,048
6 Dallas-Fort Worth 60.44% 2,539,650
8 Houston 56.25% 2,144,202
----------
SUBTOTAL MSA RANK 1-25 POPs 27,651,824 98.3%
168 Galveston-Texas City 34.30% 79,514
----------
SUBTOTAL MSA RANK 126-175 POPs 79,514 0.3%
TOTAL MSA POPs 27,731,338 98.6%
----------
Connecticut RSA 1 100.00% 177,241
Texas RSA 17 100.00% 230,209
TOTAL RSA POPs 407,450 1.4%
----------
TOTAL POPs 28,138,788 100.0%
----------
</TABLE>
- ---------------
(a) Assumes $90 per RSA POP.
<PAGE> 27
CELLULAR TRANSACTION ANALYSIS
MCCAW CELLULAR COMMUNICATIONS
Provides useful data point for valuation of Upper and Middle Tier MSAs
<TABLE>
<CAPTION>
TRANSACTION NET TV PER TV PER
DATE ACQUIROR VALUE POPS POP MSA POP(a)
- ---------- -------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C>
8/16/93 AT&T $19,482.2 59,826,710 $326 $330
(Pending)
</TABLE>
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- ----------------------------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
1 New York, NY (b) 48.9% 7,318,004
2 Los Angeles, CA (b) 21.0% 3,061,838
4 Philadelphia, PA (b) 26.2% 1,288,008
6 Dallas, TX (b) 54.3% 2,289,687
9 San Francisco, CA 50.0% 1,881,654
10 Houston, TX (b) 29.5% 1,074,200
11 Miami, FL 100.0% 3,332,680
14 Minneapolis/St. Paul, MN/WI 100.0% 2,516,992
15 St. Louis, MO/IL 15.0% 367,816
18 Seattle/Everett, WA 100.0% 2,081,016
19 Pittsburgh, PA 64.3% 1,334,188
20 Tampa, FL 100.0% 2,063,801
21 Denver, CO 100.0% 1,927,888
24 San Jose, CA 50.0% 770,095
25 Kansas City, MO/KN 50.0% 739,426
----------
SUBTOTAL MSA RANK 1 - 25 POPs 32,047,294 53.6%
27 Portland, OR/WA 100.0% 1,473,434
29 Sacramento, CA 100.0% 1,437,441
30 San Antonio, TX 100.0% 1,358,318
33 Orlando, FL 100.0% 1,182,341
34 Buffalo, NY 25.0% 294,698
36 Salt Lake City, UT 100.0% 1,138,550
42 Jacksonville, FL 100.0% 972,985
43 Oklahoma City, OK 100.0% 956,362
45 West Palm Beach, FL 100.0% 927,926
49 Austin, TX 100.0% 850,714
52 Las Vegas, NV 100.0% 844,197
</TABLE>
<PAGE> 28
CELLULAR TRANSACTION ANALYSIS
MCCAW CELLULAR COMMUNICATIONS
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs
- -------- ----------------------------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
59 Tulsa, OK 100.0% 756,223
61 Worcester, MA 9.4% 67,464
63 Fresno, CA 100.0% 702,820
66 Oxnard/Simi Valley, CA 97.6% 681,956
71 N.E. Pennsylvania 34.3% 221,807
73 Tacoma, WA 100.0% 616,272
----------
SUBTOTAL MSA RANK 26 - 75 POPs 14,483,508 24.2%
83 Little Rock, AR 89.7% 469,561
84 Stockton, CA 100.0% 514,449
92 Vallejo/Fairfield, CA 50.0% 240,217
99 Colorado Springs, CO 100.0% 436,133
100 Melbourne, FL 91.1% 395,600
103 Lakeland, FL 93.0% 394,252
106 Santa Rosa, CA 45.3% 184,700
109 Daytona Beach, FL 100.0% 402,992
110 Modesto, CA 95.7% 380,369
113 Santa Barbara, CA 81.7% 313,776
116 Shreveport, LA 97.5% 368,817
117 Salinas/Seaside, CA 49.4% 182,582
118 Spokane, WA 88.2% 324,826
123 Corpus Christi, TX 91.0% 322,537
----------
SUBTOTAL MSA RANK 76 - 125 POPs 4,930,811 8.2%
130 Visalia/Tulare, CA 92.2% 301,261
140 Sarasota, FL 83.5% 248,377
143 Salem, OR 91.5% 263,620
144 Eugene/Springfield, OR 100.0% 287,855
149 Erie, PA 88.3% 243,645
150 Fort Pierce, FL 100.0% 275,807
151 Provo/Orem, UT 92.6% 254,888
153 Reno, NV 88.3% 242,050
156 Killeen/Temple, TX 100.0% 265,517
159 Tallahasse, FL 100.0% 259,588
164 Anchorage, AK 87.2% 208,736
166 Johnstown, FL 100.0% 237,263
168 Bradenton, FL 90.1% 206,667
172 Fort Smith, AR/OK 100.0% 223,365
173 Galveston, TX (b) 18.2% 40,341
----------
SUBTOTAL MSA RANK 126 - 175 POPs 3,558,980 5.9%
</TABLE>
<PAGE> 29
CELLULAR TRANSACTION ANALYSIS
MCCAW CELLULAR COMMUNICATIONS
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs
- -------- ----------------------------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
177 Fayetteville, AR 100.0% 219,210
178 Boise City, ID 88.0% 191,172
179 Lafeyette, LA 87.2% 186,635
182 Ocala, FL 87.3% 184,600
184 Bremerton, WA 95.7% 195,853
186 St. Cloud, MN 69.3% 136,963
187 Fort Collins, CO 89.9% 176,502
188 Yakima, WA 92.8% 180,191
190 Waco, WA 100.0% 193,303
191 Topeka, KS 10.2% 19,705
204 Olympia, WA 86.2% 148,356
208 Longview/Marshall, TX 100.0% 164,541
215 Wheeling, WV/OH 84.2% 131,621
219 Redding, CA 87.1% 133,403
220 Richland, WA 100.0% 152,226
222 Medford, OR 90.8% 137,195
----------
SUBTOTAL MSA RANK 176 - 225 POPs 2,551,476 4.3%
230 Monroe, LA 80.0% 115,006
239 Texarkana, AR/TX 89.3% 121,144
242 Greeley, CO 86.8% 116,431
245 Bellingham, WA 87.3% 116,803
252 Bryan/Col. St., TX 100.0% 129,576
255 Yuba City, CA 94.4% 119,457
259 Pueblo, CO 75.0% 92,076
----------
SUBTOTAL MSA RANK 226 - 275 POPs 810,493 1.4%
278 Rochester, MN 84.1% 92,114
289 St. Joseph, MO 45.5% 44,138
291 Sherman/Denison, TX 100.0% 95,957
296 Lawrence, KS 50.0% 42,618
297 Pine Bluff, AR 80.8% 68,500
----------
SUBTOTAL MSA RANK 275+ POPs 343,327 0.6%
TOTAL MSA POPs 58,725,889 98.2%
California RSA 4 25.0% 80,684
California RSA 8 100.0% 94,382
Colorado RSA 3 91.5% 222,777
</TABLE>
<PAGE> 30
CELLULAR TRANSACTION ANALYSIS
MCCAW CELLULAR COMMUNICATIONS
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MARKET OWNERSHIP POPS TOTAL NET POPS
- ----------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Hawaii RSA 2 100.0% 108,675
Minnesota RSA 3 100.0% 56,179
Utah RSA 1 100.0% 112,515
Washington RSA 1 100.0% 238,251
Washington RSA 5 20.0% 21,286
Washington RSA 6 100.0% 166,072
TOTAL RSA POPs 1,100,821 1.8%
TOTAL POPs 59,826,710 100.0%
</TABLE>
- ---------------
(a) Assumes $90 per RSA POP.
(b) Represents McCaw's proportionate interest in a LIN Broadcasting POP, at the
time of announcement.
<PAGE> 31
CELLULAR TRANSACTION ANALYSIS
CELLULAR COMMUNICATIONS INC.
Provides useful data point for valuation of Upper and Middle Tier MSAs.
Although Cellular Communications information is based on public
multiples, such valuation should reflect private market
valuation as a result of AirTouch's 1997
private market guarantee.
<TABLE>
<CAPTION>
PRICE
PER SHARES OUTSTANDING MARKET MARKET CAP MARKET CAP
DATE SHARE (IN MILLIONS) CAPITALIZATION PER POP PER MSA POP(a)
- ------- -------- -------------------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
8/19/94 $54.00 42.5 $2,422 $308 $315
<CAPTION>
PERCENTAGE OF
MSA RANK MARKET OWNERSHIP NET POPS TOTAL NET POPs
<S> <C> <C> <C> <C>
5 Detroit-Ann Arbor 50.00% 2,298,465
23 Cleveland 50.00% 923,303
----------
SUBTOTAL MSA RANK 1 - 25 POPs 3,221,768 41.0%
26 Cincinnati 50.00% 747,341
32 Columbus 50.00% 635,800
51 Dayton 50.00% 427,304
57 Toledo 50.00% 394,979
62 Grand Rapids 50.00% 359,345
69 Akron 50.00% 336,808
----------
SUBTOTAL MSA RANK 26 - 75 POPs 2,901,577 36.9%
87 Flint 50.00% 252,016
89 Lansing-East Lansing 50.00% 250,041
110 Saginaw-Bay City Midland 50.00% 201,166
111 Canton 50.00% 200,194
----------
SUBTOTAL MSA RANK 76 - 125 POPs 903,417 11.5%
136 Hamilton-Middletown 50.00% 154,378
152 Lorain-Elyria 50.00% 138,291
----------
SUBTOTAL MSA RANK 126 - 175 POPs 292,669 3.7%
178 Lima 50.00% 110,268
197 Muskegon 19.46% 36,153
198 Springfield 45.28% 83,824
----------
SUBTOTAL MSA RANK 176 - 225 POPs 230,245 2.9%
256 Mansfield 50.00% 63,295
----------
SUBTOTAL MSA RANK 226 - 275 POPs 63,295 0.8%
TOTAL MSA POPs 7,612,971 96.9%
----------
Ohio RSA 3 50.00% 50,725
Ohio RSA 4 50.00% 109,344
Ohio RSA 8 50.00% 83,485
TOTAL RSA POPs 243,554 3.1%
----------
TOTAL POPs 7,856,525 100.0%
----------
</TABLE>
- ---------------
(a) Assumes $90 per RSA POP.
<PAGE> 32
CELLULAR TRANSACTION ANALYSIS
DALLAS, TEXAS PROPERTIES OF GTE MOBILNET (MSA RANK 9)
Provides useful data point for valuation of Upper Tier MSAs.
<TABLE>
<CAPTION>
NET TRANSACTION TV PER
DATE ACQUIROR POPS VALUE POP
- ------- --------------------------------------------------- ------- ----------- ------
<S> <C> <C> <C> <C>
Dec-93 Southwestern Bell 421,744 $120 $285
</TABLE>
<PAGE> 33
CELLULAR TRANSACTION ANALYSIS
ASSOCIATED COMMUNICATIONS
Provides useful data point for valuation of Middle Tier MSAs (tax free
stock transaction)
<TABLE>
<CAPTION>
TRANSACTION NET TV PER
DATE ACQUIROR VALUE POPS POP
- -------- ------------------------------------------- ----------- --------- --------------
<S> <C> <C> <C> <C>
2/25/94 Southwestern Bell $ 680.0 3,604,062 $189
</TABLE>
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- ------------------------------------------- ----------- --------- --------------
<S> <C> <C> <C> <C>
9 San Francisco, CA 3.0% 112,899
19 Pittsburgh, PA 35.7% 740,754
24 San Jose, CA 3.0% 46,206
---------
SUBTOTAL MSA RANK 1-25 POPs 899,859 25.0%
34 Buffalo, NY 75.0% 884,093
40 Rochester, NY 85.7% 863,632
53 Albany, NY 100.0% 836,265
---------
SUBTOTAL MSA RANK 26-75 POPs 2,583,990 71.7%
260 Glen Falls, NY 100.0% 120,213
---------
SUBTOTAL MSA RANK 226-275 POPs 120,213 3.3%
TOTAl POPs 3,604,062 100.0%
---------
</TABLE>
<PAGE> 34
CELLULAR TRANSACTION ANALYSIS
C-TEC CORPORATION
Provides useful data point for valuation of Middle and Lower Tier MSAs and RSAs
<TABLE>
<CAPTION>
TRANSACTION NET TV PER TV PER
DATE ACQUIROR VALUE POPs POP MSA POP(a)
- ---------- ----------------------- ----------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
4/5/94 INDEPENDENT CELLULAR $ 182.5 1,359,148 $134 $167
(Pending)
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPs TOTAL NET POPs
-------- ---------------------------- --------- --------- --------------
<S> <C> <C> <C> <C>
56 NEPA Partnership 79.0% 513,000
58 Allentown, PA 4.0% 27,200
---------
SUBTOTAL MSA RANK 26-75 POPs 540,200 39.7%
118 Reading, PA 10.0% 32,000
---------
SUBTOTAL MSA RANK 76-125 POPs 32,000 2.4%
259 Center County, PA 100.0% 123,786
---------
SUBTOTAL MSA RANK 226-275 POPs 123,786 9.1%
296 Iowa City, IA 89.9% 85,500
---------
SUBTOTAL MSA RANK 275+ POPs 85,500 6.3%
TOTAL MSA POPs 781,486 57.5%
---------
Pennsylvania RSA 4 100.0% 28,076
Pennsylvania RSA 5 28.6% 19,354
Pennsylvania RSA 5 83.3% 28,000
Iowa RSAs 3, 4, 6 & 11 100.0% 502,232
TOTAL RSA POPs 577,662 42.5%
---------
TOTAL POPs 1,359,148 100.0%
---------
</TABLE>
- ---------------
(a) Assumes $90 per RSA POP.
<PAGE> 35
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
CELUTEL INC.
Provides useful data point for valuation of Lower Tier MSAs
<TABLE>
<CAPTION>
TRANSACTION NET TV PER
DATE ACQUIROR VALUE POPS POP
- -------- --------------------------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
8/19/93 CENTURY TELEPHONE ENTERPRISES $146.8 1,110,687 $132
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- --------------------------------- ----------- --------- --------------
<S> <C> <C> <C> <C>
105 McAllen/Edinburg, TX 67.3% 276,491
108 Jackson, MS 86.1% 348,416
---------
SUBTOTAL MSA RANK 76 - 125 POPS 624,907 56.3%
154 Brownsville/Harlingen, TX 77.4% 211,142
---------
SUBTOTAL MSA RANK 126 - 175 POPS 211,142 19.0%
181 Biloxi/Gulfport, MS 84.8% 179,825
---------
SUBTOTAL MSA RANK 176 - 225 POPS 179,825 16.2%
272 Pascagoula, MS 82.6% 94,813
---------
SUBTOTAL MSA RANK 226 - 275 POPS 94,813 8.5%
--------------------------------
TOTAL POPS 1,110,687 100.0%
--------------------------------
</TABLE>
<PAGE> 36
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
Provides useful data points for valuation of MSA and RSA
markets on a market by market basis.
<TABLE>
<CAPTION>
MSA / GTEM / Sold / Net Proceeds
Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP
- -------- ----- ----------------- ------ ------ ------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7 MSA SAN FRANCISCO, CA CCI Acq'd Mar-93 0.06% 2,378 $202
16 MSA CLEVELAND, OH GTEM Acq'd 1992 10.00% 341,389 $186
------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 1 - 25 POP VALUE $186
MEDIAN (POP WEIGHTED) MSA RANK 1 - 25 POP VALUE $186
------------------------------------------------------------------------------------------
30 MSA PORTLAND, OR GTEM Acq'd 1992 3.70% 95,000 $ 43
61 MSA CHARLOTTE, NC GTEM Sold 1992 5.00% 39,014 $141
------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 26 - 75 POP VALUE $ 72
MEDIAN (POP WEIGHTED) MSA RANK 26 - 75 POP VALUE $ 43
------------------------------------------------------------------------------------------
112 MSA CORPUS CHRISTI, TX GTEM Sold 1992 49.00% 174,312 $157
------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 76 - 125 POP VALUE $157
MEDIAN (POP WEIGHTED) MSA RANK 76 - 125 POP VALUE $157
------------------------------------------------------------------------------------------
133 MSA MANCHESTER, NH CCI Sold Jan-94 60.00% 201,777 $187
144/151 MSA ORANGE/POUGHKEEPSIE, NY CCI Sold Dec-93 25.00% 145,350 $183
155 MSA SAVANNAH, GA GTEM Acq'd Mar-93 0.30% 794 $155
166 MSA FORT SMITH, AR CCI Sold 1992 60.00% 133,184 $194
------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 126 - 175 POP VALUE $188
MEDIAN (POP WEIGHTED) MSA RANK 126 - 175 POP VALUE $187
------------------------------------------------------------------------------------------
</TABLE>
- ------------
<PAGE> 37
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
<TABLE>
<CAPTION>
MSA / GTEM / Sold / Net Proceeds
Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP
- --------- ----- --------------- ------ ------ ------ --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
182 MSA FAYETTEVILLE, AR CCI Sold 1992 89.90% 193,126 $183
222 MSA TUSCALOOSA, AL CCI Acq'd Feb-93 0.35% 541 $ 29
222 MSA TUSCALOOSA, AL CCI Acq'd Mar-93 1.74% 2,692 $ 29
222 MSA TUSCALOOSA, AL CCI Acq'd Apr-93 0.71% 1,098 $ 29
222 MSA TUSCALOOSA, AL CCI Acq'd Apr-94 0.35% 560 $ 28
------------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 176 - 225 POP VALUE $179
MEDIAN (POP WEIGHTED) MSA RANK 176 - 225 POP VALUE $183
------------------------------------------------------------------------------------------------
280 MSA BURLINGTON, NC GTEM Acq'd Mar-93 90.98% 99,854 $115
280 MSA BURLINGTON, NC GTEM Acq'd Sep-93 4.75% 5,213 $ 90
280 MSA BURLINGTON, NC GTEM Acq'd Dec-93 4.27% 4,687 $ 90
-----------------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) MSA RANK 275+ POP VALUE $113
MEDIAN (POP WEIGHTED) MSA RANK 275+ POP VALUE $115
-----------------------------------------------------------------------------------------------
307 RSA ALABAMA 1 CCI Acq'd Jun-94 8.33% 13,725 $ 44
307 RSA Partition of ALABAMA RSA 1 CCI Sold Apr-93 52,130 $ 20
313 RSA ALABAMA 7 (Butler cnty only) CCI Sold 1992 100.00% 22,113 $ 35
316 RSA ALASKA (Matanuska) GTEM Sold Mar-93 50.00% 23,692 $102
319 RSA ARIZONA 2 CCI Sold Dec-93 25.00% 54,025 $ 42
320 RSA ARIZONA 3 CCI Sold Dec-93 39.47% 55,895 $ 14
321 RSA ARIZONA 4 CCI Sold Dec-93 25.00% 31,700 $ 31
323 RSA ARIZONA 6 CCI Sold Dec-93 30.00% 49,500 $ 74
324 RSA ARKANSAS 1 CCI Sold 1992 57.22% 17,603 $ 42
331 RSA ARKANSAS 8 CCI Sold 1992 57.22% 36,695 $ 41
339 RSA CALIFORNIA 4 CCI Acq'd 79.20% 263,900 $180 (c)
389 RSA IDAHO 2 CCI Sold Sep-93 19.70% 11,978 $ 35
390 RSA IDAHO 3 CCI Sold Sep-93 33.33% 4,917 $ 30
391 RSA IDAHO 4 CCI Sold 1992 25.00% 30,267 $ 66
392 RSA IDAHO 5 CCI Sold 1992 14.29% 20,713 $ 65
409/10/11 RSAs INDIANA 7/8/9 (b) CCI Acq'd May-94 3.09% 18,840 $ 50
</TABLE>
<PAGE> 38
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
<TABLE>
<CAPTION>
MSA / GTEM/ Sold / Net Proceeds
Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP
-------- ----- ---------------- ----- ------- ------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
412 RSA IOWA 1 CCI Sold Jan-94 7.07% 4,354 $ 79
413 RSA IOWA 2 CCI Sold Sep-93 33.00% 16,665 $ 86
415 RSA IOWA 4 (b) CCI Acq'd 21.00% 31,000 $ 41(c)
416 RSA IOWA 5 (b) CCI Acq'd 79.00% 84,000 $ 54(c)
418 RSA IOWA 7 CCI Sold Sep-93 6.67% 3,571 $ 64
419 RSA IOWA 8 CCI Sold May-94 16.67% 9,110 $ 25
421 RSA IOWA 10 CCI Sold Sep-93 5.25% 9,539 $ 84
425 RSA IOWA 14 CCI Sold May-94 5.66% 6,028 $ 39
425 RSA IOWA 14 GTEM Sold May-94 5.66% 6,028 $ 39
485 RSA MINNESOTA 4 CCI Sold Sep-93 50.00% 6,850 $ 30
488 RSA MINNESOTA 7 CCI Sold Aug-93 6.25% 10,992 $ 54
489 RSA MINNESOTA 8 CCI Sold Aug-93 10.00% 8,780 $ 55
490 RSA MINNESOTA 9 GTEM Sold Aug-93 6.67% 3,888 $ 46
490 RSA MINNESOTA 9 CCI Sold Aug-93 6.67% 8,851 $ 46
491 RSA MINNESOTA 10 GTEM Sold Aug-93 6.25% 14,041 $ 69
491 RSA MINNESOTA 10 CCI Sold Aug-93 6.25% 14,044 $ 68
492 RSA MINNESOTA 11 GTEM Sold Sep-93 4.78% 9,576 $ 74
492 RSA MINNESOTA 11 CCI Sold Sep-93 7.34% 14,702 $ 72
535-540 RSA NEBRASKA 3,5,6,8 GTEM Sold 1992 8.58% 36,854 $ 31
561 RSA NEW YORK 3 CCI Acq'd Feb-93 2.50% 11,911 $ 16
582 RSA NORTH DAKOTA 3 CCI Sold Sep-93 7.69% 7,075 $ 65
599 RSA OKLAHOMA 4 CCI Sold 1992 66.67% 127,708 $ 64
609 RSA OREGON 4 GTEM Sold Sep-93 20.00% 41,041 $ 57
610 RSA OREGON 5 CCI Sold May-94 66.67% 164,764 $103
638 RSA SOUTH DAKOTA 581 CCI Sold Dec-93 33.33% 4,301 $ 23
639 RSA SOUTH DAKOTA 681 CCI Sold Dec-93 14.29% 5,079 $ 18
644 RSA TENNESSEE 2 CCI Acq'd Jan-94 100.00% 155,849 $ 67
645 RSA TENNESSEE 3 CCI Acq'd Jan-94 51.00% 164,757 $ 62
648 RSA TENNESSEE 6 CCI Acq'd Jun-93 100.00% 146,237 $118
651 RSA TENNESSEE 9 CCI Acq'd Dec-93 100.00% 56,182 $130
668 RSA TEXAS 17 GTEM Acq'd Aug-93 4.94% 11,288 $ 92
</TABLE>
<PAGE> 39
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
MOBILENET / CCI ACQUISITIONS AND DISPOSITIONS
<TABLE>
<CAPTION>
MSA / GTEM / Sold / Net Proceeds
Rank (a) RSA Market CCI Acq'd. Date Ownership POPs Per POP
- -------- ----- ------------ ------ ------- ------ --------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
693 RSA WASHINGTON 1 CCI Sold Sep-93 20.00% 47,660 $ 67
694 RSA WASHINGTON 2 CCI Sold Sep-93 33.33% 38,629 $ 32
695 RSA WASHINGTON 3 CCI Sold Sep-93 33.33% 15,665 $ 7
696 RSA WASHINGTON 4 CCI Sold Nov-93 20.00% 52,200 $ 32
699 RSA WASHINGTON 7 GTEM Sold Sep-93 75.00% 19,009 $ 7
------------------------------------------------------------------------------------
MEAN (POP WEIGHTED) RSA POP VALUE $ 79
MEDIAN (POP WEIGHTED) RSA POP VALUE $ 65
------------------------------------------------------------------------------------
OTHER TRANSACTIONS
CALIFORNIA (San Fran) GTEM Acq'd Apr-93 0.36% 24,481 $133
Acq'd Nov-93 0.13% 8,840 $ 48
120 MSA HUNTSVILLE, AL CCI Acq'd 100.00% 390,000
308 RSA ALABAMA 2 CCI Acq'd 100.00% 125,000
------- ----
515,000 $203(c)
289 MSA RAPID CITY, SD CCI Sold Dec-93 100.00%
638 RSA SOUTH DAKOTA 582 CCI Sold Dec-93 33.33%
639 RSA SOUTH DAKOTA 682 CCI Sold Dec-93 14.29% ------- ----
119,890 $ 85
</TABLE>
- ----------------------------------------------------------------------------
(a) SOURCE: 1993 CELLULAR TELEPHONE ATLAS, PAUL KAGAN ASSOCIATES, INC.
(b) PART OF RAPID CITY SWAP TRANSACTION.
(c) PRICE/POP IS MAXIMUM ACQUISITION PRICE INCLUDED IN STRATEGIC REQUISITION.
<PAGE> 40
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
U S WEST NEW VECTOR
<TABLE>
<CAPTION>
TRANSACTION NET TV PER TV PER
DATE ACQUIROR VALUE POPS POP MSA POP (a)
- -------- -------------------------------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
11/20/90 U S West $ 2,388.1 16,845,900 $142 $146
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- -------------------------------- ----------- ---------- --------------
15 Minneapolis, MN 69.0% 1,673,500
18 San Diego, CA 100.0% 2,512,300
19 Denver, CO 100.0% 1,896,700
20 Seattle, WA 44.6% 1,427,600
----------
SUBTOTAL MSA RANK 1 - 25 POPS 7,510,100 44.6%
26 Phoenix, AZ 100.0% 2,118,500
30 Portland, OR 7.6% 106,200
39 Salt Lake City, UT 100.0% 1,115,800
65 Omaha, NE 93.8% 590,600
----------
SUBTOTAL MSA RANK 26 - 75 POPS 3,931,100 23.3%
77 Tucson, AZ 70.6% 463,000
82 Tacoma, WA 73.6% 423,400
86 Albuquerque, NM 51.0% 290,300
102 Des Moines, IA 76.0% 303,800
109 Spokane, WA 100.0% 360,300
117 Colorado Springs, CO 69.5% 289,800
----------
SUBTOTAL MSA RANK 76 - 125 POPS 2,130,600 12.6%
135 Eugene, OR 70.5% 193,800
141 Duluth, MN 51.0% 122,500
148 Salem, OR 7.6% 21,000
159 Provo, UT 100.0% 245,100
----------
SUBTOTAL MSA RANK 126 - 175 POPS 582,400 3.5%
</TABLE>
<PAGE> 41
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
U S WEST NEW VECTOR
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- -------------------------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
176 Springfield, IL 12.7% 24,500
190 Boise, ID 100.0% 205,900
196 Champaign-Urbana, IL 12.7% 21,800
210 Fort Collins, CO 90.0% 167,100
212 Bremerton, WA 73.6% 141,500
221 Fargo, ND 51.0% 76,400
----------
SUBTOTAL MSA RANK 176 - 225 POPS 637,200 3.8%
230 Decatur, IL 12.7% 15,500
241 Pueblo, CO 34.0% 43,400
242 Olympia, WA 63.8% 104,400
243 Greely, CO 67.5% 92,800
250 Bloomington, IL 12.7% 15,900
267 Sioux Falls, SD 51.0% 65,500
270 Bellingham, WA 100.0% 123,400
----------
SUBTOTAL MSA RANK 226 - 275 POPS 460,900 2.7%
276 Grand Forks, ND 51.0% 53,200
297 Great Falls, MI 70.0% 54,200
298 Bismark, ND 80.0% 69,200
299 Casper, WY 100.0% 63,300
----------
SUBTOTAL MSA RANK 275+ POPS 239,900 1.4%
----------------------------------
TOTAL MSA POPS 15,492,200 92.0%
----------------------------------
Arizona 2 16.7% 33,200
Arizona 3 25.0% 35,000
Arizona 4 25.0% 27,900
Arizona 5 14.0% 12,900
Arizona 6 30.0% 48,100
Colorado 3 38.5% 86,500
Idaho 1 50.0% 100,500
Idaho 2 16.7% 9,800
Idaho 3 33.3% 4,800
Idaho 4 25.0% 30,300
Idaho 5 14.3% 20,700
Idaho 6 16.7% 44,900
</TABLE>
<PAGE> 42
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
U S WEST NEW VECTOR
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
- -------- --------------- --------- ------ --------------
<S> <C> <C> <C> <C>
Illinois 2 2.5% 6,400
Illinois 4 0.1% 200
Illinois 5 12.7% 12,100
Illinois 6 7.7% 15,700
Illinois 7 7.7% 18,600
Iowa 1 7.2% 4,600
Iowa 2 33.2% 17,300
Iowa 7 13.3% 7,300
Iowa 8 8.3% 4,900
Iowa 10 22.6% 41,100
Iowa 11 7.2% 8,100
Iowa 14 5.6% 6,300
Iowa 15 6.7% 5,700
Iowa 16 8.3% 8,700
Minnesota 1 25.0% 12,700
Minnesota 2 11.1% 6,700
Minnesota 3 11.1% 6,300
Minnesota 4 50.0% 7,400
Minnesota 5 4.4% 9,200
Minnesota 6 5.9% 14,100
Minnesota 7 6.3% 10,600
Minnesota 8 10.0% 7,200
Minnesota 9 6.7% 9,300
Minnesota 10 6.3% 13,900
Minnesota 11 7.1% 14,400
Nebraska 1 8.1% 7,700
Nebraska 2 8.1% 2,700
Nebraska 3 6.0% 7,200
Nebraska 4 8.1% 3,100
Nebraska 5 7.4% 10,700
Nebraska 6 5.1% 5,300
Nebraska 7 9.0% 8,000
Nebraska 8 4.9% 3,000
Nebraska 9 1.7% 1,500
Nebraska 10 1.7% 1,500
New Mexico 4 W 57.1% 66,000
New Mexico 4 E 14.3% 16,100
New Mexico 6 II 12.5% 14,800
</TABLE>
<PAGE> 43
CELLULAR TRANSACTION ANALYSIS
- --------------------------------------------------------------------------------
U S WEST NEW VECTOR
<TABLE>
<CAPTION>
NET PERCENTAGE OF
MSA RANK MARKET OWNERSHIP POPS TOTAL NET POPS
-------- ---------------- ---------- ------ --------------
<S> <C> <C> <C> <C>
North Dakota 3 7.7% 7,700
North Dakota 4 16.7% 12,900
North Dakota 5 25.0% 13,800
Oregon 2 W 16.7% 8,600
Oregon 2 E 16.7% 1,700
Oregon 3 11.1% 15,700
Oregon 4 12.0% 23,600
Oregon 6 25.0% 39,600
South Dakota 1 14.0% 8,600
South Dakota 2 14.3% 3,600
South Dakota 3 16.7% 9,400
South Dakota 5 A 33.3% 3,800
South Dakota 5 B 33.3% 5,000
South Dakota 6 A 14.3% 700
South Dakota 6 B 14.3% 5,000
South Dakota 7 14.3% 9,600
South Dakota 8 12.5% 9,000
South Dakota 9 16.7% 15,000
Utah 1 25.0% 27,500
Utah 2 50.0% 15,100
Utah 3 16.7% 8,400
Utah 4 50.0% 35,100
Utah 6 20.0% 4,900
Washington 1 29.4% 64,500
Washington 3 33.3% 15,900
Washington 4 20.0% 20,400
Washington 8 20.0% 21,400
Wyoming 4 50.0% 64,200
Wyoming 5 100.0% 12,000
----------------------------
TOTAL RSA POPS 1,353,700 8.0%
----------------------------
----------------------------
TOTAL POPS 16,845,900 100.0%
----------------------------
</TABLE>
- ---------------------------------------
(a) Assumes $90 per RSA POP.
<PAGE> 44
RELEVANT ISSUES RELATING TO ACORN VALUATION
- - Acorn's markets are concentrated in areas with relatively weak
demographics.
<TABLE>
<CAPTION>
CONTROLLED MSAs
----------------------------------------
# OF MARKETS Above # OF MARKETS BELOW
U.S. AVERAGE U.S. AVERAGE
------------------ ------------------
<S> <C> <C>
Population Density 8 26
Household Income 3 31
Traffic Density 5 29
</TABLE>
- - Acorn's markets have a relatively high percentage of RSAs, which will
in general not achieve the penetration of larger MSA markets, and
hence have reduced value.
<TABLE>
<CAPTION>
COMPANY % RSA POPs
----------------------- ----------
<S> <C>
LIN Broadcasting 1%
Cellular Communications 3%
McCaw Cellular 3%
GTE Mobilnet 7%
Vanguard Cellular 11%
Centennial Cellular 16%
ACORN 20%
U.S. Cellular 64%
</TABLE>
<PAGE> 45
RELEVANT ISSUES RELATING TO ACORN VALUATION
- - Acorn's holdings of non-control interests, which typically carry a
valuation discount of approximately 25 to 33%, are relatively high.
<TABLE>
<CAPTION>
MINORITY INTEREST POPs
AS A PERCENTAGE OF NET POPs
---------------------------
<S> <C>
Cellular Communications 0.5%(1)
McCaw Cellular 3.8%(2)
Vanguard Cellular 7.2%
GTE Mobilnet 8.0%
U.S. Cellular 15.8%
Centennial Cellular 19.2%
LIN Broadcasting 29.7%
ACORN 30.2%
</TABLE>
- --------------------
(1) Includes as control POPs all Air Touch/CCI Joint Venture control POPs.
(2) Includes as control POPs all Air Touch/McCaw Joint Venture control POPs.
<PAGE> 46
RELEVANT ISSUES RELATING TO ACORN VALUATION
- -------------------------------------------------------------------------------
- - Given its portfolio of properties, Acorn's current penetration is
relatively low.
<TABLE>
<CAPTION>
REVENUE/SUBSCRIBER/ OPERATING CASH FLOW
COMPANY PENETRATION MONTH MARGIN
----------------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
GTE Mobilnet 4.2% NA NA
Cellular Communications 3.4% $65 NA
LIN Broadcasting 3.4% $80 48%
McCaw Cellular 3.3% $78 41%
ACORN 2.4% $65 38%
Vanguard Cellular 2.3% $63 24%
U.S. Cellular 1.2% $72 23%
Centennial Cellular 0.9% $78 51%
</TABLE>
- - Acorn's POPs clearly have weaker standing than those of GTE.
<TABLE>
<CAPTION>
ACORN GTE MOBILNET
------------------------------------- ---------------------------------------
MSA RANK MAJORITY % MINORITY % MAJORITY % MINORITY %
---------- -------- ----- -------- ----- -------- ----- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 25 0 0.0% 4,319 18.3% 12,704 44.0% 1,463 5.1%
26 to 75 6,208 26.4% 911 3.9% 4,590 15.9% 159 0.6%
76 to 125 4,909 20.9% 552 2.3% 3,998 13.9% 55 0.2%
126 to 175 949 4.0% 85 0.4% 2,220 7.7% 17 0.1%
176 to 225 299 1.3% 2 0.0% 424 1.5% 61 0.2%
226 to 275 452 1.9% 19 0.1% 623 2.2% 64 0.2%
276+ 227 1.0% 0 0.0% 327 1.1% 17 0.1%
------ ---- ----- ---- ------ ---- ----- ---
Total MSA POPs 13,044 55.4% 5,887 25.0% 24,886 86.2% 1,834 6.4%
RSAs 3,396 14.4% 1,214 5.2% 1,678 5.8% 462 1.6%
------ ---- ----- ---- ------ ---- ----- ---
Total POPs 16,440 69.8% 7,102 30.2% 26,564 92.0% 2,296 8.0%
</TABLE>
<PAGE> 47
RELEVANT ISSUES RELATING TO ACORN VALUATION
- -------------------------------------------------------------------------------
- - Looking out into the future, the wireless industry is expected to
undergo significant changes related to increased competition. Due to
these factors, as well as a general maturation of the business,
Acorn's growth in operating results is expected to slow significantly
beyond 1999.
-- PCS buildout by late 1997/early 1998.
-- ESMR ubiquitous coverage by 1999.
-- Growth in importance of national brand names.
- - Because of the characteristics of Acorn's POPs, when examining per POP
valuation parameters, it is imperative that its properties be valued on
a market by market basis. We find no market evidence to rebut the
following ranges:
<TABLE>
<CAPTION>
VALUE PER POP
-----------------------
MSA RANK LOW HIGH
---------- ---- ----
<S> <C> <C>
1 to 25 $250 $350
26 to 75 175 250
76 to 125 150 200
126 to 175 125 175
176 to 225 125 150
226 to 275 125 150
276+ 75 125
RSAs 90 90
</TABLE>
<PAGE> 48
PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK
- -------------------------------------------------------------------------------
MSA MARKET REVEIW
<TABLE>
<CAPTION>
MAJORITY MSA POPs MINORITY MSA POPs
--------------------- -----------------------
NET POPs % OF TOTAL NET POPs % OF TOTAL
MSA RANKING (000s) MAJORITY (000s) MINORITY
------------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1-25 0 0.0% 4,484 74.6%
26-75 6,793 51.7 729 12.1
76-125 3,870 29.5 592 9.8
126-175 1,167 8.9 185 3.1
176-225 296 2.2 3 0.1
226-275 638 4.9 17 0.3
276-300 369 2.8 0 0.0
------ ---- ----- ----
Total 13,133 100% 6,010 100%
====== ==== ===== ====
% of Total MSA POPs 68.6% 31.4%
</TABLE>
<PAGE> 49
PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK
- -------------------------------------------------------------------------------
MSA MARKET REVEIW
<TABLE>
<CAPTION>
MARKET PROFILE
------------------------------------------------
MAJORITY MSA POPs MINORITY MSA POPs
---------------------- ----------------------
# MARKETS # MARKETS # MARKETS # MARKETS
ABOVE U.S. BELOW U.S. ABOVE U.S. BELOW U.S.
STATISTIC AVERAGE AVERAGE AVERAGE AVERAGE
------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1992 POPs/Square Mile 8 26 14 15
1990-1995 POP Growth 13 21 25 4
% of Household Income in Excess of $50,000 3 31 14 15
High Profile POPs as % of Employee Base 13 21 15 14
Local Interstate Traffic Density 5 29 12 17
--- --- --- ---
Total 42 128 80 65
=== === === ===
</TABLE>
<PAGE> 50
PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK
- -------------------------------------------------------------------------------
MSA MARKET REVIEW (13.1mm MAJORITY MSA POPs)
<TABLE>
<CAPTION>
1992 1990-1995 HIGH LOCAL
POPs/ ---------------------- % HH PROFILE INTERSTATE
CCXLA MSA 1992 SQUARE POP RETAIL SALES INC. MEDIAN POPs % TRAFFIC
MARKET NET POPs RANK TOTAL POPs MILE GROWTH GROWTH >$50K HH INC. EMP BASE DENSITY
- -------------------- -------- ---- ---------- ------- ------ ------------ ----- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(000's) (000's)
Nashville, TN 1,030 38 1,030 250 1.45% 3.71% 21.7% $28,799 21.0% 37,446
Norfolk, VA 975 39 1,015 755 1.99% 6.32% 20.0% $28,442 25.4% 68,673
Memphis, TN 1,006 41 1,006 434 1.04% 2.92% 18.3% $24,901 21.3% 37,240
Louisville, KS 903 47 903 641 0.04% 7.32% 16.2% $25,998 18.1% 40,050
Birmingham, AL 884 48 884 260 0.45% 6.44% 16.7% $24,633 25.7% 33,973
Richmond, VA 731 58 762 357 1.49% 3.95% 25.7% $32,912 25.8% 35,892
Fresno, CA 647 63 702 117 2.58% 6.62% 21.9% $27,326 24.6% 22,411
El Paso, TX 619 72 619 610 2.25% 7.38% 12.2% $20,884 17.9% 19,142
Bakersfield, CA 532 78 575 71 2.95% 6.19% 22.9% $28,797 22.2% 24,986
Knoxville, TN 483 85 510 314 0.59% 3.17% 17.1% $24,356 13.6% 45,378
Mobile, AL 488 89 488 171 0.68% 6.69% 15.8% $24,007 22.2% 25,499
Newport News, VA 429 95 448 712 1.60% 4.69% 18.0% $27,191 15.3% 43,572
Johnson City, TN 438 97 438 152 0.09% 3.28% 12.8% $22,887 12.0% 19,667
Chattanooga, TN 437 98 437 208 0.57% 2.59% 14.2% $23,845 17.4% 31,009
Lexington, KY 358 120 358 239 0.93% 8.22% 17.3% $24,886 17.3% 24,441
Pensacola, FL 357 122 357 210 1.48% 7.06% 18.8% $26,150 20.9% 30,529
Davenport, LA 348 124 348 203 (0.69%) 7.96% 20.7% $30,615 15.5% 13,304
Manchester, NH 201 127 348 397 1.80% 3.51% 36.4% $39,598 17.2% 42,295
Visalia, CA 301 130 327 68 2.45% 4.10% 13.6% $22,105 20.4% 0
Evansville, IN 279 134 311 158 0.06% 5.36% 15.1% $25,809 14.9% 5,910
Binghamton, NY 125 136 305 149 0.10% 4.30% 22.3% $29,430 12.8% 16,311
Rockford, IL 169 145 285 358 0.28% 6.21% 20.5% $31,185 10.9% 21,151
Roanoke, VA 92 169 230 194 0.15% 6.94% 15.3% $25,773 22.8% 29,056
Clarksville, TN 176 202 176 137 0.95% 3.98% 11.0% $21,086 15.9% 12,514
Tuscaloosa, AL 120 216 153 114 0.79% 5.39% 11.9% $20,449 19.1% 20,139
Las Cruces, NM 146 228 146 37 2.76% 5.08% 10.8% $18,273 21.5% 8,984
Burlington, VT 141 232 141 224 1.40% 2.39% 26.4% $31,921 17.6% 17,507
Florence, AL 120 248 131 105 (0.12%) 6.44% 12.2% $22,411 13.3% 0
Petersburg, VA 116 257 126 155 0.16% 6.04% 16.9% $26,669 15.9% 19,579
Anniston, AL 116 267 116 191 0.17% 6.67% 9.6% $20,765 10.7% 20,302
Rapid City, SD 107 280 107 17 1.54% 9.28% 15.6% $24,273 20.6% 7,620
Gadsden, AL 90 288 100 184 (0.12%) 5.13% 8.0% $18,290 13.3% 9,940
Elmira, NY 95 293 95 233 0.25% 2.16% 14.5% $24,953 13.8% 0
Owensboro, KY 78 294 87 188 0.00% 7.28% 11.6% $22,824 18.5% 0
- -----------------------------------------------------------------------------------------------------------------------------------
CCXLA weighted avg.
based on total pops 229 0.98% 4.27% 15.7% $22,486 16.6% 23,304
% Above/(Below) Avg. (30.5%) (14.4%) (27.5%) (36.4%) (27.0%) (17.6%) (40.6%)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 51
PRELIMINARY CONTEL CELLULAR VALUATION FRAMEWORK
- -------------------------------------------------------------------------------
MSA MARKET REVIEW (6.0mm MINORITY MSA POPs)
<TABLE>
<CAPTION>
1992 1990-1995 HIGH LOCAL
POPs/ ---------------------- % HH PROFILE INTERSTATE
CCXLA MSA 1992 SQUARE POP RETAIL SALES INC. MEDIAN POPs % TRAFFIC
MARKET NET POPs RANK TOTAL POPs MILE GROWTH GROWTH >$50K HH INC. EMP BASE DENSITY
- -------------------- -------- ---- ---------- ------- ------ ------------ ----- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(000's) (000's)
Los Angeles, CA 1,634 2 14,438 449 2.07% 6.54% 30.8% $33,853 18.5% 81,298
Washington, DC 1,341 8 3,791 1,350 1.78% 3.62% 44.0% $45,118 23.0% 102,876
San Francisco, CA 421 9 3,772 1,520 1.16% 6.42% 36.6% $38,443 27.9% 125,423
Houston, TX 160 10 3,572 529 1.12% 6.18% 22.9% $30,631 23.4% 91,974
Minneapolis, MN 755 14 2,519 546 1.66% 7.91% 26.7% $33,800 18.1% 43,187
San Jose, CA 172 24 1,536 1,188 1.28% 4.64% 44.9% $45,662 11.8% 128,258
Sacramento, CA 14 29 1,432 421 2.83% 6.23% 27.6% $32,012 22.6% 42,237
San Antonio, TX 408 30 1,352 537 1.92% 7.97% 15.5% $23,888 22.3% 40,760
Jacksonville, FL 132 42 970 301 2.40% 6.08% 21.5% $27,623 26.1% 37,165
Austin, TX 26 49 818 292 2.36% 8.53% 20.9% $26,784 22.5% 46,600
Oxnard, CA 78 65 696 374 2.03% 6.99% 38.1% $40,320 19.6% 0
Greenville, SC 72 69 656 311 1.16% 4.35% 14.0% $24,709 25.2% 26,315
Albuquerque, NM 277 79 572 117 2.57% 7.11% 15.9% $24,392 21.5% 32,423
Stockton, CA 5 84 503 356 2.33% 6.28% 21.4% $27,627 22.5% 33,585
Vallejo, CA 54 92 479 304 3.08% 5.59% 25.6% $32,781 19.6% 61,191
Santa Rosa, CA 46 106 408 254 2.57% 7.43% 29.3% $33,505 22.6% 0
Modesto, CA 4 110 395 262 3.32% 5.24% 19.1% $26,446 18.0% 22,047
Santa Barbara, CA 150 113 379 138 1.28% 5.22% 29.3% $32,650 19.0% 0
Salinas, CA 41 117 373 113 2.41% 6.14% 26.1% $31,878 19.6% 0
Beaumont, TX 16 121 357 162 -0.60% 6.40% 20.1% $29,410 18.7% 29,858
Orange County, NY 80 132 319 386 1.86% 4.04% 26.7% $33,407 18.9% 29,872
Reno, NV 3 153 266 42 2.27% 9.13% 24.1% $30,460 21.1% 25,472
Poughkeepsie, NY 66 158 266 330 1.18% 6.43% 35.1% $38,897 13.3% 39,558
Santa Cruz, CA 27 165 237 532 1.68% 7.42% 31.0% $33,294 15.1% 0
Galveston, TX 10 173 220 551 0.61% 6.10% 21.0% $29,177 20.3% 40,689
Chico, CA 2 195 189 115 1.82% 6.03% 11.9% $20,435 16.4% 0
Redding, CA 2 219 156 41 2.95% 4.42% 15.1% $23,280 22.3% 18,814
Anderson, SC 16 226 148 205 0.81% 5.25% 12.3% $24,627 11.6% 24,136
Yuba City, CA 1 255 127 102 1.69% 6.01% 16.4% $23,312 20.7% 0
- ----------------------------------------------------------------------------------------------------------------------------------
CCXLA weighted avg.
based on total pops 743 1.82% 6.38% 31.0% $34,938 21.6% 76,100
% Above/(Below) Avg. 125.8% 59.4% 8.2% 25.6% 13.4% 7.4% 85.4%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
GTE MOBILE COMMUNICATIONS BENCHMARKING
CUSTOMERS
(000s)
<TABLE>
<CAPTION>
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI
----- ----- ------- ------ --------- ------ ------------- ------- --------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 1,439 410 774 428 1,524 435 753 1,513 646 1,156 804 352
2Q93 1,558 445 857 484 1,650 475 821 1,643 698 1,254 865 389
3Q93 1,695 486 934 539 1,769 517 893 1,777 755 1,364 930 434
4Q93 1,934 575 1,046 652 1,990 601 1,039 2,049 860 1,585 1,064 521
1Q94 2,117 644 1,131 725 2,144 665 1,148 2,206 949 1,718 1,150 568
2Q94 2,259 736 1,221 811 2,292 738 1,300 2,425 1,039 1,878 1,256 622
</TABLE>
<PAGE> 53
GTE MOBILE COMMUNICATIONS BENCHMARKING
ANNUAL CUSTOMER GROWTH (%)
<TABLE>
<CAPTION>
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI
----- ----- -------- ------ --------- ------ ------------- ------- --------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 30.8% 26.9% 34.4% 53.2% 43.2% 32.9% 40.1% 47.9% 30.8% 33.9% 31.8% 38.8%
2Q93 34.0% 29.2% 38.7% 52.3% 37.2% 33.3% 42.3% 47.6% 38.8% 36.3% 33.2% 43.4%
3Q93 35.4% 34.7% 42.4% 57.8% 37.1% 35.9% 44.7% 45.5% 44.9% 39.7% 35.7% 49.3%
4Q93 41.6% 47.0% 44.7% 66.5% 39.2% 45.0% 48.8% 45.0% 46.8% 45.4% 39.6% 59.0%
1Q94 47.1% 57.3% 46.1% 69.4% 40.7% 53.0% 52.5% 45.8% 46.9% 48.6% 43.1% 61.3%
2Q94 45.0% 65.4% 42.5% 67.5% 39.0% 55.4% 58.3% 47.6% 48.9% 49.7% 45.3% 59.6%
</TABLE>
<PAGE> 54
GTE MOBILE COMMUNICATIONS BENCHMARKING
PENETRATION (%)
<TABLE>
<CAPTION>
McCaw NYNEX AirTouch Sprint BellSouth USWest Bell Atlantic SW Bell Ameritech GTE PCS GTE MN CCI
----- ----- -------- ------ --------- ------ ------------- ------- --------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 2.4% 2.1% 2.4% 2.3% 3.2% 2.2% 2.2% 4.2% 3.0% 2.4% 2.3% 2.0%
2Q93 2.6% 2.4% 2.6% 2.6% 3.3% 2.4% 2.4% 4.6% 3.2% 2.6% 2.9% 2.2%
3Q93 2.8% 2.5% 2.8% 2.9% 3.6% 3.0% 2.6% 4.9% 3.4% 2.9% 3.1% 2.5%
4Q93 3.1% 2.8% 3.1% 3.1% 4.0% 3.3% 2.9% 5.9% 3.9% 3.3% 3.5% 2.9%
1Q94 3.4% 3.3% 3.2% 3.5% 4.3% 3.6% 3.3% 6.4% 4.3% 3.5% 3.8% 3.2%
2Q94 3.7% 3.6% 3.5% 3.9% 4.6% 4.1% 3.7% 6.9% 4.7% 3.9% 4.1% 3.5%
</TABLE>
<PAGE> 55
GTE MOBILE COMMUNICATIONS BENCHMARKING
REV/COST/MONTH
<TABLE>
<CAPTION>
McCaw NYNEX AirTouch Sprint BellSouth USWest GTE PCS GTE MN CCI
----- ----- -------- ------ --------- ------ ------- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 84 75 88 70 75 74 70 70 70
2Q93 89 83 90 77 76 79 72 72 74
3Q93 87 83 86 74 73 78 71 70 73
4Q93 84 81 85 68 71 74 68 68 68
1Q94 81 77 79 69 68 70 67 68 67
2Q94 83 86 81 74 70 73 70 69 71
</TABLE>
<PAGE> 56
GTE MOBILE COMMUNICATIONS BENCHMARKING
OPERATING CASH FLOW MARGIN
<TABLE>
<CAPTION>
McCaw NYNEX AirTouch Sprint BellSouth USWEST GTE PCS GTE MN CCI
----- ----- -------- ------ --------- ------ ------- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q93 45.1% 31.4% 41.0% 21.8% 40.8% 27.4% 35.1% 39.8% 24.2%
2Q93 47.0% 33.1% 44.9% 24.7% 41.6% 26.8% 38.0% 40.6% 32.5%
3Q93 47.6% 32.6% 46.5% 27.2% 41.4% 30.6% 38.5% 41.4% 32.2%
4Q93 40.6% 21.5% 38.2% 19.4% 40.9% 20.1% 23.8% 28.8% 13.3%
1Q94 40.8% 20.9% 46.1% 24.5% 42.8% 25.4% 33.7% 37.4% 26.2%
2Q94 41.5% 19.2% 46.7% 27.5% 44.6% 30.7% 38.9% 41.2% 34.2%
</TABLE>
<PAGE> 57
CONTEL CELLULAR
- -------------------------------------------------------------------------------
COMPARISON OF MARKET CLUSTERS
<TABLE>
<CAPTION>
PEN OCF >200K 100-200K 50-100K 20-50K 10-20K <10K
---- --- ----- -------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIN 2.3% 48% 75% 25% -- -- -- --
McCaw (w/o LIN) 2.1% 43% 26% 33% 35% 5% -- 1%
PacTel 2.1% 41% 77% 11% 8% 4% -- --
NYNEX 1.5% 36% 78% -- 22% -- -- --
Bell South 2.7% 40% 78% 10% 8% 4% -- --
Centel 2.4% 24% -- 58% -- 19% 23% --
CCI 1.6% 22% -- 41% 21% 17% 9% 12%
Vanguard 1.5% 16% -- -- -- 63% -- 37%
US Cellular 2.1% 14% -- -- -- 21% 15% 65%
</TABLE>
<PAGE> 58
CONTEL CELLULAR
- -------------------------------------------------------------------------------
BENCHMARKING
SEPTEMBER 1992 YTD
<TABLE>
<CAPTION>
BELL MCCAW U.S.
SOUTH CENTEL W/LIN PACTEL CELLULAR CCI NYNEX VANGUARD
----- ------ ----- ------ -------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Cash Flow % 40.3% 24.5% 44.7% 41.0% 13.8% 21.7% 35.7% 16.3%
% Top 30 POPs 50.1% 0.0% 58.8% 76.8% 0.0% 0.0% 72.4% 0.0%
Penetration 2.7% 2.4% 2.1% 2.1% 2.1% 1.6% 1.5% 1.5%
R/C/M $71 $77 $91 $93 $106 $79 $88 $89
</TABLE>
<PAGE> 59
CONTEL CELLULAR INC.
- --------------------------------------------------------------------------------
Margins and Market Cluster Size
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MARKET SEPT. YTD OPERATING
CLUSTER SIZE (000) CASH FLOW MARGIN
----------------------- -------------------
<S> <C> <C>
Vanguard 33 16%
US Cellular 11 14
CCI 65 22
Centel 105 24
McCaw 129 44
LIN 237 48
NYNEX 224 36
PacTel 299 41
BellSouth 252 40
</TABLE>
<PAGE> 60
ANALYSIS OF SELECTED PUBLICLY TRADED CELLULAR TELEPHONE COMPANIES
SUMMARY INFORMATION
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FULLY
DILUTED FULLY LTM
CURRENT FULLY MARKET DILUTED TOTAL LTM REPORTED
MARKET PRICE DILUTED VALUE OF MARKET LTM NET REPORTED LTM EBITDA
UNITED STATES CELLULAR COMPARABLES 10/17/94 SHARES EQUITY (a) CAP. (b) REVENUES EBITDA EBITDA (c) MARGIN
- ---------------------------------- ------------ ------- ---------- ------------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) $ 29.00 493.6 $14,314 $13,231 $1,096 $304 $425 28%
CELLULAR COMMUNICATIONS, INC. 53.00 42.5 2,200 2,383 NA NA NA NA
CELLULAR COMM. OF PUERTO RICO 37.12 13.3 492 532 49 5 5 10%
CENTENNIAL CELLULAR CORP. 17.00 12.3 209 550 43 17 27 39%
COMMNET CELLULAR (CELLULAR, INC.) 25.12 11.9 299 493 53 7 2 13%
CONTEL CELLULAR INC. 23.75 100.2 2,380 4,416 461 107 186 23%
INTERCEL, INC. 10.25 10.1 104 116 17 4 4 25%
LIN BROADCASTING CORPORATION 136.75 52.5 7,177 8,989 777 307 430 40%
UNITED STATES CELLULAR
CORPORATION 32.00 80.7 2,582 2,862 302 54 84 18%
VANGUARD CELLULAR SYSTEMS, INC. 27.25 39.9 1,092 1,378 150 30 30 20%
</TABLE>
<TABLE>
<CAPTION>
5 YEAR 1994
OCF GROWTH ESTIMATED
UNITED STATES CELLULAR COMPARABLES RATE (d) 1995 EBITDA (e)
- ---------------------------------- ------------ ---------------
<S> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) 18.8 $505
CELLULAR COMMUNICATIONS, INC. 21.0 NA
CELLULAR COMM. OF PUERTO RICO 57.0 8
CENTENNIAL CELLULAR CORP. 24.1 34
COMMNET CELLULAR (CELLULAR, INC.) 44.0 3
CONTEL CELLULAR INC. 28.8 240
INTERCEL, INC. NA NA
LIN BROADCASTING CORPORATION 13.5 489
UNITED STATES CELLULAR
CORPORATION 43.9 120
VANGUARD CELLULAR SYSTEMS, INC. 33.6 40
- ------------------------------------------------------------------------------------------------------------------------------
UNITED STATES SUMMARY INFORMATION:
Maximum: 40%
Mean: 24%
Median: 23%
Minimum: 10%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
(a) Fully diluted, assuming the conversion of exercisable in-the-money stock
options and warrants.
(b) Market Capitalization = Fully Diluted Market Value + Total Debt + Preferred
Stock + Minority Interest - Cash & Equivalents.
(c) Reported EBITDA plus tax-effected earnings from unconsolidated subsidiaries
less tax-effected minority interests.
(d) Source: Merrill Lynch Research.
(e) Merrill Lynch estimated EBITDA growth rate multiplied by EBITDA (including
tax effected unconsolidated earnings and tax effected minority interest).
<PAGE> 61
MERRILL LYNCH & CO.
ANALYSIS OF SELECTED PUBLICLY -- TRADED CELLULAR TELEPHONE COMPANIES
<TABLE>
<CAPTION>
STOCK PRICE INFORMATION
------------------------------------------
PRICE AS MSA POPS
52 WEEK 52 WEEK A % OF 52 TICKER/ NET POPS AS A % OF
UNITED STATES CELLULAR COMPARABLES 10/17/94 LOW HIGH WEEK HIGH EXCHANGE (MM) NET POPS (a)
- ---------------------------------- -------- ------- ------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) $ 29.00 $ 19.88 $ 28.25 102.7% ATI/NYSE 35.0 98%(c)
CELLULAR COMMUNICATIONS, INC. 53.00 40.25 54.50 97.2% COMMA/OTC 7.9 97%
CELLULAR COMM. OF PUERTO RICO 37.12 18.25 31.00 119.7% CCPR/OTC 3.0 91%
CENTENNIAL CELLULAR CORP. 17.00 14.00 24.25 70.1% CYCL/OTC 4.2 84%
COMMNET CELLULAR (CELLULAR, INC.) 25.12 15.25 24.50 102.5% CELS/OTC 3.2 20%
CONTEL CELLULAR INC. 23.75 13.00 22.00 108.0% CCXLA/OTC 23.2 80%
INTERCEL, INC. 10.25 7.75 10.25 100.0% ICEL/OTC 0.8 33%
LIN BROADCASTING CORPORATION 136.75 102.75 135.25 101.1% LINB/OTC 25.7 99%
UNITED STATES CELLULAR CORPORATION 32.00 23.38 39.25 81.5% USM/AMEX 24.3 38%
VANGUARD CELLULAR SYSTEMS, INC. 27.25 26.50 39.75 68.6% VCELA/OTC 6.5 90%
Averages: 13.9 60%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
AVERAGE MONTHLY AVERAGE
MONTHLY CELLULAR MONTHLY
CELLULAR OPERATING CELLULAR
SERVICE CASH FLOW OPERATING
MARKETS REVENUE/ (b)/ CASH FLOW
UNITED STATES CELLULAR COMPARABLES SERVED SUBSCRIBERS PENETRATION SUBSCRIBER SUBSCRIBER MARGIN
- ---------------------------------- ------- ----------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) 61 1,221,000 3.49% $74 $34 46%
CELLULAR COMMUNICATIONS, INC. 21 289,500 3.68% 66 NA NA
CELLULAR COMM. OF PUERTO RICO 12 47,800 1.59% 86 9 10%
CENTENNIAL CELLULAR COPR. 15 57,830 1.38% 78 39 51%
COMMNET CELLULAR (CELLULAR, INC.) 80 88,686 2.81% 44 2* 5%
CONTEL CELLULAR INC. 108 621,600 2.68% 64 25 39%
INTERCEL, INC. 7 23,783 3.03% 57 14 24%
LIN BROADCASTING CORPORATION 6 918,000 3.57% 86 39 46%
UNITED STATES CELLULAR CORPORATION 208 331,000 1.36% 71 21 30%
VANGUARD CELLULAR SYSTEMS, INC. 36 169,000 2.61% 63 15 23%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
UNITED STATES SUMMARY INFORMATION:
<S> <C> <C> <C> <C> <C>
MAXIMUM: 1,221,000 3.68% $86 39 51%
MEAN: 376,820 2.62% $69 24 34%
MEDIAN: 289,500 2.77% 71 26 40%
MINIMUM: 23,783 1.36% 44 9 10%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RBOC & GTE CELLULAR COMPARABLES (d)
- -----------------------------------
<S> <C> <C>
AMERITECH 4.31% $64
BELL ATLANTIC 3.30% 74
BELLSOUTH 4.29% 66
NYNEX 3.19% 73
SOUTHWESTERN BELL 5.78% 63
US WEST 3.59% 72
GTE 3.45% 70
</TABLE>
- --------------------------------
* Excluded from summary statistics
(b) Cellular Operating Cash Flow = Estimated Cellular Service Revenue - Cost of
Cellular Service + Depreciation.
(c) % MSA POPs represent domestic only.
(d) Source: Merrill Lynch Research; DLJ Wireless Communications, Summer 1994.
<PAGE> 62
MERRILL LYNCH & CO.
ANALYSIS OF SELECTED PUBLICLY TRADED CELLULAR TELEPHONE COMPANIES
SUMMARY INFORMATION
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FULLY FULLY
DILUTED DILUTED MARKET MARKET TOTAL TOTAL
MARKET TOTAL CAP. OF CAP. OF MARKET MARKET
VALUE OF MARKET CELLULAR CELLULAR CAP./ CAP./
EQUITY CAP. ASSETS FRANCHISE LTM NET LTM
UNITED STATES CELLULAR COMPARABLES (MM) (a) (MM) (b) (MM) (c) (MM) (d) REVENUE EBITDA
- ---------------------------------- -------- -------- -------- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) $14,314 $13,231 $7,949 (g) $6,989 (g) 12.1x 31.1x
CELLULAR COMMUNICATIONS, INC. 2,200 2,383 2,326 (i) 2,313 (i) NA NA
CELLULAR COMM. OF PUERTO RICO 492 532 532 485 10.8 106.4*
CENTENNIAL CELLULAR CORP. 209 550 551 517 12.7 20.2
COMMNET CELLULAR (CELLULAR, INC.) 299 493 489 419 9.2 NM
CONTEL CELLULAR INC. 2,380 4,416 4,402 3,858 9.6 23.7
INTERCEL, INC. 104 116 114 101 6.8 30.0
LIN BROADCASTING CORPORATION 7,177 8,989 8,127 (f) 7,695 (f) 11.6 20.9
UNITED STATES CELLULAR
CORPORATION 2,582 2,862 2,847 2,562 9.5 34.2
VANGUARD CELLULAR SYSTEMS, INC. 1,092 1,378 1,348 (j) 1,266 (j) 9.2 45.9
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------
UNITED STATES SUMMARY INFORMATION:
<S> <C> <C>
MAXIMUM: 12.7x 45.9x
MEAN: 10.2 29.4
MEDIAN: 9.6 30.0
MINIMUM: 6.8 20.2
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET MARKET MARKET
CAP. OF CAP. OF CAP. OF
CELLULAR MSA CELLULAR CELLULAR
ASSETS/ ASSETS/NET FRANCHISE/
UNITED STATES CELLULAR COMPARABLES NET POPS MSA POPS (e) NET POPS
- ---------------------------------- --------- ------------ ----------
<S> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) $227 $231 $200
CELLULAR COMMUNICATIONS, INC. 296 303 294
CELLULAR COMM. OF PUERTO RICO 177 186 161
CENTENNIAL CELLULAR CORP. 131 139 123
COMMNET CELLULAR (CELLULAR, INC.) 155 412 133
CONTEL CELLULAR INC. 189 215 166
INTERCEL, INC. 145 256 129
LIN BROADCASTING CORPORATION 316 320 300
UNITED STATES CELLULAR
CORPORATION 117 161 105
VANGUARD CELLULAR SYSTEMS, INC. 208 222 196
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNITED STATES SUMMARY INFORMATION:
<S> <C> <C> <C>
MAXIMUM: $316 $412 300
MEAN: 196 244 181
MEDIAN: 199 227 181
MINIMUM: 117 139 105
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED
PRIVATE PUBLIC MKT. LTM OCF TOT. MKT.
TOTAL MSA POPS MARKET (PREMIUM) MULTIPLE/ CAP./1995
DEBT/ AS A % OF VALUE/ DISCOUNT TO 1993 GROWTH ESTIMATED
UNITED STATES CELLULAR COMPARABLES NET POPS NET POPS POP (h) PMV RATE EBITDA
- ---------------------------------- -------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
AIRTOUCH COMMUNICATIONS (PACTEL) $2 98% $165 -38% 1.65 26.2x
CELLULAR COMMUNICATIONS, INC. NA 97% 269 -10% NA NA
CELLULAR COMM. OF PUERTO RICO 19 91% 112 -58% 1.87 67.8
CENTENNIAL CELLULAR CORP. 60 84% 173 24% 0.84 16.2
COMMNET CELLULAR (CELLULAR, INC.) 72 20% 130 -19% NM 156.3*
CONTEL CELLULAR INC. 87 80% 177 -7% 0.82 18.4
INTERCEL, INC. 14 33% 185 22% NA NA
LIN BROADCASTING CORPORATION 72 99% 273 -16% 1.55 18.4
UNITED STATES CELLULAR
CORPORATION 11 38% 157 25% 0.78 23.8
VANGUARD CELLULAR SYSTEMS, INC. 44 90% 191 -9% 1.36 34.3
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
UNITED STATES SUMMARY INFORMATION:
<S> <C> <C> <C> <C> <C> <C>
MAXIMUM: $87 99% $273 25% 1.87 67.8x
MEAN: $42 72% $183 -9% 1.27 29.3
MEDIAN: $44 89% $169 -13% 1.36 23.8
MINIMUM: $2 20% $112 -58% 0.78 16.2
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* Excluded from summary statistics
(a) Fully Diluted Market Value assumes the proceeds from exercisable in-the-
money stock options and warrants are used to repurchase shares.
(b) Market Capitalization = Fully Diluted Market Value + Total Debt + Preferred
Stock + Minority Interest - Cash & Equivalents.
(c) Market Capitalization of Cellular Assets = Total Market Capitalization -
Minority Interest - Estimated Public Market Value of Non-Cellular Assets.
(d) Market Capitalization of Cellular Franchise = Market Capitalization of
Cellular Assets - Net Working Capital - Net PP&E.
(e) Market Capitalization of MSA Cellular Franchise = Market Capitalization of
Cellular Assets - RSA Cellular Assets at 90$ per POP.
(f) Assumes non-cellular assets, consisting of seven network affiliated
television stations and a specialty publishing operation, trade at 9.0x
trailing cash flow of $87.0 million.
(g) Excludes international cellular assets consisting of 54.7 million POPs at
$80.00 per POP, non-cellular assets consisting of 1,167,000 paging units at
$550 per unit and AirTouch's investment in Qualcomm at market.
(h) Source: Merrill Lynch Research, except Intercel (Kagan).
(i) Excludes Note receivable from Cellular Communications of Puerto Rico at
$55.3 million.
(j) Excludes 2.5 million Geotek shares at market.
<PAGE> 63
<TABLE>
<CAPTION>
MERRILL LYNCH & CO.
COMPARISON OF SELECTED PUBLICLY -- TRADED CELLULAR TELEPHONE COMPANIES
- -----------------------------------------------------------------------------------------------
SUMMARY DATA RANKINGS
MARKET VALUE OF EQUITY ($MM) TOTAL MARKET CAPITALIZATION ($MM)
- ----------------------------------------------- ----------------------------------------------
<S> <C> <C> <C>
1 AIRTOUCH CORPORATION (PACTEL) $14,314 1 AIRTOUCH CORPORATION (PACTEL) 13,231
2 LIN BROADCASTING CORPORATION 7,177 2 LIN BROADCASTING CORPORATION 8,989
3 UNITED STATES CELLULAR CORPORATION 2,582 3 CONTEL CELLULAR INC. 4,416
4 CONTEL CELLULAR INC. 2,380 4 UNITED STATES CELLULAR CORPORATION 2,862
5 CELLULAR COMMUNICATIONS, INC. 2,200 5 CELLULAR COMMUNICATIONS, INC. 2,383
6 VANGUARD CELLULAR SYSTEMS, INC. 1,092 6 VANGUARD CELLULAR SYSTEMS, INC. 1,378
7 CELLULAR COMM. OF PUERTO RICO 492 7 CENTENNIAL CELLULAR CORP. 550
8 COMMNET CELLULAR (CELLULAR, INC.) 299 8 CELLULAR COMM. OF PUERTO RICO 532
9 CENTENNIAL CELLULAR CORP. 209 9 COMMNET CELLULAR (CELLULAR, INC.) 493
10 INTERCEL 104 10 INTERCEL 116
AVERAGE: $ 3,085 AVERAGE: $ 3,495
</TABLE>
<TABLE>
<CAPTION>
MARKET CAPITALIZATION OF CELLULAR FRANCHISE ($MM)
- -------------------------------------------------
<S> <C>
1 LIN BROADCASTING CORPORATION 7,695
2 AIRTOUCH CORPORATION (PACTEL) 6,989
3 CONTEL CELLULAR INC. 3,858
4 UNITED STATES CELLULAR CORPORATION 2,562
5 CELLULAR COMMUNICATIONS, INC. 2,313
6 VANGUARD CELLULAR SYSTEMS, INC. 1,266
7 CENTENNIAL CELLULAR CORP. 517
8 CELLULAR COMM. OF PUERTO RICO 485
9 COMMNET CELLULAR (CELLULAR, INC.) 419
10 INTERCEL 101
AVERAGE: $2,620
</TABLE>
<TABLE>
<CAPTION>
MARKET CAPITALIZATION / NET POPS MARKET CAPITALIZATION OF CELLULAR ASSETS / NET POPS
- ------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
1 AIRTOUCH CORPORATION (PACTEL) $378 1 LIN BROADCASTING CORPORATION $316
2 LIN BROADCASTING CORPORATION 350 2 CELLULAR COMMUNICATIONS, INC. 296
3 CELLULAR COMMUNICATIONS, INC. 303 3 AIRTOUCH CORPORATION (PACTEL) 227
4 VANGUARD CELLULAR SYSTEMS, INC. 213 4 VANGUARD CELLULAR SYSTEMS, INC. 208
5 CONTEL CELLULAR INC. 190 5 CONTEL CELLULAR INC. 189
6 CELLULAR COMM. OF PUERTO RICO 177 6 CELLULAR COMM. OF PUERTO RICO 177
7 COMMNET CELLULAR (CELLULAR, INC.) 156 7 COMMNET CELLULAR (CELLULAR, INC.) 155
8 INTERCEL 148 8 INTERCEL 145
9 CENTENNIAL CELLULAR CORP. 131 9 CENTENNIAL CELLULAR CORP. 131
10 UNITED STATES CELLULAR CORPORATION 118 10 UNITED STATES CELLULAR CORPORATION 117
AVERAGE: $216 AVERAGE: $196
</TABLE>
<TABLE>
<CAPTION>
MARKET CAPITALIZATION OF CELLULAR FRANCHISE / NET POPS
- -------------------------------------------------------
<S> <C>
1 LIN BROADCASTING CORPORATION $300
2 CELLULAR COMMUNICATIONS, INC. 294
3 AIRTOUCH CORPORATION (PACTEL) 200
4 VANGUARD CELLULAR SYSTEMS, INC. 196
5 CONTEL CELLULAR INC. 166
6 CELLULAR COMM. OF PUERTO RICO 161
7 COMMNET CELLULAR (CELLULAR, INC.) 133
8 INTERCEL 129
9 CENTENNIAL CELLULAR CORP. 123
10 UNITED STATES CELLULAR CORPORATION 105
AVERAGE: $181
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
MSA POPS AS A % OF NET POPS PENETRATION
- ------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
1 LIN BROADCASTING CORPORATION 99% 1 CELLULAR COMMUNICATIONS, INC. 3.68%
2 AIRTOUCH CORPORATION (PACTEL) 98% 2 LIN BROADCASTING CORPORATION 3.57%
3 CELLULAR COMMUNICATIONS, INC. 97% 3 AIRTOUCH CORPORATION (PACTEL) 3.49%
4 CELLULAR COMM. OF PUERTO RICO 91% 4 INTERCEL 3.03%
5 VANGUARD CELLULAR SYSTEMS, INC. 90% 5 COMMNET CELLULAR (CELLULAR, INC.) 2.81%
6 CENTENNIAL CELLULAR CORP. 84% 6 CONTEL CELLULAR INC. 2.68%
7 CONTEL CELLULAR INC. 80% 7 VANGUARD CELLULAR SYSTEMS, INC. 2.61%
8 UNITED STATES CELLULAR CORPORATION 38% 8 CELLULAR COMM. OF PUERTO RICO 1.59%
9 INTERCEL 33% 9 CENTENNIAL CELLULAR CORP. 1.38%
10 COMMNET CELLULAR (CELLULAR, INC.) 20% 10 UNITED STATES CELLULAR CORPORATION 1.36%
AVERAGE: 73% AVERAGE: 2.62%
</TABLE>
<TABLE>
<CAPTION>
LTM EBITDA MARGIN
- --------------------------------------------
<S> <C>
1 LIN BROADCASTING CORPORATION 40%
2 CENTENNIAL CELLULAR CORP. 39%
3 AIRTOUCH CORPORATION (PACTEL) 28%
4 INTERCEL 24%
5 CONTEL CELLULAR INC. 23%
6 VANGUARD CELLULAR SYSTEMS, INC. 20%
7 UNITED STATES CELLULAR CORPORATION 18%
8 CELLULAR COMM. OF PUERTO RICO 10%
9 COMMNET CELLULAR (CELLULAR, INC.) 5% *
AVERAGE: 25%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY CELLULAR SERVICE REVENUE / SUBSCRIBER AVERAGE MONTHLY CELLULAR OPERATING CASH FLOW / SUBSCRIBER
- ------------------------------------------------------ ---------------------------------------------------------
<S> <C> <C> <C>
1 CELLULAR COMM. OF PUERTO RICO $86 1 CENTENNIAL CELLULAR CORP. $39
2 LIN BROADCASTING CORPORATION 86 2 LIN BROADCASTING CORPORATION 39
3 CENTENNIAL CELLULAR CORP. 78 3 AIRTOUCH CORPORATION (PACTEL) 34
4 AIRTOUCH CORPORATION (PACTEL) 74 4 CONTEL CELLULAR INC. 25
5 UNITED STATES CELLULAR CORPORATION 71 5 UNITED STATES CELLULAR CORPORATION 21
6 CONTEL CELLULAR INC. 64 6 VANGUARD CELLULAR SYSTEMS, INC. 15
7 VANGUARD CELLULAR SYSTEMS, INC. 63 7 INTERCEL 14
8 INTERCEL 57 8 CELLULAR COMM. OF PUERTO RICO 9
9 COMMNET CELLULAR (CELLULAR, INC.) 44 9 COMMNET CELLULAR (CELLULAR, INC.) 2 *
AVERAGE: $69 AVERAGE: $24
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY CELLULAR OPERATING CASH FLOW MARGIN
- ---------------------------------------------------
<S> <C>
1 CENTENNIAL CELLULAR CORP. 51%
2 AIRTOUCH CORPORATION (PACTEL) 46%
3 LIN BROADCASTING CORPORATION 46%
4 CONTEL CELLULAR INC. 39%
5 UNITED STATES CELLULAR CORPORATION 30%
6 INTERCEL 24%
7 VANGUARD CELLULAR SYSTEMS INC. 23%
8 CELLULAR COMM. OF PUERTO RICO 10%
9 COMMNET CELLULAR (CELLULAR, INC.) 5%
AVERAGE: 34% *
</TABLE>
<PAGE> 65
Merrill Lynch & Co.
<TABLE>
<CAPTION>
CELLULAR ACQUISITION COMPARABLES
Comparison of Selected Cellular Telephone Company Acquisitions
- ------------------------------------------------------------------------------------------------------------------------------------
(in millions, except per POP data)
Aggregate Price Paid
--------------------------
Acquiror Transaction Adj. Trans. Adjusted
Date Target Target Business Description Value(a) Value(b) POPs
- ---- --------------------------------- ------------------------------------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
10/11/94* Compagnie Generale des Eaux An indirect 10% stake in SBC's
SBC Communications Washington / Baltimore operating region. $215.0 $215.0 0.73
4/5/94* Independent Cellular Network Interests in Pennsylvania and Iowa. $182.5 $182.5 1.40
C-TEC Corporation
2/25/94* Southwestern Bell Interests in Buffalo, Rochester, Albany
Associated Communications Corp. and Glens Falls, New York. 680.0 648.5 3.60
11/26/93 Southwestern Bell A 10% stake in the Dallas SMSA Limited
GTE Mobilnet Inc. Partnership for $120 mm. 1,200.0(l) 1,200.0(l) 4.20
11/11/93* Southwestern Bell Interests in Syracuse, Utica, Ithaca,
Syracuse Telephone Cortland and Auburn, New York. 150 - 250(p) 150 - 250 1.30
Utica Telephone
Finger Lakes Telephone
8/19/93* Century Telephone Enterprises Non-wireline operator in Texas and
Celutel Inc. Mississippi. 143.3 127.1 1.11
8/16/93* AT&T
(Pending) McCaw Cellular Communications McCaw is the largest non-wireline
operator in the United States. 19,248.2(o) 15,454.8 60.44
8/12/93* InterCel, Inc. Wireline interests in the Bangor,
Unity Cellular Systems, Inc. Maine MSA and Maine RSA 2
& Maine RSA 3 (Augusta) 35.2 28.1 0.45
12/31/92* ALLTEL Corporation Interests in MSAs serving Fort Smith
Contel Cellular and Fayetteville, Arkansas and
Arkansas RSA 1 and 8 and Oklahoma RSA 4. 71.3 71.3 0.53
8/03/92 Associated Communications Interests in Albany, Glen Falls, and
McCaw Cellular Communications Rochester, New York. 85.6 85.6 0.68
6/08/92* ALLTEL Corporation Interests in Houston/ Galveston/ Beaumont,
STL Communications, Inc.(m) Texas MSA; Little Rock, Arkansas MSA and
several RSA interests in Arkansas and
Texas. 34.3 - 58.0 34.3 - 58.0 0.33
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
Price Paid Per POP
--------------------------
Transaction Adjusted
Acquiror Value per Trans. Value
Date Target Target Business Description POP(a) per POP(b) % MSA
- ---- --------------------------------- ----------------------------------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
10/11/94* Compagnie Generale des Eaux An indirect 10% stake in SBC's
SBC Communications Washington / Baltimore operating region. $295 $295 88.5%
4/5/94* Independent Cellular Network Interests in Pennsylvania and Iowa. $130 $130 65.0%
C-TEC Corporation
2/25/94* Southwestern Bell Interests in Buffalo, Rochester, Albany
Associated Communications Corp. and Glens Falls, New York. 189 180 60.0%
11/26/93 Southwestern Bell A 10% stake in the Dallas SMSA Limited
GTE Mobilnet Inc. Partnership for $120 mm. 286 286 93.1%
11/11/93* Southwestern Bell Interests in Syracuse, Utica, Ithaca,
Syracuse Telephone Cortland and Auburn, New York. 115 - 192** 115 - 192** NA
Utica Telephone
Finger Lakes Telephone
8/19/93* Century Telephone Enterprises Non-wireline operator in Texas and
Celutel Inc. Mississippi. 129 115 100.0%
8/16/93* AT&T
(Pending) McCaw Cellular Communications McCaw is the largest non-wireline
operator in the United States. 318 256 94.9%
8/12/93* InterCel, Inc. Wireline interests in the Bangor,
Unity Cellular Systems, Inc. Maine MSA and Maine RSA 2
& Maine RSA 3 (Augusta) 79 63 33.2%
12/31/92* ALLTEL Corporation Interests in MSAs serving Fort Smith
Contel Cellular and Fayetteville, Arkansas and
Arkansas RSA 1 and 8 and Oklahoma RSA 4. 134 134 58.0%
8/03/92 Associated Communications Interests in Albany, Glen Falls, and
McCaw Cellular Communications Rochester, New York. 126 126 100.0%
6/08/92* ALLTEL Corporation Interests in Houston/ Galveston/ Beaumont,
STL Communications, Inc.(m) Texas MSA; Little Rock, Arkansas MSA and
several RSA interests in Arkansas and
Texas. 104.0 - 177.0** 104.0 - 177.0** NA
</TABLE>
<PAGE> 67
Merrill Lynch & Co.
<TABLE>
<CAPTION>
CELLULAR ACQUISITION COMPARABILES
COMPARISON OF SELECTED CELLULAR TELEPHONE COMPANY ACQUISITIONS
-----------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER POP DATA)
AGGREGATE PRICE PAID
---------------------------------
ACQUIROR TRANSACTION ADJ. TRANS.
DATE TARGET TARGET BUSINESS DESCRIPTION VALUE (a) VALUE (b)
- ---- ---------------------------- -------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C>
5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 1267.2-2187.8 1267.2-2187.8
Centel Corporation (n) RSA markets and minority interests
in 34 MSA and 22 RSA markets located
predominantly in the Midwest and South.
9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 2,317.1 2,102.4
Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona,
New Mexico and Texas.
7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 107.0 107.0
Crowley Cellular Telecomm. and Waco, Texas.
5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 512.0 512.0
CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States
CyberTel RSA Cellular LP/ and British Virgin Islands.
5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 1,129.6 1,065.9
Metromedia Co. (e) including the Philadelphia metropolitan area,
New Brunswick and Long Branch, NJ.
4/11/91* BellSouth Interests in 18 midwest cellular telephone 454.8 454.8
McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and
Communications (f) 1 in Illinois.
11/12/90 US WEST (g) Interests in the Northwest and Southwest 2,388.1 2,071.1
US WEST NewVector (California, Colorado, Arizona, Washington,
Utah, Idaho, Montana, and Oregon).
7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 1,822.8 1,750.7
Cellular Communications except Toledo, and 5 markets in Puerto Rico,
including San Juan-Caguas, Mayaguez, and
Arecibo.
4/20/90* GTE Corporation Interests in 12 Southeastern markets, 710.0 661.4 (i)
Providence Journal including Greensboro-Winston-Salem and
Raleigh-Durham, North Carolina, Charleston,
South Carolina; Savannah, Georgia and
Lynchburg, Virginia.
1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 1,093.5 (r) 1,093.5
Cellular Communications partnership for $60.8 mm.
11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 6,676.0 6,639.7
Lin Broadcasting Corp. New York, Los Angeles, Philadelphia,
Dallas and Houston. Also involved in
broadcasting.
</TABLE>
<TABLE>
<CAPTION>
ACQUIROR ADJUSTED
DATE TARGET TARGET BUSINESS DESCRIPTION POPs
- ---- --------------------- -------------------------------------------- --------
<S> <C> <C> <C>
5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 16.69
Centel Corporation (n) RSA markets and minority interests
in 34 MSA and 22 RSA markets located
predominantly in the Midwest and South.
9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 11.52
Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona,
New Mexico and Texas.
7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 0.61
Crowley Cellular Telecomm. and Waco, Texas.
5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 2.80
CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States
CyberTel RSA Cellular LP/ and British Virgin Islands.
5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 5.19
Metromedia Co. (e) including the Philadelphia metropolitan area
New Brunswick and Long Branch, NJ.
4/11/91* BellSouth Interests in 18 midwest cellular telephone 2.53
McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and
Communications (f) 1 in Illinois.
11/12/90 US WEST (g) Interests in the Northwest and Southwest 16.90
US WEST NewVector (California, Colorado, Arizona, Washington,
Utah, Idaho, Montana, and Oregon).
7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 9.71
Cellular Communications except Toledo, and 5 markets in Puerto Rico,
including San Juan-Caguas, Mayaguez, and
Arecibo.
4/20/90* GTE Corporation Interests in 12 Southeastern markets, 3.50
Providence Journal including Greensboro-Winston-Salem and
Raleigh-Durham, North Carolina, Charleston,
South Carolina; Savannah, Georgia and
Lynchburg, Virginia.
1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 3.88
Cellular Communications partnership for $60.8 mm.
11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 18.90
Lin Broadcasting Corp. New York, Los Angeles, Philadelphia,
Dallas and Houston. Also involved in
broadcasting.
</TABLE>
<TABLE>
<CAPTION>
PRICE PAID PER POP
-------------------------------
TRANSACTION ADJUSTED
ACQUIROR VALUE PER TRANS. VALUE
DATE TARGET TARGET BUSINESS DESCRIPTION POP (a) PER POP (b)
- ---- -------- ----------------------------------------------- ------------ --------------
<S> <C> <C> <C> <C>
5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 76.0-131.0** 76.0-131.0**
Centel Corporation(n) RSA markets and minority interests
in 34 MSA and 22 RSA markets located
predominantly in the Midwest and South.
9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, 201 183
Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona,
New Mexico and Texas.
7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 175 175
Crowley Cellular Telecomm. and Waco, Texas.
5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, 183 183
CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States
CyberTel RSA Cellular LP/ and British Virgin Islands.
5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, 218 205
Metromedia Co. (e) including the Philadelphia metropolitan area,
New Brunswick and Long Branch, NJ.
4/11/91* BellSouth Interests in 18 midwest cellular telephone 180 180
McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and
Communications (f) 1 in Illinois.
11/12/90 US WEST (g) Interests in the Northwest and Southwest 141 123
US WEST NewVector (California, Colorado, Arizona, Washington,
Utah, Idaho, Montana, and Oregon).
7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 188 180
Cellular Communications except Toledo, and 5 markets in Puerto Rico,
including San Juan-Caguas, Mayaguez, and
Arecibo.
4/20/90* GTE Corporation Interests in 12 Southeastern markets, 203 189 (i)
Providence Journal including Greensboro-Winston-Salem and
Raleigh-Durham, North Carolina, Charleston,
South Carolina; Savannah, Georgia and
Lynchburg, Virginia.
1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 282 282
Cellular Communications partnership for $60.8 mm.
11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 353 351
Lin Broadcasting Corp. New York, Los Angeles, Philadelphia,
Dallas and Houston. Also involved in
broadcasting.
</TABLE>
<TABLE>
<CAPTION>
ACQUIROR
DATE TARGET TARGET BUSINESS DESCRIPTION % MSA
- ---- -------- ----------------------------------------------- -----
<S> <C> <C> <C>
5/27/92* Sprint Corporation Majority Interests in 42 MSA and 21 87.4%
Centel Corporation (n) RSA markets and minority interests
in 34 MSA and 22 RSA markets located
predominantly in the Midwest and South.
9/24/91* Bell Atlantic Corporation Interests in Connecticut, Rhode Island, NA
Metro Mobile CTS, Inc. (d) Massachusetts, North Carolina, Arizona,
New Mexico and Texas.
7/18/91* McCaw Cellular Communications Interests in Daytona Beach, Florida 90.3%
Crowley Cellular Telecomm. and Waco, Texas.
5/28/91* Ameritech Interests in St. Louis, Illinois, Missouri, NA
CyberTel Financial Corp./ Minneapolis, Hawaii and in the United States
CyberTel RSA Cellular LP/ and British Virgin Islands.
5/07/91* Comcast Corp. Interests in New Jersey and Pennsylvania, NA
Metromedia Co. (e) including the Philadelphia metropolitan area,
New Brunswick and Long Branch, NJ.
4/11/91* BellSouth Interests in 18 midwest cellular telephone 96.7%
McCaw Cellular markets: 7 in Indiana, 10 in Wisconsin and
Communications (f) 1 in Illinois.
11/12/90 US WEST (g) Interests in the Northwest and Southwest NA
US WEST NewVector (California, Colorado, Arizona, Washington,
Utah, Idaho, Montana, and Oregon).
7/25/90 Pacific Telesis (h) Interests in MI and all major Ohio markets, 94.9%
Cellular Communications except Toledo, and 5 markets in Puerto Rico,
including San Juan-Caguas, Mayaguez, and
Arecibo.
4/20/90* GTE Corporation Interests in 12 Southeastern markets, NA
Providence Journal including Greensboro-Winston-Salem and
Raleigh-Durham, North Carolina, Charleston,
South Carolina; Savannah, Georgia and
Lynchburg, Virginia.
1/11/90 McCaw Cellular Communications A 5.56% stake in the Dallas non-wireline 100.0%
Cellular Communications partnership for $60.8 mm.
11/20/89* McCaw Cellular Communications Interests in top MSA markets, including 100.0%
Lin Broadcasting Corp. New York, Los Angeles, Philadelphia,
Dallas and Houston. Also involved in
broadcasting.
</TABLE>
<PAGE> 68
Merrill Lynch & Co.
<TABLE>
<CAPTION>
CELLULAR ACQUISITION COMPARABLES
Comparison of Selected Cellular Telephone Company Acquisitions
-----------------------------------------------------------------------------------------------------------------------------------
(in millions, except per POP data)
AGGREGATE PRICE PAID
------------------------------
ACQUIROR TRANSACTION ADJ. TRANS.
DATE TARGET TARGET BUSINESS DESCRIPTION VALUE(a) VALUE(b)
- ---- --------------------------------- --------------------------------- ------------- ------------
<S> <C> <C> <C> <C>
10/27/89* LIN Broadcasting Corp.(k) 46.3% interest in New York City 1,941.0 1,941.0
Metromedia Co. cellular market.
10/3/89* Contel Cellular Interest in 13 markets, including 1,299.3 1,233.7
McCaw Cellular Communications Birmingham, Alabama, Louisville,
(Southeastern POPs) Kentucky, Memphis and Nashville,
Tennessee.
1/9/89 British Telecom plc(l) British Telecom acquired a 22% 7,100.2 6,694.0
McCaw Cellular Communications stake in the largest cellular
telephone company in the United
States.
</TABLE>
<TABLE>
<CAPTION>
ACQUIROR ADJUSTED
DATE TARGET TARGET BUSINESS DESCRIPTION POPs
- ---- --------------------------------- --------------------------------- --------
<S> <C> <C> <C>
10/27/89* LIN Broadcasting Corp. (k) 46.3% interest in New York City 7.22
Metromedia Co. cellular market.
10/3/89* Contel Cellular Interest in 13 markets, including 6.10
McCaw Cellular Communications Birmingham, Alabama, Louisville,
(Southeastern POPs) Kentucky, Memphis and Nashville,
Tennessee.
1/9/89 British Telecom plc (l) British Telecom acquired a 22% 50.30
McCaw Cellular Communications stake in the largest cellular
telephone company in the United
States.
</TABLE>
<TABLE>
<CAPTION>
PRICE PAID PER POP
--------------------------
TRANSACTION ADJUSTED
ACQUIROR VALUE PER TRANS. VALUE
DATE TARGET TARGET BUSINESS DESCRIPTION POP(a) PER POP(b) % MSA
- ---- --------------------------------- --------------------------------- ----------- ------------ ----
<S> <C> <C> <C> <C> <C>
10/27/89* LIN Broadcasting Corp. (k) 46.3% interest in New York City 269 269 NA
Metromedia Co. cellular market.
10/3/89* Contel Cellular Interest in 13 markets, including 213 202 NA
McCaw Cellular Communications Birmingham, Alabama, Louisville,
(Southeastern POPs) Kentucky, Memphis and Nashville,
Tennessee.
1/9/89 British Telecom plc (l) British Telecom acquired a 22% 141 133 96.7%
McCaw Cellular Communications stake in the largest cellular
telephone company in the United
States.
</TABLE>
<TABLE>
All Transactions:
<S> <C> <C>
Maximum $353 $351
Mean 193 185
Minimum 79 63
- ----------------------------------------------
Change of Control
Transactions*:
Maximum $353 $351
Mean 187 178
Minimum 79 63
- ----------------------------------------------
Non-Change of Control
Transactions:
Maximum $295 $295
Mean 208 203
Minimum 126 123
- ----------------------------------------------
</TABLE>
<PAGE> 69
Merrill Lynch & Co.
CELLULAR ACQUISITION COMPARABLES
Comparison of Selected Cellular Telephone Company Acquisitions
- --------------------------------------------------------------------------------
(in millions, except per POP data)
- ------------------------------------
* Change of control transaction.
** Midpoint of range used in summary multiples.
*** Excluded from summary multiples.
(a) Transaction value is defined as market value of equity on a
fully-diluted basis plus preferred stock plus debt less cash less
estimated value of non-cellular operations.
(b) Adjusted transaction value represents transaction value less property,
plant and equipment and net working capital. Adjusted transaction value
is meant to represent the value of the license itself, as opposed to the
value of the ongoing business.
(c) Adjusted population or POPs equals the total population of a market
multiplied by the percentage interest held by the target; no distinction
is made between RSA and MSA POPs.
(d) Assumes $215 million value for distribution properties.
(e) Assumes $64 million value for media properties.
(f) Value based on $360 million purchase price plus $50 million of debt
forgiven by BellSouth plus 35% interest in Rochester mobile phone system
(280,000 POPs @ $160 per POP).
(g) US WEST acquired the remaining 19% interest in US WEST New Vector for US
WEST stock. The transaction value and adjusted transaction are
calculated on a price per share of $36.25 for US WEST and assumes 100%
was acquired at this price.
(h) Assumes market value of assets and licenses contributed by PacTel and
Cellular Communications to joint venture are equal and that PacTel paid
$87 million for 5% of Cellular Communications after the spinoff of
certain operations.
(i) Based on GTE press release in 8-K filing dated 4/20/90, excluding PP&E
but not net working capital.
(j) Post-offer, McCaw owns approximately 52% of LIN shares outstanding;
transaction values are calculated as if 100% acquired and assume LIN's
media properties valued at $1.26 billion.
(k) Offer represented exercise of LIN's right of first refusal in response
to McCaw's bid for NYC market on 10/3/89 and acquisition of 2.1%
minority interests. Assumes market value of $850 million preferred
stock issued is equal to fair market value and that no debt was assumed.
Balance sheet information not disclosed.
(l) Transaction and adjusted transaction values are calculated as if 100% of
the equity was acquired.
(m) Assumes a $2,500-$3,000 per access line valuation for telephone company
segment, a $2,000 per subscriber valuation for cable television segment,
and a $550 per pager valuation for paging segment; also includes $20
million valuation for STL's interest in NYNEX / DPI, a joint venture.
(n) Assumes a $1,200-$1,800 per access line valuation for telephone company
segment. Adjusted to exclude 63,000 access lines sold to Century
Telephone in April, 1992, and Century's assumption of $15 million in
preferred stock. $120 million in cash is used in the calculation to
reflect this transaction.
(o) Assumes a merger price of $60.125 at announcement.
(p) Industry analyst estimates. Midpoint of $153 per POP used in change of
control analysis.
<PAGE> 70
SUMMARY OF SELECTED MINORITY CLOSEOUTS FROM 1/14/88 - 10/14/94
STOCK OR CASH TRANSACTIONS
<TABLE>
<CAPTION>
PREMIUMS PAID OVER PRICE PER SHARE
% Change of -----------------------------------------------------------
Initial to 6 Months 1 Month 1 Day 1 Day LTM LTM
Final Offer Prior Prior Prior After High Low
----------- -------- ------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
All Deals
- ---------
Mean 11.7% 40.0% 43.4% 31.7% 10.9% 1.8% 85.9%
Median 4.6 33.3 33.3 21.3 7.4 2.2 60.7
High 240.8 480.0 533.3 322.2 137.5 123.5 660.0
Low (10.7) (66.2) (8.4) (19.3) (15.6) (47.9) (20.5)
Deals Under $250 Million
- ------------------------
Mean 7.6% 41.1% 45.7% 33.0% 9.6% 0.5% 86.4%
Median 4.5 33.7 34.7 23.2 7.7 0.0 66.9
High 50.0 480.0 533.3 322.2 137.5 123.5 660.0
Low (9.3) (66.2) (8.4) (19.3) (15.6) (47.9) (20.5)
Deals Over $250 Million
- -----------------------
Mean 24.0% 36.3% 35.5% 25.4% 15.4% 6.5% 84.1%
Median 8.5 33.3 32.5 18.9 7.4 5.3 57.0
High 240.8 130.8 87.5 66.7 57.9 62.2 350.0
Low (10.7) (43.9) (2.5) 1.8 (3.2) (46.3) 21.3
</TABLE>
<PAGE> 71
SUMMARY OF SELECTED MINORITY CLOSEOUTS FROM 1/14/88 - 10/14/94
<TABLE>
<CAPTION>
STOCK AND OTHER NON-CASH TRANSACTIONS
-----------------------------------------------------------------------
PREMIUMS PAID OVER PRICE PER SHARE
----------------------------------------------------
% Change of
Initial to 6 Months 1 Month 1 Day 1 Day
All Deals Final Offer Prior Prior Prior After
- --------- ----------- -------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Mean 5.7% 34.7% 46.9% 30.9% 11.4%
Median 0.0 34.0 33.3 19.4 34.9
High 240.8 245.5 533.3 322.2 533.3
Low (10.7) (66.2) (2.5) (9.0) 7.9
Deals Under $250 Million
- ------------------------
Mean 6.2% 36.5% 51.0% 33.5% 9.9%
Median 4.2 34.7 33.3 20.1 6.2
High 26.7 245.5 533.3 322.2 137.5
Low (9.3) (66.2) 7.9 (9.0) (15.1)
Deals Over $250 Million
- -----------------------
Mean 5.4% 30.0% 36.8% 24.4% 15.4%
Median 0.0 28.3 32.9 18.8 7.4
High 240.8 106.0 87.5 66.7 57.9
Low (10.7) (43.9) (2.5) 1.8 (3.2)
</TABLE>
<TABLE>
<CAPTION>
CASH TRANSACTIONS
-------------------------------------------------------------------------
PREMIUMS PAID OVER PRICE PER SHARE
-----------------------------------------------------
% Change of
Initial to 6 Months 1 Month 1 Day 1 Day
All Deals Final Offer Prior Prior Prior After
- --------- ----------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Mean 10.4% 50.2% 36.8% 31.9% 9.8%
Median 4.9 30.4 34.7 24.6 9.5
High 50.0 480.0 120.0 120.0 42.9
Low 0.0 (29.7) (8.4) (19.3) (15.6)
Deals Under $250 Million
- ------------------------
Mean 11.7% 48.2% 37.7% 32.2% 9.1%
Median 5.3 29.8 36.0 26.8 9.8
High 50.0 480.0 120.0 120.0 38.8
Low 0.0 (29.7) (8.4) (19.3) (15.6)
Deals Over $250 Million
- -----------------------
Mean 5.7% 65.6% 29.5% 29.8% 15.8%
Median 4.5 36.4 23.3 22.4 2.3
High 12.5 130.8 61.4 62.2 42.9
Low 0.0 29.6 3.7 4.9 2.2
</TABLE>
<PAGE> 72
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION> % OWNED BY EQUITY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE ------------------
ANNOUCEMENT ACQUIROR/ ANNOUCEMENT ----------------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
----------- -------- ----------- -------- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
09/13/94 Investor Group 69.0% N/A $5.50 NA $10 $3
LDB Corp
09/08/94 GTE Corp. 90.0% N/A $22.50 NA $2,240 $224
Contel Cellular Inc.
08/24/94 Dole Food Co Inc. 83.0% N/A $14.00 NA $426 $72
Castle & Cooke Homes Inc.
07/28/94 WMX Technologies Inc. 78.6% $7.86 $8.85 12.6% $1,639 $397
Chemical Waste Management
06/30/94 Parkway Co. 51.3% $14.59 $17.25 18.2% $25 $12
EB Inc.
06/09/94 Investor Group 53.8% N/A $1.43 NA $2 $1
S & M Co.
04/26/94 Burlington Resources Inc. 87.1% N/A $4.48 NA $330 $43
Diamond Shamrock Offshore
03/15/94 MFS Communications Co. 7.0% N/A $11.00 NA $201 $187
Centex Telemanagement Inc.
03/14/94 Sea Containers Ltd. 41.9% N/A $2.68 NA $129 $75
Orient Express Hotels Inc.
01/07/94 Holderbank Financiere Glaris 95.0% $7.65 $7.65 0.0% $1,034 $52
Holnam Inc.
10/18/93 La Quinta Motor Inns Inc. 11.4% N/A $13.00 NA $52 $46
La Quinta Motor Inns LP
10/14/93 Valero Energy Corp. 49.0% N/A $12.10 NA $230 $117
Valero Natural Gas
Partners LP
10/13/93 Medco Containment 54.2% $25.00 $27.25 9.0% $267 $123
Services Inc.
Medical Marketing
Group Inc.
09/22/93 Primerica Corp. 27.0% N/A $36.99 NA $5,419 $3,956
Travelers Corp.
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
------------------------------------------------------
ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
----------- -------- -------- ------- ----- ----- ---- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/13/94 Investor Group 37.5% 22.2% 22.2% 15.8% (4.3%) 57.1% Cash
LDB Corp
09/08/94 GTE Corp. 38.5% 23.3% 26.8% (2.7%) (6.3%) 73.1% Cash
Contel Cellular Inc.
08/24/94 Dole Food Co Inc. 3.7% 33.3% 20.4% (1.8%) (11.1%) 47.4% Cash
Castle & Cooke Homes Inc.
07/28/94 WMX Technologies Inc. (17.7%) 1.1% 10.6% 7.3% (22.2%) 26.4% Common Stock
Chemical Waste Management
06/30/94 Parkway Co. 56.8% 50.0% 43.8% 1.5% 0.0% 56.8% Common Stock
EB Inc. & Cash
06/09/94 Investor Group 90.7% 52.5% 20.4% 20.4% (4.7%) 90.7% Cash
S & M Co.
04/26/94 Burlington Resources Inc. (29.7%) 8.6% (3.1%) (0.4%) (33.6%) 12.0% Cash
Diamond Shamrock Offshore Tender Offer
03/15/94 MFS Communications Co. 63.0% 120.0% 120.0% 4.8% (2.2%) 144.4% Cash
Centex Telemanagement Inc. Tender Offer
03/14/94 Sea Containers Ltd. 34.0% 78.7% 114.4% (6.8%) (14.2%) 114.4% Common Stock
Orient Express Hotels Inc. Tender Offer
01/07/94 Holderbank Financiere Glaris 61.1% 5.5% 13.3% 0.3% (1.3%) 80.0% Cash
Holnam Inc.
10/18/93 La Quinta Motor Inns Inc. 44.4% 33.3% 33.3% 14.3% (1.9%) 36.8% Cash
La Quinta Motor Inns LP Tender Offer
10/14/93 Valero Energy Corp. 51.3% 36.3% 18.0% 11.3% (1.2%) 38.3% Cash
Valero Natural Gas Merger
Partners LP
10/13/93 Medco Containment 29.8% (8.4%) (19.3%) 4.3% (19.9%) 13.5% Cash
Services Inc. Merger
Medical Marketing
Group Inc.
09/22/93 Primerica Corp. 33.3% 15.1% 2.8% (2.0%) (4.8%) 21.3% Common Stock
Travelers Corp. Tender Offer
</TABLE>
<PAGE> 73
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION> EQUITY
% OWNED BY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE ----------------
ANNOUNCEMENT ACQUIROR/ ANNOUNCEMENT ---------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ------------ ------------------------------- ------------ -------- ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
09/20/93 Valley Fashions Corp. 95.0% N/A $46.00 NA $1,288 $64
West Point-Pepperrell
(Valley Fashions)
08/26/93 McGraw-Hill Inc 50.0% N/A N/A NA $338 $169
Macmillan/McGraw-Hill School
08/17/93 Time Warner Entertainment Co. 50.0% N/A N/A NA $70 $35
Six Flags Entertainment Corp.
02/19/93 National Mutual Insurance Co. 55.0% N/A $5.80 NA $4 $2
Celina Financial Corp.
01/04/93 Investor Group 52.0% N/A $9.50 NA $25 $12
United Medical Corp.
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
--------------------------------------------------------------
ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
- ----------- ------------------------------ -------- ------- ----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/20/93 Valley Fashions Corp. -4.7% -5.4% -7.8% -15.6% 11.5% -20.5% Cash
West Point-Pepperrell
(Valley Fashions)
08/26/93 McGraw-Hill Inc N/A N/A N/A N/A N/A N/A Cash
Macmillan/McGraw-Hill School Tender Offer
08/17/93 Time Warner Entertainment Co. N/A N/A N/A N/A N/A N/A Cash
Six Flags Entertainment Corp. Tender Offer
02/19/93 National Mutual Insurance Co. 480.0% 36.5% 36.5% 16.0% -10.8% 480.0% Cash
Celina Financial Corp. Tender Offer
01/04/93 Investor Group 31.0% 49.0% 49.0% 4.1% -2.6% 55.1% Cash
United Medical Corp. Tender Offer
</TABLE>
<TABLE>
<CAPTION> EQUITY
% OWNED BY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE ----------------
ANNOUNCEMENT ACQUIROR/ ANNOUNCEMENT ---------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ------------ ------------------------------- ------------ -------- ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
11/13/92 Rust International Corp. 55.8% N/A $18.75 NA $419 $185
Brand Cos Inc.
03/02/92 WR Grace & Co 83.4% N/A $19.00 NA $464 $77
Grace Energy Corp
02/24/92 Unocal Corp 96.0% N/A $11.68 NA $2,925 $117
Unocal Exploration Corp
02/06/92 Charter Co. 82.3% N/A $7.25 NA $239 $42
Spelling Entertainment Inc.
10/16/91 Time Warner Inc. 82.0% N/A $82.50 NA $8,994 $1,619
American Television & Comm.
05/01/91 Tele-Communications Inc. 53.2% $4.75 $16.19 240.8% $2,327 $1,089
United Artists Entertainment
03/01/91 Air & Water Technologies Corp. 82.0% $18.27 $18.92 3.6% $272 $49
Metcalf & Eddy Cos. Inc.
01/31/91 Murphy Oil Corp 61.1% $19.39 $17.31 -10.7% $985 $383
Odeco
02/06/91 BHP Holdings 50.1% $40.00 NA NA $1,055 $528
Hamilton Oil
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
--------------------------------------------------------------
ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
- ----------- ------------------------------ -------- ------- ----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/13/92 Rust International Corp. -4.5% 10.3% 4.9% -6.3% -21.5% 33.9% Common Stock
Brand Cos Inc. Merger
03/02/92 WR Grace & Co 13.4% 61.7% 31.0% 10.9% 0.0% 0.7% Cash
Grace Energy Corp Tender Offer
02/24/92 Unocal Corp 2.7% 19.8% 18.3% 1.6% N/A N/A Common Stock
Unocal Exploration Corp Merger
02/06/92 Charter Co. 34.9% 48.7% 52.6% 20.8% -3.3% 7.4% Common Stock
Spelling Entertainment Inc. Merger
10/16/91 Time Warner Inc. 82.3% 87.5% 66.7% 57.9% 32.3% 32.8% Con. Pfd.
American Television & Comm. Exchange
Stock Merger
05/01/91 Tele-Communications Inc. 61.9% 29.5% 19.9% 8.8% N/A N/A Common Stock
United Artists Entertainment Merger
03/01/91 Air & Water Technologies Corp. 42.8% 22.1% 20.1% 0.9% N/A N/A Common Stock
Metcalf & Eddy Cos. Inc. Merger
01/31/91 Murphy Oil Corp -12.4% -2.5% 1.8% -3.2% N/A N/A Common Stock
Odeco Tender
02/06/91 BHP Holdings 18.5% 16.8% 25.0% 26.0% 11.9% 58.4% Cash
Hamilton Oil Tender Offer
</TABLE>
<PAGE> 74
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION>
% OWNED BY EQUITY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE -------------------
ANNOUCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ----------- -------------------------------- ----------- -------- ------ ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
11/12/90 U.S. West Inc. 81.0% $36.00 $44.00 22.2% $1,850 $350
U.S. West NewVector Group
9/26/90 Pier 1 Imports 54.0% $12.00 $12.00 0.0% $42 $19
Sunbelt Nursery Group
7/31/90 Freeport-McMoran Inc. 81.5% $10.50 $11.00 4.8% $1,292 $239
Freeport-McMoran Oil & Gas Co.
7/6/90 Renault Vehicles 44.5% $6.00 $6.25 4.2% $186 $103
Mack Trucks
5/17/90 Kansas City Southern Industries 87.1% $14.00 $15.85 13.2% $270 $35
DST Systems
5/9/90 Primerica Corp. 82.8% $11.06 $11.80 6.7% $285 $49
American Capital Mgmt.
& Research
3/19/90 De Georges 51.0% $24.00 $25.00 4.2% $78 $38
LPL Technologies
2/26/90 American Express 68.4% $11.45 $12.90 12.7% $1,245 $394
Shearson Lehman Hutton
1/24/90 Imetal SA 65.6% $15.50 $17.00 9.7% $151 $52
Copperweld Corp.
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
---------------------------------------------------------
ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
- ----------- -------------------------------- -------- ------- ----- ----- ---- ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/12/90 U.S. West Inc. 47.9% 74.3% 44.3% 28.0% 2.9% 122.8% Common Stock
U.S. West NewVector Group Merger
9/26/90 Pier 1 Imports 84.6% 41.2% 37.1% 2.1% 0.0% 128.6% Cash
Sunbelt Nursery Group Tender Offer
7/31/90 Freeport-McMoran Inc. 15.8% 49.2% 37.5% 8.6% (15.4%) 54.4% Common Stock
Freeport-McMoran Oil & Gas Co. Merger
7/6/90 Renault Vehicles 13.6% 22.0% 19.0% (3.8%) (47.9%) 35.1% Cash
Mack Trucks Tender Offer
5/17/90 Kansas City Southern Industries 47.4% 54.6% 24.3% 7.5% 4.8% 76.1% Cash
DST Systems Tender Offer
5/9/90 Primerica Corp. 36.8% 36.8% 40.9% 29.3% 18.0% 43.0% Common Stock
American Capital Mgmt. Merger
& Research
3/19/90 De Georges 42.9% 44.9% 28.2% 11.1% 0.0% 163.2% Cash & Preferred
LPL Technologies Tender
2/26/90 American Express (43.9%) 18.6% 18.6% 7.4% (46.3%) 27.4% Common Stock
Shearson Lehman Hutton Merger
1/24/90 Imetal SA 23.6% 31.4% 7.8% 7.9% 6.3% 51.1% Cash
Copperweld Corp. Tender Offer
</TABLE>
<PAGE> 75
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION>
% OWNED BY EQUITY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE -------------------
ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ------------ ------------------------------- ----------- -------- ------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1/15/91 Fuji Heavy Industries 49.5% $6.00 $8.50 41.7% $420 $208
Subaru of America
4/9/90 Canadian Pacific Ltd. 55.8% $21.50 $19.50 -9.3% $185 $82
Soo Line Corp.
12/20/89 National Intergroup 44.1% $4.00 $4.43 10.8% $106 $59
Permian Partners
10/5/89 Ogden Corp. 68.3% $14.75 $15.13 2.6% $114 $36
ERC Environmental
10/3/89 Esselte AB 78.0% $40.00 $46.50 16.3% $956 $210
Esselte Business Systems Inc.
9/22/89 Dow Jones & Co. 67.0% $18.00 $21.00 16.7% $1,993 $658
Telerate, Inc.
8/4/89 Jefferson Smurfit Group 78.0% $38.00 $43.00 13.2% $497 $109
PLC/Morgan Stanley Leveraged
Equity Fund II L.P.
Jefferson Smurfit Corporation
7/31/89 Montedison S.p.A. 72.0% $37.00 $37.00 0.0% $1,639 $459
Erbamont NV
7/31/89 Montedison S.p.A. 81.0% $49.00 $51.00 4.1% $3,306 $628
Himont Incorporated
6/9/89 Primerica 69.0% $20.50 $20.50 0.0% $1,385 $429
A.L. Williams corp.
6/9/89 Henley Group, Inc. 80.0% $20.50 $22.25 8.5% $815 $163
Fisher Scientific Group Inc.
5/24/89 Tele-Communications Inc. 75.0% $32.25 $32.25 0.0% $401 $100
WestMarc Communications Inc.
5/19/89 Carlson Hospitality Group 80.0% $14.50 $14.88 2.6% $165 $33
TGI Fridays Inc.
1/17/89 Paramount Communications 74.8% $7.50 $9.50 26.7% $187 $47
TVX Broadcast Group
12/14/88 Ingram Industries 59.0% $12.50 $12.50 0.0% $90 $37
Micro D
12/6/88 General Electric 54.0% $22.50 $22.50 0.0% $602 $277
FGIC Corp
12/6/88 Investor (Amini) 69.0% $5.87 $5.87 0.0% $65 $20
Sage Energy
12/1/88 RTZ Corp. 60.5% $11.79 $12.63 7.1% $619 $244
Indal Ltd.
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
--------------------------------------------------------
ANNOUNCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
---- ------ ----- ----- ----- ----- ---- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/15/91 Fuji Heavy Industries 47.8% 44.7% 61.9% 38.8% 0.0% 70.0% Cash
Subaru of America Merger
4/9/90 Canadian Pacific Ltd. 3.3% 12.2% 11.4% (3.7%) (24.6%) 14.7% Cash
Soo Line Corp. Tender Offer
12/20/89 National Intergroup (21.2%) 26.6% 26.6% 14.3% (36.7%) 86.5% Cash
Permian Partners Tender Offer
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/5/89 Ogden Corp. 89.0% 78.0% 61.4% 23.5% 15.3% 108.7% Cash
ERC Environmental Tender Offer
10/3/89 Esselte AB 36.8% 38.8% 24.2% 8.1% 22.8% 69.1% Cash
Esselte Business Systems Inc. Tender Offer
9/22/89 Dow Jones & Co. 52.7% 37.7% 3.0% 5.0% 3.1% 57.0% Cash
Telerate, Inc. Tender Offer
8/4/89 Jefferson Smurfit Group 20.3% 62.3% 38.7% 12.4% 13.5% 74.6% Cash
PLC/Morgan Stanley Leveraged Tender Offer
Equity Fund II L.P.
Jefferson Smurfit Corporation
7/31/89 Montedison S.p. A. 23.3% 33.3% 18.9% 1.0% 2.4% 45.1% Cash/Warrents
Erbamont NV Tender Offer
7/31/89 Montedison S.p. A. 22.5% 32.5% 15.6% 7.4% 6.8% 54.5% Cash/Warrents
Himont Incorporated Tender Offer
6/9/89 Primerica 41.4% 33.3% 14.7% 13.9% 13.1% 34.3% Common Stock
A.L. Williams corp. Merger
6/9/89 Henley Group, Inc. 36.9% 14.1% 15.6% 9.9% 7.2% 58.9% Cash
Fisher Scientific Group Inc. Tender Offer
5/24/89 Tele-Communications Inc. 79.2% 55.4% 19.4% 6.2% 7.1% 98.5% Cash or Pfd
WestMarc Communications Inc. Tender Offer
5/19/89 Carlson Hospitality Group 29.3% 14.4% 12.3% 0.0% 8.2% 95.1% Cash
TGI Fridays Inc. Tender Offer
1/17/89 Paramount Communications 245.5% 533.3% 322.2% 137.5% 123.5% 660.0% Cash
TVX Broadcast Group Tender Offer
12/14/88 Ingram Industries 33.3% 33.3% 19.0% 2.0% 5.3% 88.7% Cash
Micro D Tender Offer
12/6/88 General Electric 36.4% 23.3% 22.4% 2.3% 14.6% 60.7% Cash
FGIC Corp Merger
12/6/88 Investor (Amini) (7.9%) 9.2% 11.8% 11.8% (9.7%) 11.8% Cash
Sage Energy Merger
12/1/88 RTZ Corp. 34.7% 20.3% (9.0%) (15.1%) (15.1%) (9.0%) Cash
Indal Ltd. Tender Offer
</TABLE>
<PAGE> 77
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION>
% OWNED BY EQUITY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE -------------------
ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ------------ -------------------------------- ----------- -------- ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
12/1/88 Network Security Corporation 56.0% $14.50 $17.38 19.9% $69 $30
Interactive Technologies, Inc.
11/18/88 Management 51.0% $80.00 $90.00 12.5% $991 $486
Henely Manufacturing Corp.
10/6/88 Bally Manufacturing Corp. 71.0% $5.34 $5.34 0.0% $84 $24
U.S. Health Inc.
10/4/88 Qintex Australia Limited 53.0% $15.50 $15.50 0.0% $150 $71
Princeville Corporation
9/28/88 Nontedison SpA 72.7% $33.50 $35.00 4.5% $1,019 $278
Ausimont NV
9/16/88 Investors (Warburg) 63.0% $8.50 $8.50 0.0% $89 $33
Coast America
8/15/88 MGC Merger Company (a) 75.0% $10.25 $11.13 8.6% $94 $24
Malrite Communications
6/15/88 Albert Energy Co. Ltd. (b) 57.0% $11.48 $11.48 0.0% $231 $100
Chieftain Development
5/2/88 Management Group 70.0% $15.00 $22.50 50.0% $168 $50
Thompson Medical Co.
4/26/88 S.H. Holdings 77.0% $10.50 $11.75 11.9% $96 $22
Gruen Marketing
4/25/88 DC Holdings Inc. 76.0% $35.00 $35.00 0.0% $90 $22
Diamond Crystal Salt
4/22/88 Carl C. Ichan (c) 77.0% $39.50 $41.19 4.3% $1,257 $289
Trans World Airlines
4/13/88 Curtis Squire Inc. 70.0% $16.25 $17.70 8.9% $146 $44
Regis Corp.
3/18/88 Management 80.0% $29.50 $29.50 0.0% $80 $16
Meyers Parking Systems, Inc.
3/18/88 Dyson-Kissner-Moran Corp. 53.8% $17.00 $19.35 13.8% $110 $51
Kearney-National Inc.
3/17/88 ESOP (d) 70.0% $57.00 $60.00 5.3% $152 $46
Arthur D. Little Inc.
3/10/88 ISSC Holdings 55.0% $12.00 $12.00 0.0% $49 $22
Ideal School Supply
2/25/88 Compagnie de Saint-Gobain 57.0% $41.00 $47.50 15.9% $902 $388
Certain Teed Corporation
2/25/88 L'Air Liquid S.A. 94.1% $37.00 $37.00 0.0% $466 $27
Liquid Air Corporation
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
--------------------------------------------------------
ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
- ----------- -------------------------------- -------- ------- ----- ----- ---- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/1/88 Network Security Corporation 61.7% 22.0% 24.1% 5.3% 8.6% 275.8% Cash
Interactive Technologies, Inc. Tender Offer
11/18/88 Management 130.8% 61.4% 62.2% 42.9% 62.2% 350.0% Cash
Henely Manufacturing Corp. Merger
10/6/88 Bally Manufacturing Corp. 6.8% 8.1% 6.8% 4.2% 6.8% 151.3% Cash
U.S. Health Inc. Merger
10/4/88 Qintex Australia Limited 36.3% 27.8% 7.8% 5.1% 6.0% 87.9% Cash
Princeville Corporation Tender Offer
9/28/88 Nontedison SpA 29.6% 3.7% 4.9% 2.2% (2.4%) 164.2% Cash
Ausimont NV Merger
9/16/88 Investors (Warburg) 13.3% 36.0% 30.8% 7.9% 3.0% 38.8% Cash
Coast America Merger
8/15/88 MGC Merger Company (a) 68.0% 29.0% 39.1% 9.9% (12.7%) 93.6% Cash/Notes
Malrite Communications Tender Offer
6/15/88 Albert Energy Co. Ltd. (b) 64.0% 21.6% (0.2%) (1.2%) (1.2%) 70.1% Cash
Chieftain Development Tender Offer
5/2/88 Management Group 56.5% 78.2% 59.3% 17.6% (4.3%) 93.5% Cash
Thompson Medical Co. Merger
4/26/88 S.H. Holdings 67.9% 16.0% 17.5% 19.0% 2.2% 91.8% Cash
Gruen Marketing Tender Offer
4/25/88 DC Holdings Inc. 9.4% 12.9% (1.4%) (1.4%) (10.3%) 40.0% Cash
Diamond Crystal Salt Tender Offer
4/22/88 Carl C. Ichan (c) 106.0% 51.2% 49.8% 53.3% 18.1% 115.4% Merger for
Trans World Airlines Cash/Notes
4/13/88 Curtis Squire Inc. 18.0% 22.1% 8.9% 9.8% 8.9% 64.7% Cash
Regis Corp. Merger
3/18/88 Management 25.5% 73.5% 68.6% 18.0% 15.7% 84.4% Cash
Meyers Parking Systems, Inc. Merger
3/18/88 Dyson-Kissner-Moran Corp. 17.7% 56.4% 50.3% 9.8% 9.8% 54.8% Cash
Kearney-National Inc. Merger
3/17/88 ESOP (d) 20.0% 71.4% 81.8% 9.1% 15.4% 81.8% Cash
Arthur D. Little Inc. Merger
3/10/88 ISSC Holdings 3.2% 7.9% 14.3% 11.6% (12.7%) 54.8% Cash
Ideal School Supply Tender Offer
2/25/88 Compagnie de Saint-Gobain 4.4% 86.3% 50.2% 4.4% 5.3% 91.9% Cash
Certain Teed Corporation Tender Offer
2/25/88 L'Air Liquid S.A. 10.4% 52.6% 31.0% 2.8% 8.8% 60.9% Cash
Liquid Air Corporation Tender Offer
</TABLE>
<PAGE> 78
MERRILL LYNCH & CO.
ANALYSIS OF SELECTED MINORITY CLOSE OUT TRANSACTIONS
<TABLE>
<CAPTION>
% OWNED BY EQUITY VALUE ($MIL)
ACQUIROR ON OFFER PER SHARE -------------------
ANNOUNCEMENT ACQUIROR/ ANNOUCEMENT ------------------------------- MINORITY
DATE TARGET DATE ORIGINAL LAST CHANGE (%) TOTAL POSITION
- ------------ ---------------------------------------- ----------- -------- ------ ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2/17/88 Minstar Inc. 83.5% $11.50 $12.50 8.7% $362 $60
Genmar Industries
2/1/88 Donald J. Trump (e) 0.0% $22.00 $22.00 0.0% $125 $125
Resorts International (Class A shares)
1/14/88 Kinburn Corp. 51.8% $9.31 $9.31 0.0% $112 $54
Paperboard Industries Corp.
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PAID OVER PER SHARE PRICE
--------------------------------------------------------
ANNOUCEMENT ACQUIROR/ 6 MONTHS 1 MONTH 1 DAY 1 DAY LTM LTM FORM OF
DATE TARGET PRIOR PRIOR PRIOR AFTER HIGH LOW TRANSACTION
- ----------- ---------------------------------------- -------- ------- ----- ----- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2/17/88 Minstar Inc. 19.0% 51.5% 37.0% 16.3% 17.6% 127.3% Cash
Genmar Industries Tender Offer
2/1/88 Donald J. Trump (e) (66.2%) 67.6% 12.1% 6.7% 8.6% 12.1% Cash
Resorts International (Class A shares) Tender Offer
1/14/88 Kinburn Corp. (13.9%) 77.3% 2.0% 4.9% 55.2% Cash
Paperboard Industries Corp. Tender Offer
</TABLE>
<PAGE> 79
CONTEL CELLULAR INC. (CLASS A)
HISTORICAL PRICE PERFOMANCE
SUMMARY: APRIL 21, 1988 TO OCTOBER 14, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Calendar 1988 Stock Trading Summary:
High: $ 12.00 30-Dec-88 High Close: $ 12.00 30-Dec-88 Average Close: $ 9.28
Low: 7.06 23-May-88 Low Close: 7.06 23-May-88 Average Volume: 153,331
Calendar 1989 Stock Trading Summary:
High: $ 27.25 13-Sep-89 High Close: $ 26.75 13-Sep-89 Average Close: $ 21.20
Low: 11.75 04-Jan-89 Low Close: 11.81 03-Jan-89 Average Volume: 92,956
Calendar 1990 Stock Trading Summary:
High: $ 25.50 02-Jan-90 High Close: $ 25.25 01-Jan-90 Average Close: $ 17.26
Low: 9.38 21-Sep-90 Low Close: 9.75 21-Sep-90 Average Volume: 53,509
Calendar 1991 Stock Trading Summary:
High: $ 25.00 28-Mar-91 High Close: $ 24.88 28-Mar-91 Average Close: $ 20.40
Low: 16.00 14-Jan-91 Low Close: 16.50 14-Jan-91 Average Volume: 31,984
Calendar 1992 Stock Trading Summary:
High: $ 23.25 03-Jan-92 High Close: $ 22.50 01-Jan-92 Average Close: $ 16.97
Low: 13.00 23-Jun-92 Low Close: 13.25 25-Jun-92 Average Volume: 33,592
Calendar 1993 Stock Trading Summary:
High: $ 22.00 15-Oct-93 High Close: $ 22.00 14-Oct-93 Average Close: $ 16.35
Low: 13.25 08-Feb-93 Low Close: 13.50 19-Apr-93 Average Volume: 59,577
Calendar 1994YTD Stock Trading Summary:
High: $ 24.00 13-Oct-94 High Close: $ 23.88 05-Oct-94 Average Close: $ 17.51
Low: 13.00 04-Apr-94 Low Close: 13.25 04-Apr-94 Average Volume: 63,263
- --------------------------------------------------------------------------------------------------
Stock Trading Summary Since IPO:
High: $ 27.25 13-Sep-89 High Close: $ 26.75 13-Sep-89 Average Close: $ 17.34
Low: 7.06 23-May-88 Low Close: 7.06 23-May-88 Average Volume: 63,481
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Stock Trading Summary Since GTE/Contel Merger Annoucement (7/11/90):
High: $ 25.00 28-Mar-91 High Close: $ 24.88 28-Mar-91 Average Close: $ 17.54
Low: 9.38 21-Sep-90 Low Close: 9.75 21-Sep-90 Average Volume: 46,575
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Stock Trading Summary Since GTE Minority Buyback Announcement (9/8/94):
High: $ 24.00 13-Oct-94 High Close: $ 23.88 05-Oct-94 Average Close: $ 23.61
Low: 22.75 08-Sep-94 Low Close: 23.13 09-Sep-94 Average Volume: 233,289
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 80
OVERVIEW OF CONTEL CELLULAR
- --------------------------------------------------------------------------------
STOCK PRICE PERFORMANCE
<TABLE>
<CAPTION>
PRIOR TO MERGER
AT IPO ANNOUNCEMENT CURRENT PRICE
21-APR-88 11-JUL-90 17-OCT-94
--------- --------------- -------------
<S> <C> <C> <C>
Contel Cellular Stock Price $8.500 $17.625 $23.750
RETURNS SINCE IPO:
Contel Cellular Compound Annual Return 17.1% --
Composite Cellular Index Annual Return
April 21, 1988 to October 17, 1994(a) 14.1% --
Adjusted Composite Cellular Index Annual Return
April 21, 1988 to October 17, 1994(b) 12.2% --
RETURNS SINCE MERGER ANNOUNCEMENT
Contel Cellular Compound Annual Return -- 7.2%
Composite Cellular Index Annual Return
July 11, 1990 to October 17, 1994(a) -- 11.4%
Adjusted Composite Cellular Index Annual Return
July 11, 1990 to October 17, 1994(b) -- 6.5%
</TABLE>
- ---------------------------
(a) Cellular Composite: LIN Broadcasting, McCaw Cellular, Vanguard Cellular &
U.S. Cellular
(b) Adjusted Cellular Composite excludes McCaw Cellular & LIN Broadcasting
<PAGE> 1
April 21, 1995
To the Holders of Stock Options
Issued Pursuant to the
1987 Key Employee Stock Plan
of Contel Cellular Inc.
As you know, Contel Corporation ("Contel"), a subsidiary of GTE, intends to
acquire all of the outstanding shares of Class A Common Stock of Contel Cellular
Inc. ("CCI") for $25.50 per share in cash. The transaction will be structured as
a merger (the "Merger") of a Contel subsidiary into CCI. CCI will be the
surviving corporation.
On the effective date of the Merger (the "Effective Date"), the holders of
currently outstanding shares of Class A Common Stock will be entitled to receive
$25.50 per share in cash, and the outstanding shares of Class A Common Stock of
CCI will be cancelled. After the Merger, there will no longer be a public market
for the Class A Common Stock, and that stock will cease to be quoted on the
Nasdaq National Market. When the Merger occurs, the surviving corporation will
file to terminate the registration of the Class A Common Stock under the
Securities Exchange Act of 1934. Once the registration of the Class A Common
Stock is terminated, the surviving corporation will no longer be required to
file reports with the Securities and Exchange Commission or to solicit proxies.
You have been granted non-qualified options to purchase shares of Class A
Common Stock of CCI pursuant to the terms of the 1987 Key Employee Stock Plan of
Contel Cellular Inc. (the "Plan"). (The number of options you hold and their
exercise prices are set forth on the attached Schedule 1.) In connection with
the Merger, CCI offers to make a cash payment to you for the surrender of all
(but not less than all) of the options you hold, other than those options which
have ceased to be exercisable prior to the date of the Merger (the "Options").
The offer is conditioned upon consummation of the Merger.
For each Option you surrender, whether or not your interest in the Option
is vested, you will receive an amount in cash (the "Option Consideration") equal
to $25.50, less the exercise price for the Option. If you agree to surrender
your Options based on the terms of this offer, CCI will pay you the Option
Consideration for each Option you hold, whether or not that Option is currently
vested. You will receive the Option Consideration promptly after the Effective
Date. If the Merger is not consummated within 6 months of the date of this
letter, this letter agreement shall be null and void.
The Option Consideration will be taxable to you as ordinary income;
reported on your Form W-2 in the year the consideration is paid to you; and
subject to applicable federal and state payroll tax withholding. This is the
same tax treatment you would receive if you exercised the Options. The Option
Consideration will not be considered compensation under any company pension or
benefit plan.
By executing this letter in the space indicated below, you hereby agree
that upon the effectiveness of the Merger and payment of the Option
Consideration for all of your Options (less all applicable taxes required to be
withheld), and without any further action by CCI, you or any other person, all
rights under
(i) all Options and any related SARs (as defined in the Plan), and
(ii) the Plan and all Stock Option Agreements and Stock Appreciation
Rights Agreements entered into between you and CCI thereunder,
shall be terminated. You further agree to execute any additional documents that
may be requested to evidence such termination.
C-2-1
<PAGE> 2
By executing this letter, you acknowledge and agree that you have received
and had the opportunity to review the Information Statement on Schedule 14C
relating to the Merger.
You should be aware that if you do not surrender your Options, in
accordance with the terms of the Plan and existing Stock Options Agreements, if
your employment with CCI terminates, any unvested Options will be forfeited and
the period during which your Options can be exercised will be limited. If you
are transferred to another GTE subsidiary, that will be considered to be a
termination under the Plan. If you are under age 55 at the time of your
employment with CCI terminates, you will have 90 days to exercise any vested
Options. If you are age 55 or older at that time, you will have one year to
exercise any vested options.
If any Options have not been surrendered under the terms of this letter on
the Effective Date or terminated in accordance with the terms of the Plan, the
committee administering the Plan has authority under Article X of the Plan to
adjust the terms of such Options. The committee could decide to adjust the terms
of such Options to provide that, upon the Effective Date, each remaining Option
entitles the holder thereof to receive, upon exercise of the Option, a cash
payment equal to the payment to be made to holders of shares of Class A Common
Stock of CCI pursuant to the Merger less the exercise price of the Option. The
committee has decided not to make any adjustment to the terms of the Options.
Thus, the Options will continue to entitle the holder to acquire Class A Common
Stock of CCI. However, that stock will not be listed for trading on any
exchange, nor will it be registered under the securities laws. Accordingly, such
stock will not be transferable, unless an exemption from registration is
available, and it is not expected that there will be any regular market for such
stock.
To surrender your Options in exchange for the Option Consideration, you
must sign this letter in the space indicated below and return the executed copy
to the following address no later than May 5, 1995. If you have any questions
about this offer, please contact Jae Early.
Contel Cellular Inc.
245 Parimeter Center Parkway
Atlanta, GA 30346
(404) 804-3443
Very truly yours,
Acknowledged and Agreed
Name: ______________________
Date: ______________________
C-2-2
<PAGE> 1
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES REPRESENTING SHARES OF CLASS A COMMON STOCK
OF
CONTEL CELLULAR INC.
PURSUANT TO THE MERGER AGREEMENT DATED AS OF DECEMBER 27, 1994, AS AMENDED
AMONG
CONTEL CELLULAR INC.,
CONTEL CELLULAR ACQUISITION CORPORATION,
CONTEL CORPORATION
AND
GTE CORPORATION
DISBURSING AGENT: CHEMICAL BANK
<TABLE>
<CAPTION>
If by Mail: If by Hand or Overnight Delivery:
<S> <C>
Chemical Bank Chemical Bank
Reorganization Department Reorganization Department
P.O. Box 1916 55 Water Street
GPO Station Second Floor--Room 234
New York, NY 10116-1916 New York, NY 10041
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK ENCLOSED
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
OF CLASS A COMMON STOCK, $1.00 PAR VALUE PER SHARE CERTIFICATE(S) ENCLOSED
(PLEASE FILL IN) (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) NUMBER OF SHARES
------------------------------------------------
<S> <C> <C>
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
Total Number of Shares
------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
Pursuant to the Merger Agreement dated as of December 27, 1994, as amended
(the "Merger Agreement"), providing for the merger (the "Merger") of Contel
Cellular Acquisition Corporation ("CCI Acquisition") with and into Contel
Cellular Inc. (the "Company"), the undersigned surrenders the enclosed
certificate(s) which, prior to the Merger, represented shares of Class A common
stock of the Company, $1.00 par value (the "Shares"), to be exchanged for cash
in the amount of $25.50, without interest, for each such Share. The undersigned
has received a copy of the Information Statement dated April 21, 1995.
The undersigned hereby represents and warrants that (i) the undersigned is
the exclusive owner of the Shares represented by the enclosed certificates and
is entitled to all rights evidenced thereby and (ii) such Shares are free and
clear of all liens, claims and encumbrances. All authority conferred or agreed
to be conferred in this Letter of Transmittal shall be binding upon the
undersigned and the successors, assigns, heirs, executors, administrators and
legal representatives of the undersigned and shall not be affected by, and shall
survive the death or incapacity of, the undersigned.
Submission of the certificates for Shares listed above is subject to the
terms, conditions and limitations set forth in the Merger Agreement and in the
instructions herein contained.
In accordance with the Merger Agreement, please deliver in compliance with
the instructions below a check in an amount determined by multiplying $25.50
times the number of Shares submitted herewith as payment for such Shares. Unless
otherwise indicated under Special Payment Instructions, please issue the check
in the name of the undersigned. Unless otherwise indicated under Special
Delivery Instructions, please mail the check to the person to whom it is issued
at the address shown above or, if the Special Payment Instructions are
completed, at the address there indicated.
<PAGE> 2
- -------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5 AND 6)
To be completed ONLY if the check is to be issued in the name of someone
other than the undersigned.
Issue check to:
Name __________________________________________________________________________
(Please Print)
Address _______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5 AND 6)
To be completed ONLY if the check is to be sent to a name or address other
than that of the party to which it is to be issued.
Mail check to:
Name __________________________________________________________________________
(Please Print)
Address _______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCKHOLDER(S) SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
_
_______________________________________________________________________________
_
_______________________________________________________________________________
Signature(s) of Registered Holder(s))
Dated: __________________________________________________________________, 19__
(MUST BE SIGNED BY THE REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
STOCK CERTIFICATE(S) OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S)
BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS OF
CORPORATIONS OR OTHERS ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE
PROVIDE THE FOLLOWING INFORMATION AND SEE INSTRUCTION 4.)
Name(s) _______________________________________________________________________
_______________________________________________________________________________
(Please print)
Capacity (full title) _________________________________________________________
Address _______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: _______________________________________________
Tax Identification or
Social Security No. ___________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 4)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
Name of Firm __________________________________________________________________
(Please Print)
Address _______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Dated: __________________________________________________________________, 19__
- -------------------------------------------------------------------------------
<PAGE> 3
INSTRUCTIONS
1. Guarantee of Signatures. Signatures on all Letters of Transmittal must
be guaranteed by a financial institution that is a member of a Securities
Transfer Association approved medallion program such as STAMP, SEMP or MSP (an
"Eligible Institution"), except in cases where Shares are surrendered (i) by a
registered holder of Shares who has not completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 4.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal, properly completed and duly executed, together with the
certificate(s) for Shares described should be delivered to the address set forth
on the face hereof. A return envelope addressed to the Disbursing Agent is
enclosed for convenience.
THE METHOD OF DELIVERY OF CERTIFICATE(S) FOR SHARES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE OWNER, BUT IF SENT BY MAIL, IT IS
RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL WITH RETURN RECEIPT REQUEST.
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers and the number of Shares should be listed on a separate schedule to be
attached hereto.
4. Signatures on Letter of Transmittal, Stock Powers and
Endorsements. When this Letter of Transmittal is signed by the registered
owner(s) of the certificate(s) listed and surrendered hereby, no endorsements of
certificates or separate stock powers are required.
If the certificate(s) surrendered hereby is (are) owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any surrendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by a person other than the
registered owner of the certificate(s) listed, such certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence, satisfactory to
the Disbursing Agent, of their authority must be submitted.
5. Stock Transfer Taxes. If payment for Shares is to be made to any person
other than the registered holder, or if surrendered certificates are registered
in the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the payment for such Shares if satisfactory
evidence of the payment of such taxes, or exemption therefrom, is not submitted.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
6. Special Payment and Delivery Instructions. Indicate the name and
address to which payment for the Shares is to be sent if different from the name
and address of the person(s) signing this Letter of Transmittal.
7. Return of Certificate(s) for Shares. If the Merger is not consummated
within 120 days from the date of the Information Statement, the Disbursing Agent
will return all certificates for Shares to stockholders. The Company's
stockholders may request that the Disbursing Agent return the certificates for
Shares to them at any time before the Merger is consummated.
8. Substitute Form W-9. The stockholder is required to provide the
Disbursing Agent with a correct taxpayer identification number on Substitute
Form W-9. Failure to provide the information on the form may subject the
tendering shareholder to 31% Federal income tax withholding on any payments due
to such stockholder. A stockholder may write "Applied For" in the space provided
in Part I of Substitute Form W-9 and may sign the Certificate of Awaiting
Taxpayer Identification Number if the stockholder has not been issued a taxpayer
identification number and has applied for a number or intends to apply for a
number in the near future. If the stockholder writes "Applied For" and signs
such Certificate and the Disbursing Agent is not provided with a taxpayer
identification number within 60 days, the Disbursing Agent will withhold 31% of
any payments due to the stockholder thereafter until a taxpayer identification
number is provided to the Disbursing Agent.
9. Additional Copies. Additional copies of this Letter of Transmittal and
of the Information Statement may be obtained from the Information Agent,
Chemical Bank at the address listed on the last page of this Letter of
Transmittal.
10. Lost or Destroyed Certificates. Any stockholder of the Company who has
lost certificates of Shares should make arrangements (which may include the
posting of a bond or other satisfactory indemnification) to replace lost
certificates for Shares. Such arrangements should be made with the Disbursing
Agent which is also the transfer agent for the Shares.
All questions as to the validity, form and eligibility of any surrender of
certificates hereunder will be determined by the Disbursing Agent and the
Company and such determination shall be final and binding. The Disbursing Agent
and the Company reserve the right to waive any irregularities or defects in the
surrender of any certificates. A surrender will not be deemed to have been made
until all irregularities have been cured or waived.
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose Shares are
surrendered for payment is required to provide the Disbursing Agent with such
stockholder's correct taxpayer identification number on Substitute Form W-9
below. If such stockholder is an individual, the taxpayer identification number
is such stockholder's social security number. If the Disbursing Agent is not
provided with the correct taxpayer identification number, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder may be subject to backup withholding.
Exempt stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Disbursing Agent. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Disbursing Agent is required to withhold
31% of any payments made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
<PAGE> 4
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares surrendered pursuant to the Merger, the stockholder is
required to notify the Disbursing Agent of his correct taxpayer identification
number by completing the form below certifying that the taxpayer identification
number provided on Substitute Form W-9 is correct (or that such stockholder is
awaiting a taxpayer identification number) and that the stockholder is not
subject to backup withholding either because he has not been notified by the IRS
that he is subject to backup withholding or because the IRS has notified him
that he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DISBURSING AGENT
The taxpayer identification number that must be provided is that of the
registered holder(s) of the Shares or of the last transferee appearing on the
transfers attached to or endorsed on the Shares (or, if the check is made
payable to another person(s) as provided in Instruction 6, then of such
persons(s)). The taxpayer identification number is the social security number or
employer identification number of such registered holder(s) or of such last
transferee. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering stockholder or other payee has not been
issued a taxpayer identification number, but has applied for a taxpayer
identification number, or intends to apply for one in the near future, such
holder should write "Applied For" in the space provided for the taxpayer
identification number in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I and the Disbursing
Agent is not provided with a taxpayer identification number within sixty (60)
days, the Disbursing Agent will withhold 31% of all payments to such stockholder
until a taxpayer identification number is provided to the Disbursing Agent. If
the tendering stockholder or other payee furnishes the Disbursing Agent with his
taxpayer identification number within sixty (60) days of the date of the
Substitute Form W-9, the Disbursing Agent shall remit such amounts retained
during such period to such holder. If, however, the tendering stockholder or
other payee has not provided the Disbursing Agent with his taxpayer
identification number within the sixty (60) day period, the Disbursing Agent
shall remit such previously retained amounts to the Internal Revenue Service as
backup withholding. For additional guidance, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
- --------------------------------------------------------------------------------
PAYER'S NAME: CHEMICAL BANK
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW ---------------------------------------
SUBSTITUTE SOCIAL SECURITY NUMBER(S)
FORM W-9
OR
DEPARTMENT OF THE TREASURY ---------------------------------------
INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER(S)
-------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- Under Penalties of Perjury, I certify that: PART 3 --
(1) The number shown on this form is my correct Taxpayer Identification
PAYER'S REQUEST FOR TAXPAYER Number (or I am waiting for a number to be issued to me) and Awaiting TIN / /
IDENTIFICATION NUMBER (TIN)
-------------------
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding or
(b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or dividends or (c)
the IRS has notified me that I am no longer subject to backup withholding.
-------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by
the IRS that you are currently subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such Item(2).
SIGNATURE: DATE , 1995
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a tax identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days of the date of this Certificate.
<TABLE>
<S> <C>
- --------------------------------------------------- ------------------------------------------,1995
Signature Date
</TABLE>
THE INFORMATION AGENT FOR THE MERGER IS:
CHEMICAL BANK
INFORMATION AGENT
450 WEST 33RD STREET, 15TH FLOOR
NEW YORK, NY 10001
OR
CALL TOLL-FREE 1-800-648-8169
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C>
- ----------------------------------------------------------------
In re:
CONTEL CELLULAR INC. Civil Action No. 13726
SHAREHOLDERS' LITIGATION
- ----------------------------------------------------------------
</TABLE>
NOTICE OF PENDENCY OF CLASS ACTIONS,
CLASS ACTION DETERMINATION, PROPOSED SETTLEMENT,
SETTLEMENT HEARING AND RIGHT TO APPEAR
TO: ALL RECORD AND BENEFICIAL OWNERS OF CLASS A COMMON STOCK ("CLASS A STOCK")
OF CONTEL CELLULAR INC. ("CONTEL") AT ANY TIME FROM SEPTEMBER 8, 1994 AND THEIR
SUCCESSORS IN INTEREST OR TRANSFEREES AND ASSIGNS, IMMEDIATE AND REMOTE,
EXCLUDING ANY SUCH OWNERS WHO VALIDLY REQUEST AN APPRAISAL OF THEIR CLASS A
STOCK.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A
PROPOSED SETTLEMENT OF THE SHAREHOLDER CLASS ACTION LITIGATION AND CONTAINS
IMPORTANT INFORMATION REGARDING YOUR RIGHTS. AN ESSENTIAL ELEMENT OF THIS
SETTLEMENT IS A MERGER. THE $25.50 PER SHARE PRICE PROVIDED BY THE MERGER WILL
BE PAID ONLY TO THOSE MEMBERS OF THE CLASS WHO OWN CLASS A STOCK AT THE TIME OF
THE MERGER. YOU NEED NOT FILE A PROOF OF CLAIM IN ORDER TO RECEIVE THE $25.50
PER SHARE AMOUNT.
IF THE COURT APPROVES THE PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM
CONTESTING THE FAIRNESS, REASONABLENESS, OR ADEQUACY OF THE PROPOSED SETTLEMENT
AND FROM PURSUING THE SETTLED CLAIMS.
IF YOU ARE NOT THE BENEFICIAL HOLDER OF CLASS A STOCK BUT HOLD CLASS A STOCK FOR
A BENEFICIAL HOLDER, PLEASE TRANSMIT THIS NOTICE TO SUCH BENEFICIAL HOLDER.
ADDITIONAL COPIES OF THIS NOTICE WILL BE MADE AVAILABLE TO YOU FOR THIS PURPOSE
UPON REQUEST DIRECTED TO THE INFORMATION AGENT FOR THE MERGER -- CHEMICAL BANK,
450 WEST 33RD STREET, 15TH FLOOR, NEW YORK, NY 10001.
This notice is given pursuant to Rule 23 of the Court of Chancery of the
State of Delaware, in and for New Castle County (the "Court"), and pursuant to
an Order of the Court, to notify you of the pendency of these lawsuits, the
proposed settlement of these lawsuits, and the Court's certification of a class
of Contel common stockholders, and to give you notice of a hearing (the
"Hearing") to be held by the Court at 11:30 a.m. on June 8, 1995, and of your
rights, among other things, to participate in the Hearing. The Hearing will be
held to determine whether the proposed settlement should be approved by the
Court as fair, reasonable and adequate, and in the best interests of the Class
as defined below, and whether final judgment should be entered thereon, and to
consider the applications by plaintiffs' counsel for attorneys' fees and
reimbursement of expenses.
BACKGROUND
On or about September 8, 1994, defendant GTE Corporation ("GTE") announced
that GTE had proposed to acquire all outstanding Contel Cellular Inc. ("Contel")
Class A common stock held by the public, consisting entirely of approximately 10
million shares of Class A Stock, for $22.50 cash per share (the "Class A
Stock"). (GTE owns the remaining 90 percent of outstanding Contel common shares,
consisting entirely of Contel Class B common stock ("Class B Stock")). Under the
terms of the proposal, a GTE subsidiary would be merged into Contel, and the
Class B Stock would remain outstanding as shares of the
<PAGE> 2
merged entity. It was further announced that the proposed merger (the "Merger")
would not require a vote by the holders of Class A Stock or the shareholders of
GTE.
Following the announcement, four class actions were commenced in this Court
alleging that the purchase price of $22.50 cash per Class A share was grossly
inadequate and constituted a breach of the defendants' fiduciary duties to
Contel public shareholders (collectively, the "Actions"). The Actions were
brought by plaintiffs Airmont Plaza Associates, Arnel Gonzalez, Blimy Itzkowitz,
and Paul Gambal ("Plaintiffs"). The complaints asserted claims on behalf of a
Class consisting of all public common stockholders of Contel as of September 8,
1994. The actions are denoted as: Airmont Plaza Associates v. Parker, C.A. No.
13726; Gonzales v. Parker, C.A. No. 13727; Itzkowitz v. Parker, C.A. No. 13730;
and Gambal v. Contel Cellular Inc., C.A. No. 13734.
On November 16, 1994, the Court entered an Order consolidating the Actions
for all purposes as In re Contel Cellular Inc. Shareholders' Litigation, Consol.
C.A. No. 13726, and appointed the law firms of Abbey & Ellis, Wolf Popper Ross
Wolf & Jones L.L.P. and Bernstein, Liebhard & Lifshitz, as Plaintiffs' Co-lead
Counsel.
At the time GTE informed Contel of its offer to acquire the publicly held
shares of Class A Stock, nine of Contel's twelve directors were executive
officers or directors of GTE or Contel. These nine directors could not
participate in assessing the fairness of GTE's offer to acquire Contel without
the appearance of a conflict of interest. Accordingly, at a meeting of Contel's
Board of Directors on September 9, 1994, the Contel Board appointed the three
independent Contel directors who are not officers or directors of GTE or Contel
to a special committee (the "Special Committee") to review the fairness of, and
to negotiate the terms of the proposed Merger. The Special Committee retained
Cahill Gordon & Reindel ("Cahill Gordon") as its legal counsel and Lazard Freres
& Co. ("Lazard Freres") as its financial advisor.
Plaintiffs' counsel retained an expert adviser and obtained initial
documentary discovery, including documents produced by Lazard Freres.
Thereafter, counsel for GTE and Contel began discussions and negotiations with
Plaintiffs' counsel regarding the resolution of the Actions. While negotiations
were ongoing, Plaintiffs' counsel met with the Special Committee, its counsel
and Lazard Freres to discuss valuations, and negotiated with GTE during a period
of two months commencing October 17, 1994. Following negotiations with
Plaintiffs' counsel and with the Special Committee (through Lazard Freres), GTE
agreed, in December 1994, to raise the offer for the proposed merger to $25.50
per share of Class A Stock.
On December 23, 1994, GTE and Contel reached an agreement in principle with
Plaintiffs' counsel to settle the Actions, subject to confirmatory discovery,
based on the increased price of $25.50 per share of Class A Stock. Following the
settlement agreement in principle, and the completion of additional documentary
and deposition discovery, Plaintiffs and defendants executed a Stipulation and
Agreement of Compromise and Settlement (the "Stipulation" or the "Settlement")
containing the terms and conditions as set forth in more detail below.
The parties entered into an Agreement and Plan of Merger dated as of
December 27, 1994, as amended, whereby Contel agreed to merge with a subsidiary
of GTE (the "Merger Agreement").
THE SETTLEMENT
As described above, the settlement increases the consideration offered in
the proposed merger from $22.50 per share of Class A Stock to $25.50 per share.
GTE, Contel, and the Special Committee acknowledge that the litigation efforts
and negotiations by Plaintiffs' counsel were significant factors in prompting
GTE to consider the possibility of improving its original $22.50 per share offer
and in arriving at the improved price of $25.50 per Class A share.
Plaintiffs' counsel have made a thorough investigation of the facts,
including the review of thousands of pages of documents and the taking of three
depositions, the retention of a financial expert, and a study of legal
principles applicable to plaintiffs' claims and have conducted discussions and
arms-length negotiations with representatives of the defendants with a view to
settling the issues in dispute and achieving the best possible relief consistent
with the interests of the Class.
<PAGE> 3
Having made such investigation and having fully considered the events and
agreements described above, plaintiffs' counsel have determined that the terms
and conditions of the settlement are fair, reasonable, adequate and in the best
interests of the plaintiffs and the Class.
Plaintiffs and plaintiffs' counsel have agreed to settle the Actions
according to the terms and provisions of the Stipulation after considering:
(i) the benefits to be obtained by the public shareholders as a result of the
settlement; (ii) the attendant risks of litigation; (iii) the probability of
success on the merits of Plaintiffs' claims, including the uncertainty relating
to the proof of the allegations; (iv) the desirability of settling the Actions;
and (v) plaintiffs' and plaintiffs' counsels' conclusion that the settlement is
fair, reasonable and adequate.
The defendants have denied and continue to deny all claims of wrongdoing
made in the Actions. Nonetheless, the defendants consider it desirable that the
Actions be settled in the manner and on the terms and conditions set forth in
the Stipulation, thereby putting to rest all claims which have been or might
have been asserted by any parties arising out of the matters alleged in the
Actions or set forth in the Stipulation, and avoiding further expense,
inconvenience, distraction, and diversion of management of GTE and Contel, which
would be caused by further litigation.
CLASS ACTION DETERMINATION
The Court has ordered that, for purposes of the settlement only, the
Actions shall be maintained as a class action, pursuant to Court of Chancery
Rules 23(b)(1) and (b)(2), on behalf of a Class consisting of all holders of
Class A Stock from September 8, 1994 and their successors in interest and/or
transferees and assigns, immediate and remote, excluding any such holders who
validly request an appraisal of their Class A Stock and excluding the defendants
and their families and affiliates.
Inquiries or comments about the settlement may be directed to the attention
of Liaison Counsel to the Class representatives as follows:
Norman M. Monhait, Esq.
Rosenthal, Monhait, Gross & Goddess, P.A.
Suite 214 First Federal Plaza
P.O. Box 1070
Wilmington, Delaware 19899-1070
(302) 656-4433
Please do not contact the Court of Chancery or Register in Chancery
regarding any questions or comments you may have.
THE TERMS OF THE SETTLEMENT
The principal terms, conditions and other matters that are part of the
settlement are summarized here. This summary should be read in conjunction with,
and is qualified in its entirety by reference to, the Stipulation, which is on
file with the Court of Chancery.
The parties have agreed to the following terms and conditions:
In furtherance of the merger of Contel and GTE, GTE shall pay $25.50 cash
per outstanding share of Contel Class A Stock. A GTE subsidiary will merge into
Contel. The Class A Stock will be cancelled, and each outstanding share of Class
B Stock will remain outstanding as shares of Class B Stock of the merged entity.
The merger will not require a vote by the holders of Contel Class A Stock or by
GTE shareholders. GTE (not the Class) will bear the Plaintiffs' attorneys' fees
and expenses incurred in prosecuting and settling the Actions up to the amount
of $525,000, as approved by the Court.
If the settlement is approved by the Court, the Actions will be dismissed
on the merits with respect to all defendants and with prejudice as against
Plaintiffs and all holders of Class A Stock. The settlement is in full
compromise, settlement and discharge of all claims, whether or not presently
known, which have been asserted by Plaintiffs or which might have been asserted
by Plaintiffs or by Contel shareholders in this Court or any other forum against
any of the defendants arising from or in any way relating to the events or
transactions alleged in the Complaint or set forth in the Stipulation.
<PAGE> 4
APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
Plaintiffs' counsel will jointly apply to the Court for an award of
attorneys' fees and expenses in an amount not to exceed $525,000, subject to
obtaining judicial approval of the Settlement and the dismissal with prejudice
of the Actions. GTE has agreed to bear such fees and expenses, and defendants
have agreed not to oppose such application. Subject to the terms and conditions
and on the date set forth in the Stipulation, GTE will pay all such attorneys'
fees and expenses the Court awards to the Plaintiff (subject to the maximum
amount set forth above).
RIGHT TO APPEAR
Any member of the Class who objects to the Settlement, the class action
determination, the judgment to be entered in the Action, and/or the application
for attorneys' fees and disbursements, or who otherwise wishes to be heard, may
appear in person or by his or her attorney at the Hearing and present evidence
or argument that may be proper and relevant; provided, however, that no person
other than Plaintiffs' Counsel, counsel for the Defendants and counsel for the
Special Committee shall be heard and no papers, briefs, pleadings or other
documents submitted by any person shall be considered by the Court unless not
later than ten (10) calendar days prior to the Hearing such person files with
the Court and serves upon counsel: (a) written notice of intention to appear;
(b) a statement of such person's objection to any matters before the Court; (c)
the grounds or the reasons such person desires to appear and be heard, as well
as all documents or writings such person desires the Court to consider. Such
filing shall be served upon:
Norman M. Monhait, Esq.
Rosenthal, Monhait, Gross & Goddess, P.A.
First Federal Plaza
P.O. Box 1070
Wilmington, DE 19899
Counsel for Plaintiffs
David McBride, Esq.
Young, Conaway, Stargatt & Taylor
Rodney Square North
P.O. Box 391
Wilmington, DE 19899-0391
Counsel for the Special Committee
Defendants
R. Franklin Balotti, Esq.
Richards Layton & Finger
One Rodney Square
Wilmington, DE 19801
Counsel for all other Defendants
Unless the Court otherwise directs, no stockholder of Contel will be
entitled to contest the approval of the Stipulation, the settlement, the
judgment to be entered thereon, or the award of attorneys' fees and expenses to
Plaintiffs' counsel, or otherwise to be heard, except by serving and filing
written objections as described above. Any person who fails to object in the
manner prescribed above will be deemed to have waived such objection and will be
forever barred from raising such objection.
SCOPE OF THIS NOTICE
The foregoing description of the Hearing, the Actions, the activities
leading to the settlement, the terms of the settlement, and other matters
described herein, does not purport to be comprehensive. Accordingly, holders of
Contel Class A Stock are referred to the documents filed with the Court,
including the Stipulation, pleadings, briefs, and other papers, all of which may
be examined during regular business hours of each business day at the Office of
the Register in Chancery, Daniel L. Herrmann Courthouse, Eleventh and Kings
Streets, Wilmington, Delaware 19801.
Register in Chancery
Dated: April 21, 1995
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO
SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
CHECK THE APPROPRIATE BOX:
/ / PRELIMINARY INFORMATION STATEMENT
/X/ DEFINITIVE INFORMATION STATEMENT
CONTEL CELLULAR INC.
(NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CONTEL CELLULAR INC.
(NAME OF PERSON FILING THE INFORMATION STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $125 PER EXCHANGE ACT RULE 0-11(C)(1)(II), OR 14C-5(G).
/X/ FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14C-5(G) AND
0-11.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH PER UNIT PRICE OR OTHER
CLASS OF SECURITIES AGGREGATE NUMBER OF UNDERLYING VALUE OF TRANSACTION PROPOSED MAXIMUM
TO WHICH SECURITIES TO WHICH COMPUTED PURSUANT TO AGGREGATE VALUE AMOUNT OF
TRANSACTION APPLIES TRANSACTION APPLIES EXCHANGE ACT RULE 0-11 OF TRANSACTION FILING FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Class A Common Stock, par
value $1.00 per share....... 9,970,953 $25.50 $254,259,301.50 $50,851.86
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $50,851.86 Filing Party: Contel Cellular Inc.
Form, Schedule or Registration
Statement No.: 14C Date Filed: January 30, 1995
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION STATEMENT
------------------------
CONCERNING THE MERGER OF
CONTEL CELLULAR ACQUISITION CORPORATION,
A SUBSIDIARY OF CONTEL CORPORATION,
WITH AND INTO
CONTEL CELLULAR INC.,
AT A PRICE OF $25.50 PER CLASS A SHARE
------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
This Information Statement is being furnished to the holders of outstanding
shares of the Class A Common Stock (the "Class A Stockholders") of Contel
Cellular Inc., a Delaware corporation (the "Company"), as of the Record Date (as
defined below) in connection with the proposed merger (the "Merger") of Contel
Cellular Acquisition Corporation, a Delaware corporation ("CCI Acquisition"),
with and into the Company. The Company will be the corporation that survives the
Merger (the "Surviving Corporation"). The Merger will be effected pursuant to an
Agreement and Plan of Merger dated as of December 27, 1994, as amended (the
"Merger Agreement"), among the Company, GTE Corporation, a New York corporation
("GTE"), Contel Corporation, a Delaware corporation in liquidation and a wholly
owned subsidiary of GTE ("Contel"), and CCI Acquisition, which is a wholly owned
subsidiary of Contel. In the Merger, (i) each outstanding share of the Class A
Common Stock, par value $1.00 per share, of the Company (a "Class A Share")
(other than Class A Shares as to which appraisal rights have been properly
exercised under the General Corporation Law of the State of Delaware (the
"DGCL")) will be converted into the right to receive $25.50 in cash, without
interest, subject to applicable back-up withholding taxes (the "Merger
Consideration"), (ii) each Class A Share held by the Company and each
outstanding share of the common stock of CCI Acquisition will be cancelled, and
no payment will be made with respect thereto and (iii) each outstanding share of
the Class B Common Stock, par value $1.00 per share, of the Company (a "Class B
Share") will continue to be outstanding. After the effective date of the Merger,
the Class A Shares will cease to be quoted on the Nasdaq National Market.
YOU ARE URGED TO REVIEW THIS INFORMATION STATEMENT CAREFULLY TO DECIDE
WHETHER TO ACCEPT THE MERGER CONSIDERATION OR TO EXERCISE APPRAISAL RIGHTS
PURSUANT TO THE DGCL. IF YOU WISH TO ACCEPT THE MERGER CONSIDERATION, PLEASE
COMPLETE, EXECUTE AND SEND THE ENCLOSED LETTER OF TRANSMITTAL, TOGETHER WITH
CERTIFICATES REPRESENTING YOUR CLASS A SHARES, TO CHEMICAL BANK, AS DISBURSING
AGENT FOR THE MERGER (THE "DISBURSING AGENT"), IN ACCORDANCE WITH THE
INSTRUCTIONS SET FORTH IN THE LETTER OF TRANSMITTAL. IF YOU WISH TO EXERCISE
APPRAISAL RIGHTS PURSUANT TO THE DGCL, YOU MUST, WITHIN 20 DAYS OF THE DATE OF
THE MAILING OF THIS INFORMATION STATEMENT, DELIVER TO THE COMPANY A WRITTEN
DEMAND FOR A JUDICIAL APPRAISAL OF THE FAIR VALUE OF YOUR CLASS A SHARES AND
OTHERWISE COMPLY WITH THE APPLICABLE PROVISIONS OF THE DGCL. SEE "DISSENTERS'
RIGHTS OF APPRAISAL" AND THE TEXT OF SECTION 262 OF THE DGCL ATTACHED AS EXHIBIT
D TO THIS INFORMATION STATEMENT.
The record date for stockholders entitled to notice of or entitled to give
consent to the Merger was March 16, 1995 (the "Record Date"). As of the Record
Date there were issued and outstanding 9,970,953 Class A Shares and 90,000,000
Class B Shares. Each Class A Share is entitled to one vote per share and each
Class B Share is entitled to five votes per share. On the Record Date, Contel
owned 90,000,000 Class B Shares, which accounted for approximately 98% of the
combined voting power of the outstanding Class A Shares and Class B Shares.
Pursuant to the DGCL, Contel, as the owner of more than 50% of the combined
voting power of the Class A Shares and Class B Shares, approved the Merger by
written consent on April 10, 1995. Other than such written consent, no further
action by the stockholders of the Company is necessary to approve or consummate
the Merger and no such approval will be sought. The Company will not hold a
meeting of the stockholders of the Company in connection with the Merger. The
Merger will be consummated on May 12, 1995.
This Information Statement is being mailed on April 21, 1995 to Class A
Stockholders of record on the Record Date, and constitutes the notice of
appraisal rights required by Section 262 of the DGCL and the notice of corporate
action without meeting required by Section 228(d) of the DGCL.
The principal executive offices of the Company are located at 245 Perimeter
Center Parkway, Atlanta, Georgia 30346 and its telephone number is (404)
804-3400.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE DISBURSING AGENT FOR THE MERGER IS:
CHEMICAL BANK
The date of this Information Statement is April 21, 1995
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY.............................................................................. 4
SPECIAL FACTORS...................................................................... 10
Introduction; The Merger........................................................... 10
Background of the Merger........................................................... 10
Determination of the Special Committee and the Board; Fairness of the Merger....... 13
Opinion of Financial Advisor to the Special Committee.............................. 15
Determination of the Fairness of the Merger by GTE, Contel and CCI Acquisition..... 19
Opinions of Financial Advisors to GTE.............................................. 20
Certain Litigation................................................................. 29
Written Consent.................................................................... 29
Merger Consideration............................................................... 30
Accounting Treatment of the Merger................................................. 30
Certain Federal Income Tax Consequences of the Merger.............................. 30
Plans for the Company; Certain Effects of the Merger............................... 31
THE MERGER AGREEMENT................................................................. 32
General............................................................................ 32
Designation of Directors; Certificate of Incorporation and By-laws................. 32
Representations and Warranties..................................................... 32
Indemnification and Other Covenants................................................ 32
Conditions to the Merger........................................................... 33
Termination........................................................................ 33
Amendment.......................................................................... 33
Extension; Waiver.................................................................. 33
PAYMENT OF THE MERGER CONSIDERATION.................................................. 34
DISSENTERS' RIGHTS OF APPRAISAL...................................................... 35
MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK
OF THE COMPANY..................................................................... 37
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY.................................. 38
PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY................................. 39
BUSINESS OF THE COMPANY.............................................................. 41
Overview........................................................................... 41
Cellular Interests................................................................. 41
The Cellular Telephone Industry.................................................... 44
The Company's Cellular Operations.................................................. 45
Non-Controlled Systems............................................................. 49
International Interests............................................................ 50
Competition........................................................................ 50
Regulation......................................................................... 50
RELATED PARTY TRANSACTIONS........................................................... 51
Arrangements and Transactions with Contel and GTE.................................. 51
Payments to Optionholders.......................................................... 53
Relationship between GTE Director and PaineWebber.................................. 53
Transition Arrangements............................................................ 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................................... 55
Certain Beneficial Owners.......................................................... 55
Directors and Executive Officers of the Company.................................... 55
Directors and Executive Officers of GTE, Contel and CCI Acquisition................ 56
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 57
GLOSSARY............................................................................. 58
EXHIBIT A -- AGREEMENT AND PLAN OF MERGER, AS AMENDED............................... A-1
EXHIBIT B -- OPINION OF LAZARD FRERES & CO.......................................... B-1
EXHIBIT C-1 -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED...................................................... C-1-1
EXHIBIT C-2 -- OPINION OF PAINEWEBBER INCORPORATED................................... C-2-1
EXHIBIT D -- DELAWARE GENERAL CORPORATION LAW SECTION 262........................... D-1
EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION, CONTEL
CORPORATION, CONTEL CELLULAR ACQUISITION CORPORATION AND CONTEL
CELLULAR INC........................................................... E-1
</TABLE>
3
<PAGE> 5
SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement. This Summary does not purport to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Information Statement and the Exhibits hereto. Unless defined in this
Summary, capitalized terms used herein have the meanings ascribed to them
elsewhere in this Information Statement. STOCKHOLDERS ARE URGED TO READ THIS
INFORMATION STATEMENT AND THE EXHIBITS HERETO IN THEIR ENTIRETY IN ORDER TO
DECIDE WHETHER TO ACCEPT THE MERGER CONSIDERATION OR TO EXERCISE APPRAISAL
RIGHTS PURSUANT TO THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE (THE
"DGCL"). WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
SPECIAL FACTORS
Introduction; The Merger. This Information Statement is being furnished to
the holders of outstanding shares of the Class A Common Stock (the "Class A
Stockholders") of Contel Cellular Inc., a Delaware corporation (the "Company"),
in connection with the proposed merger (the "Merger") of Contel Cellular
Acquisition Corporation, a Delaware corporation ("CCI Acquisition"), with and
into the Company. The Company will be the corporation that survives the Merger
(the "Surviving Corporation"). The Merger will be effected pursuant to an
Agreement and Plan of Merger dated as of December 27, 1994, as amended (the
"Merger Agreement"), among the Company, GTE Corporation, a New York corporation
("GTE"), Contel Corporation, a Delaware corporation in liquidation and a wholly
owned subsidiary of GTE ("Contel"), and CCI Acquisition, which is a wholly owned
subsidiary of Contel. Certain additional information relating to GTE, Contel,
CCI Acquisition and the Company and each of their respective directors and
executive officers is included in Exhibit E to this Information Statement.
In the Merger, (i) each outstanding share of the Class A Common Stock of
the Company, par value $1.00 per share (each a "Class A Share") (other than
Class A Shares as to which appraisal rights have been properly exercised under
the DGCL), will be converted into the right to receive $25.50 in cash, without
interest, subject to back-up withholding taxes (the "Merger Consideration"),
(ii) each Class A Share held by the Company and each outstanding share of the
common stock of CCI Acquisition will be cancelled, and no payment will be made
with respect thereto and (iii) each outstanding share of the Class B Common
Stock of the Company, par value $1.00 per share (each a "Class B Share"), will
continue to be outstanding.
The Merger is subject to the satisfaction of certain conditions. See "THE
MERGER AGREEMENT -- Conditions to the Merger". Assuming the satisfaction of such
conditions, the Merger will be consummated on May 12, 1995.
Background of the Merger. GTE, through its wholly owned subsidiary Contel,
owns all of the outstanding Class B Shares of the Company, which constitute 90%
of the Company's outstanding common stock and approximately 98% of the combined
voting power of the capital stock of the Company. The outstanding Class A
Shares, which constitute 10% of the Company's outstanding common stock and
approximately 2% of the combined voting power of the capital stock of the
Company, are held by the public. GTE believes that the cellular communications
businesses conducted by the Company and another wholly owned subsidiary of GTE,
GTE Mobilnet Incorporated ("GTE Mobilnet"), can be conducted more effectively by
acquiring the outstanding minority interest in the Company and consolidating
GTE's cellular operations. GTE's decision is based on its belief that such
consolidation will permit GTE to implement a unified marketing strategy for its
cellular operations, provide increased flexibility in pursuing future
opportunities, generate efficiencies in the combined cellular communications
business and eliminate the complexities of operating two cellular businesses
with overlapping but not identical ownership. For a discussion of GTE's reasons
for acquiring the minority interest see "SPECIAL FACTORS -- Background of the
Merger" and "SPECIAL FACTORS -- Plans for the Company; Certain Effects of the
Merger". GTE believes that the most efficient way to effect the acquisition of
the shares held by the public and to provide Class A Stockholders with cash for
their Class A Shares is through the merger of a wholly owned subsidiary of
Contel into the Company. At the time the Company received GTE's initial proposal
to acquire the Class A Shares, nine of the Company's twelve directors were
executive officers or directors of GTE or the Company.
4
<PAGE> 6
Accordingly, the Board of Directors of the Company (the "Board") appointed a
special committee of the three independent directors (the "Special Committee")
to negotiate the Merger on behalf of Class A Stockholders and make a
recommendation to the Board of Directors in connection with the transaction.
Record Date; No Action Required by Class A Stockholders to Consummate the
Merger. The Record Date for stockholders entitled to notice of or entitled to
give consent to the Merger was March 16, 1995. As of the Record Date, there were
issued and outstanding 9,970,953 Class A Shares, each of which has one vote per
share, and 90,000,000 Class B Shares, each of which has five votes per share. On
the Record Date, Contel owned 90,000,000 Class B Shares, which accounted for
approximately 98% of the combined voting power of the outstanding Class A Shares
and Class B Shares. Pursuant to the DGCL, Contel, as holder of record of more
than 50% of the combined voting power of the Class A Shares and Class B Shares,
approved the Merger by written consent on April 10, 1995. Under the DGCL, no
action on the part of any other stockholder of the Company is necessary to
authorize or to consummate the Merger. The Company will not hold a meeting of
stockholders in connection with the Merger.
Determination of the Special Committee and the Board; Fairness of the
Merger. On December 27, 1994, the Special Committee concluded that the
acquisition of Class A Shares pursuant to the Merger was substantively and
procedurally fair to the holders of the outstanding Class A Shares, including
from a financial point of view, and unanimously recommended that the Board of
Directors approve the Merger Agreement and approve the Merger at a price of
$25.50 per Class A Share. Based on the recommendation of the Special Committee,
the Board unanimously approved the Merger and the Merger Agreement. For a
discussion of the factors the Special Committee considered in reaching its
decision, see "SPECIAL FACTORS -- Determination of the Special Committee and the
Board; Fairness of the Merger".
Opinion of Financial Advisor to the Special Committee. At a meeting on
December 22, 1994 (the "December 22 Special Committee Meeting"), Lazard Freres &
Co. ("Lazard Freres"), financial advisor to the Special Committee, informed the
Special Committee that it would be prepared to deliver a written opinion to the
effect that the proposed price of $25.50 per Class A Share to be received by the
Class A Stockholders in the Merger would be fair to such holders from a
financial point of view. Subsequently, on December 30, 1994, Lazard Freres
delivered its written opinion to the Special Committee that, as of such date,
the consideration to be received by the holders of the Class A Shares in the
Merger (other than GTE, Contel or any of their affiliates) is fair to such
holders from a financial point of view. A copy of such written opinion, setting
forth the assumptions made, matters considered and the review undertaken, is
attached to this Information Statement as Exhibit B. Class A Stockholders are
urged to read this opinion in its entirety. No limitations were imposed by the
Special Committee upon Lazard Freres with respect to the investigation made or
the procedures followed by Lazard Freres in rendering its opinion. For a
discussion of the matters Lazard Freres considered in reaching its opinion, see
"SPECIAL FACTORS -- Opinion of Financial Advisor to the Special Committee".
Determination of Fairness of the Merger by GTE, Contel and CCI
Acquisition. GTE, Contel and CCI Acquisition believe that the transaction is
fair to the Class A Stockholders. GTE, Contel and CCI Acquisition did not retain
financial advisors to evaluate the fairness of the transaction to the Class A
Stockholders. See "SPECIAL FACTORS -- Determination of the Fairness of the
Merger by GTE, Contel and CCI Acquisition".
Opinions of Financial Advisors to GTE. GTE retained Merrill Lynch, Pierce,
Fenner & Smith Incorporated and PaineWebber Incorporated (the "GTE Financial
Advisors") in connection with the transaction. The GTE Financial Advisors
assisted GTE in its negotiations with the Special Committee and Lazard Freres.
In connection with the transaction, the GTE Financial Advisors rendered opinions
to GTE to the effect that the price to be paid for the Class A Shares in the
Merger is fair to GTE from a financial point of view. A copy of the fairness
opinions of the GTE Financial Advisors setting forth the assumptions made,
matters considered and review undertaken, are attached to this Information
Statement as Exhibits C-1 and C-2 and incorporated herein by reference. For a
discussion of the matters the GTE Financial Advisors considered in reaching
their respective opinions, see "SPECIAL FACTORS -- Opinions of Financial
Advisors to GTE".
5
<PAGE> 7
Certain Litigation. Following the public announcement of the proposed
Merger four stockholders of the Company filed separate lawsuits in the Court of
Chancery of the State of Delaware in and for New Castle County (the "Court")
against the Company on behalf of the Class A Stockholders alleging that the
initially announced purchase price was inadequate. After negotiations involving
plaintiffs' counsel and counsel for GTE, Contel and CCI Acquisition and counsel
for the Special Committee, a tentative settlement agreement was reached with
plaintiffs on December 23, 1994, subject to confirmatory discovery. The
tentative settlement approves the price of $25.50 per Class A Share and the
payment of $525,000 in plaintiffs' counsel fees and expenses. The confirmatory
discovery has been completed by plaintiffs' counsel and all documentation
necessary to effect the settlement has been submitted to the Court. The Court
has scheduled a hearing on June 8, 1995 to approve the settlement. The tentative
settlement agreement does not limit the ability of Class A Stockholders to
otherwise challenge corporate actions or to exercise appraisal rights pursuant
to the DGCL. See "SPECIAL FACTORS -- Certain Litigation".
Plans for the Company; Certain Effects of the Merger. As a result of the
transaction, the Class A Stockholders will no longer have an equity interest in
the Company and, accordingly, will not continue to participate in the results of
the Company as an equity holder. However, they will receive cash for their
interest. The receipt of cash for the Class A Shares is a taxable transaction
under federal and certain state laws. Generally, each Class A Stockholder will
be required to recognize a gain or loss equal to the difference between the
stockholder's basis in the Class A Shares and the amount of cash received
pursuant to the Merger. See "SPECIAL FACTORS -- Certain Federal Income Tax
Consequences of the Merger"; "SPECIAL FACTORS -- Plans for the Company; Certain
Effects of the Merger". Also, as a result of the transaction the Class A Shares
will cease to be registered under the federal securities laws and cease to be
publicly traded.
It is expected that the operations of the Company and GTE's other cellular
subsidiary will be consolidated over time into a single business unit. For a
discussion of the effects of the Merger on GTE, Contel and the Company see
"SPECIAL FACTORS -- Certain Federal Income Tax Consequences of the Merger" and
"SPECIAL FACTORS -- Plans for the Company; Certain Effects of the Merger".
PAYMENT OF THE MERGER CONSIDERATION
CCI Acquisition will make available to Chemical Bank, as disbursing agent
in connection with the Merger (the "Disbursing Agent"), the aggregate amount of
cash to be paid in respect of the Class A Shares pursuant to the Merger. In
order to receive the Merger Consideration, Class A Stockholders must send their
certificates representing Class A Shares to the Disbursing Agent along with a
Letter of Transmittal. All certificates so surrendered will be cancelled. A
Letter of Transmittal setting forth the procedures for surrendering to the
Disbursing Agent certificates representing Class A Shares in exchange for cash
is enclosed with this Information Statement.
Upon surrender of a certificate representing Class A Shares together with a
duly executed Letter of Transmittal, the Class A Stockholder will receive $25.50
in cash in exchange for each Class A Share, without interest, subject to
applicable back-up withholding taxes. Any cash held by the Disbursing Agent that
remains unclaimed by stockholders for 180 days after the effective time of the
Merger will be returned to the Surviving Corporation. After that time, Class A
Stockholders may look only to the Surviving Corporation for payment of the
Merger Consideration without interest and subject to applicable abandoned
property, escheat and other similar laws.
ALL QUESTIONS AND REQUESTS FOR INFORMATION RELATING TO THE PROCEDURE FOR
PAYMENT OF THE MERGER CONSIDERATION FOR THE CLASS A SHARES SHOULD BE DIRECTED TO
THE DISBURSING AGENT. SEE "PAYMENT OF THE MERGER CONSIDERATION".
DISSENTERS' RIGHTS OF APPRAISAL
By following the procedures prescribed by the DGCL, Class A Stockholders
have the right to dissent from the Merger and to receive cash equal to the fair
value of their Class A Shares as determined pursuant to appraisal proceedings in
the Delaware courts. A WRITTEN DEMAND FOR APPRAISAL OF CLASS A SHARES MUST BE
6
<PAGE> 8
DELIVERED TO THE GENERAL COUNSEL OF THE COMPANY WITHIN 20 DAYS AFTER THE DATE OF
THE MAILING OF THIS INFORMATION STATEMENT. Because of the complexity of the
procedures for exercising the right to dissent, the Company believes that Class
A Stockholders who consider exercising such right should seek the advice of
counsel. Failure to take any step in connection with the exercise of dissenters'
right of appraisal may result in the termination or waiver of such rights. See
"DISSENTERS' RIGHTS OF APPRAISAL" and Exhibit D.
MARKET PRICES AND DIVIDENDS ON THE COMMON STOCK OF THE COMPANY
The Class A Shares are publicly traded in the over the counter market and
quoted on the Nasdaq National Market under the symbol "CCXLA". There is no
established trading market for the Class B Shares. The Company has not paid any
dividends on its Class A Shares or Class B Shares and does not anticipate that
it will do so in the foreseeable future.
The following table indicates the high and low sales prices for the Class A
Shares during the designated periods:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
High.......................... $ 18.75 $ 17.25 $ 24.00 $ 25.25
Low........................... 14.00 13.00 16.00 23.50
1993
High.......................... $ 18.63 $ 16.25 $ 18.75 $ 22.00
Low........................... 13.25 13.50 15.50 15.00
1992
High.......................... $ 23.25 $ 18.50 $ 16.50 $ 19.00
Low........................... 17.25 13.00 13.50 13.25
</TABLE>
On September 7, 1994, the last full day of trading prior to the
announcement of GTE's intention to acquire the Class A Shares, the high, low and
closing sales prices per Class A Share quoted on the Nasdaq National Market were
$18.25, $17.75 and $17.75, respectively.
For the first quarter of 1995, the high and low sales prices per Class A
Share quoted on the Nasdaq National Market were $25.375 and $24.875,
respectively. For the second quarter of 1995 through April 18, 1995, the high
and low sales prices per Class A Share quoted on the Nasdaq National Market were
$25.375 and $25.25, respectively.
BUSINESS OF THE COMPANY
The Company, through its subsidiaries and through partnerships, provides or
participates in the provision of cellular telephone service in various
metropolitan statistical areas ("MSAs") and rural service areas ("RSAs")
throughout the United States. As of December 31, 1994, the Company had interests
in cellular telephone systems in the United States representing approximately
23.9 million "POPs". ("POPs" refer to the population of a market area multiplied
by the Company's percentage ownership in the cellular system serving that
market.)
The Company's 23.9 million POPs include cellular systems which the Company
controls or manages and cellular systems operated by partnerships in which the
Company is not the controlling partner. As of December 31, 1994, approximately
19.5 million of the Company's 23.9 million POPs were located in 59 MSAs. The
Company owned a controlling interest in and/or managed cellular systems
servicing 32 of these 59 MSAs (representing approximately 69% of the Company's
MSA POPs). The Company owned a non-controlling interest in cellular systems
servicing the remaining 27 MSAs.
The remaining 4.4 million of the Company's 23.9 million POPs were located
in 52 RSAs. As of December 31, 1994, the Company owned controlling interests in
entities licensed to provide cellular service in 24 RSAs, owned non-controlling
interests in and managed 10 RSA markets and held non-controlling interests
7
<PAGE> 9
in 18 RSAs. Most of the Company's RSA POPs are in areas adjacent to MSAs
currently served by the Company. See "BUSINESS OF THE COMPANY".
RELATED PARTY TRANSACTIONS
The Company, Contel and GTE have a number of financial, operating and other
arrangements believed to be of mutual benefit. Those arrangements include,
without limitation, a Third Restated Competition Agreement dated March 14, 1991
among Contel, GTE and the Company (the "Competition Agreement") which, among
other things, allocates cellular business opportunities among GTE's cellular
businesses and a Services Agreement dated May 1, 1991, as amended, between GTE
Mobile Communications Service Corporation ("GTE Mobile") and the Company (the
"Services Agreement"). The terms of these arrangements have been established by
Contel and GTE in consultation with the Company but are not the result of
arms-length negotiations. See "RELATED PARTY TRANSACTIONS -- Arrangements and
Transactions with Contel and GTE".
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues and sales................................. $ 167,178 $ 235,107 $ 286,999 $ 374,014 $ 562,955
Operating income (loss)(1)......................... (38,143) (68,577) (50,113) (28,305) 41,011
Loss from consolidated operations.................. (158,865) (223,726) (196,347) (188,011) (143,332)
Equity in earnings of unconsolidated
partnerships..................................... 19,069 15,687 29,027 37,351 62,792
Gains on sales of partnership interests............ -- 18,387 60,806 48,023 96,607
Net income (loss) before cumulative effect of
change in accounting principles.................. (102,794) (118,900) (73,061) (74,918) 1,871
Cumulative effect of change in accounting
principles(2).................................... -- -- (2,080) (241) --
Net income (loss).................................. (102,794) (118,900) (75,141) (75,159) 1,871
Net income (loss) per share before cumulative
effect of change in accounting principles........ (1.03) (1.19) (0.73) (0.75) 0.02
Net income (loss) per share........................ (1.03) (1.19) (0.75) (0.75) 0.02
Number of weighted average shares outstanding (in
thousands)....................................... 99,931 99,942 99,943 99,948 99,953
OTHER OPERATING DATA:
Capital expenditures............................... 70,841 107,792 183,504 130,042 255,174
Number of ending subscribers....................... 155,285 236,282 327,645 521,226 789,580
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................................... $1,665,395 $1,870,669 $1,930,469 $2,052,984 $2,346,466
Long-term obligations:
Notes payable -- affiliates...................... 1,540,000 1,735,034 1,814,327 1,901,726 2,136,263
Other............................................ 14,280 42,280 36,280 36,792 30,792
Stockholders' equity (deficit)..................... 27,525 (91,085) (166,084) (241,221) (238,920)
Book value per share............................... 0.28 (0.91) (1.66) (2.41) (2.39)
</TABLE>
- ---------------
(1) The operating loss in 1991 includes approximately $12 million of integration
costs associated with the merger of Contel with a wholly owned subsidiary of
GTE.
(2) In 1993, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits." In 1992, the
Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
No. 109, "Accounting for Income Taxes."
Earnings were not adequate to cover fixed charges in 1992, 1993 or 1994.
The amount of such deficiency was $128 million, $129 million and $19 million for
the years ended December 31, 1992, 1993 and 1994, respectively.
8
<PAGE> 10
PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The Company does not, as a matter of course, publicly disclose projections
as to future revenues or earnings. As part of its normal planning process, the
Company has prepared certain five year projected financial data for internal
purposes. Additionally, the Company prepared ten year projected financial data
which was based on an earlier version of the five year projected financial data.
Differences between the ten and the five year projected data are attributable to
the inclusion or exclusion of certain acquisitions which occurred subsequent to
the preparation of the ten year projected data. These five year and ten year
financial projections have been included in this Information Statement because
such projections were made available to the Special Committee's financial
advisor, GTE and the GTE Financial Advisors. See "PROJECTED CONSOLIDATED
FINANCIAL DATA OF THE COMPANY". There can be no assurance that the projections
will be realized and actual results may vary materially from the projections.
9
<PAGE> 11
SPECIAL FACTORS
INTRODUCTION; THE MERGER
This Information Statement is being furnished to the holders of outstanding
shares of the Class A Common Stock (the "Class A Stockholders") of Contel
Cellular Inc., a Delaware corporation (the "Company"), in connection with the
proposed merger (the "Merger") of Contel Cellular Acquisition Corporation, a
Delaware corporation ("CCI Acquisition"), with and into the Company. The Company
will be the corporation that survives the Merger (the "Surviving Corporation").
The Merger will be effected pursuant to an Agreement and Plan of Merger dated as
of December 27, 1994, as amended (the "Merger Agreement"), among the Company,
GTE Corporation, a New York corporation ("GTE"), Contel Corporation, a Delaware
corporation in liquidation and a wholly owned subsidiary of GTE ("Contel"), and
CCI Acquisition, which is a wholly owned subsidiary of Contel. Certain
additional information relating to GTE, Contel, CCI Acquisition and the Company
and each of their respective directors and executive officers is included in
Exhibit E to this Information Statement.
In the Merger, (i) each outstanding Class A Share (other than Class A
Shares as to which appraisal rights have been properly exercised under the DGCL)
will be converted into the right to receive $25.50 in cash, without interest,
subject to backup withholding of taxes (the "Merger Consideration"), (ii) each
Class A Share held by the Company and each outstanding share of the common stock
of CCI Acquisition will be cancelled, and no payment will be made with respect
thereto and (iii) each outstanding Class B Share will continue to be
outstanding.
The Merger is subject to the satisfaction of certain conditions. See "THE
MERGER AGREEMENT -- Conditions to the Merger". The Merger will require notice
filings in a number of states, but the approval of regulatory authorities will
not be required in any jurisdiction. Assuming the satisfaction of such
conditions, the Merger will be consummated on May 12, 1995. For a discussion of
the effects of the Merger on each of the Class A Stockholders, the Company, GTE,
Contel and CCI Acquisition, see "-- Certain Federal Income Tax Consequences of
the Merger" and "-- Plans for the Company; Certain Effects of the Merger" below.
BACKGROUND OF THE MERGER
Existing Ownership. The outstanding stock of the Company consists of
9,970,953 Class A Shares, which represent approximately 2% of the voting power
of the combined capital stock of the Company, and 90,000,000 Class B Shares,
which represent approximately 98% of the voting power of the combined capital
stock of the Company. GTE, through its wholly owned subsidiary Contel, owns all
of the outstanding Class B Shares. The outstanding Class A Shares are held by
the public and trade in the over the counter market with prices quoted on the
Nasdaq National Market under the symbol "CCXLA".
The Company was originally formed as a wholly owned subsidiary of Contel.
In April 1988, a portion of the Company's stock was sold to the public in a
public offering. In March 1991, a wholly owned subsidiary of GTE merged into
Contel and Contel became a wholly owned subsidiary of GTE (the "GTE/Contel
Merger"). As a result of this merger, the Company became an indirectly held
subsidiary of GTE. GTE also provided and continues to provide cellular mobile
services through another wholly owned subsidiary, GTE Mobilnet Incorporated
("GTE Mobilnet").
GTE/Contel Merger; California Proceeding. At the time of the GTE/Contel
Merger, both GTE and Contel had telephone and cellular operations in California
subject to the jurisdiction of the California Public Utilities Commission (the
"CPUC"). The CPUC asserted jurisdiction over the GTE/Contel Merger. Under
California law, the CPUC is required to approve the merger of the California
telephone operations of GTE and Contel (the "California Proceeding"). In order
to complete the GTE/Contel Merger in jurisdictions other than California, the
companies entered into a stipulation that was approved by the CPUC (the
"Stipulation"). The Stipulation resulted in the approval of the GTE/Contel
Merger on an interim basis.
The Stipulation provided that the GTE and Contel telephone and cellular
companies located in California would be operated as separate entities until the
CPUC could conduct a detailed review of the GTE/Contel Merger under the
provisions of California law. As of this date, the GTE/Contel Merger and the
merger of the GTE and Contel regulated operations in California have not yet
received final approval.
10
<PAGE> 12
In April 1994, GTE received a proposed final decision with respect to the
California Proceeding. As a result of concerns with certain provisions in the
order with respect to the distribution of the GTE/Contel Merger benefits, GTE
requested that the evidentiary record be reopened. That request was granted. The
CPUC, however, has not yet acted based upon the additional evidence that has
been submitted.
GTE's Determination to Proceed and Discussions Regarding Structure. Since
the date of the GTE/Contel Merger, GTE's management has, from time to time,
discussed the concept of acquiring the publicly held shares of the Company. The
discussions were held among GTE's management on a limited and confidential basis
and no decision was made to proceed. In early 1994, GTE anticipated receiving an
order in the California Proceeding which would approve the GTE/Contel Merger and
clarify certain issues relating to the California operations and began to
seriously consider acquiring the publicly held shares of the Company. As a
result of the continuing delays in the CPUC proceeding described in the
preceding paragraph, GTE's management concluded in early August 1994 that
issuance of the final order in the California Proceeding would be delayed and
that it would be advisable to proceed at that time to acquire the publicly held
shares of the Company.
GTE management met with its legal and financial advisors to discuss
structuring the transaction and decided that the most efficient way to effect
the acquisition of the public minority would be through a merger of a wholly
owned subsidiary of Contel into the Company. This structure would ensure that
GTE acquired all of the Class A Shares in a single step. GTE's management
considered using GTE Common Stock to effect the Merger. However, GTE's
management believed that its Common Stock was undervalued and elected to use
cash. If a stock for stock transaction had been used to effect the Merger, the
number of shares of GTE Common Stock that holders of the Class A Shares would
have received would have been determined by reference to the market value of
shares of GTE Common Stock. Since GTE believed that shares of GTE Common Stock
were undervalued in the market, GTE felt that in a stock for stock transaction
GTE would either (a) effectively pay more for the Class A Shares than the $25.50
per share price or (b) have to offer shares of GTE Common Stock with a lower
current market value than $25.50 per Class A Share in order to give the holders
of Class A Shares what GTE considered to be of equal value to its cash offer.
Accordingly, GTE determined that payment of the purchase price in cash was
preferable from the standpoint of both GTE and its stockholders and, except with
respect to tax treatment, the Class A Stockholders.
GTE's management further considered two alternatives: whether the Company
should merge with and into a subsidiary of Contel that would be created to
accomplish the merger (the "New Subsidiary"), with the New Subsidiary being the
survivor of the merger; or whether the New Subsidiary should merge with the
Company, with the Company being the survivor of the merger. GTE's management
elected to structure the transaction so that the Company would be the survivor
of the Merger. The Company holds licenses to operate cellular systems in its
name and, under applicable rules and regulations of the Federal Communications
Commission (the "FCC"), if the Company was not the surviving company in the
merger, the merger would be considered to be a transfer of the licenses. The
Company would be required to obtain FCC approval for the transfer of the
licenses before effecting such merger. The approval process could take up to six
months and could delay the completion of the Merger and the payment of Merger
Consideration to the Class A Stockholders. The tax consequences and other
effects of a merger would be the same to the Class A Stockholders regardless of
whether the Company or the New Subsidiary was the survivor of a merger.
Approval by GTE Board. On September 8, 1994, the Board of Directors of GTE
approved a proposal to acquire the Class A Shares for $22.50 per share and also
authorized negotiations with the Company. On the same date, GTE notified the
Board of Directors of the Company of its proposal to acquire the Class A Shares
for $22.50 per Class A Share, or approximately $224 million.
Purpose of the Merger. At the present time, the Company is operated
separately from GTE's other cellular interests. The Company has retained its own
name and own brand identity. Decisions regarding opportunities for the Company
and the decisions on various actions to be taken by the Company have been made
by its Board of Directors based upon the best interests of the Company, not the
best interests of GTE's combined operations. The Merger will permit GTE to
operate its cellular operations as a single unit; enable GTE to implement a
unified marketing strategy for its cellular operations; provide increased
flexibility to
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pursue joint ventures and other combinations and new business opportunities;
generate efficiencies and reduce overhead in the combined cellular
communications business; and eliminate the complexities raised by operating two
cellular businesses under overlapping but not identical ownership. After the
Merger, GTE plans to operate its combined cellular operations as a single
business unit and to maximize the use of the GTE brand name for all of its
cellular operations. These actions will expand the area covered by service that
can be readily identified as being provided by GTE and increase recognition of
the GTE brand name among consumers that are served by GTE's cellular operations.
GTE acquired its majority equity position in the Company as part of the
GTE/Contel Merger. From time to time, GTE has attempted to align its legal
entities and simplify its corporate structure. In January 1993, Contel adopted a
plan of liquidation to facilitate the realignment of GTE and Contel entities and
is in the process of distributing its assets to GTE. Contel will continue to
wind up its affairs and to distribute its assets to GTE. When the distributions
have been completed, Contel will be completely liquidated. Contel is the parent
of the Company and, accordingly, is a party to the Merger. Contel is a wholly
owned subsidiary of GTE and is not engaged in operations or making business
determinations that are separate from GTE. The Merger and the consolidation of
the cellular operations of the Company and GTE's other cellular subsidiary are a
part of this process.
Special Committee; Negotiations with GTE Financial Advisors. At the time
GTE informed the Company of its offer to acquire the publicly held Class A
Shares, nine of the Company's twelve directors were executive officers or
directors of GTE or the Company. Accordingly, the Board of Directors of the
Company at a meeting on September 9, 1994 appointed the three independent
directors, Messrs. Irwin Schneiderman, Leo Jaffe and Robert LaBlanc, to a
special committee (the "Special Committee") to review the fairness of and
negotiate the material terms of the proposed Merger on behalf of the Class A
Stockholders. Members of the Special Committee each received a fee of $35,000
and the Chairman of the Special Committee received a fee of $45,000. As part of
the Stipulation entered into in the California Proceeding, at least three of the
Company's directors are required to be independent directors who are not
otherwise officers, directors or employees of GTE until the CPUC approval has
been received. GTE has not at this time determined whether or not Messrs.
Schneiderman, Jaffe and LaBlanc will remain as independent directors after the
Merger.
The Special Committee met for the first time on September 17, 1994 and
authorized the retention of Cahill Gordon & Reindel ("Cahill") as legal counsel
to the Special Committee. On September 17 and September 22, 1994, the Special
Committee interviewed seven investment banking firms for possible engagement as
a financial advisor to the Special Committee in its evaluation of the proposed
Merger. On September 22, 1994, the Special Committee retained Lazard Freres &
Co. ("Lazard Freres") as its financial advisor. Lazard Freres has not had any
material relationship with GTE or any of its subsidiaries including the Company.
Between September 28 and December 22, 1994, the Special Committee and
Lazard Freres held thirteen meetings either in person or by telephone conference
call to discuss the proposed Merger. During each of such meetings, members of
the Special Committee asked questions of the representatives of Lazard Freres
regarding numerous topics, including the experience of Lazard Freres in
transactions of this type, the experience of Lazard Freres in transactions in
this industry, and the methodology that Lazard Freres intended to use in valuing
the Class A Shares from a financial point of view. The methodology Lazard Freres
used and the various details of their analyses are set forth below under
"-- Opinion of Financial Advisor to the Special Committee". Beginning on October
17, 1994, the Special Committee (acting through Lazard Freres) entered into
negotiations with GTE's financial advisors, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and PaineWebber Incorporated (individually, "Merrill Lynch"
and "PaineWebber", respectively, and, collectively, the "GTE Financial
Advisors") relating to the proposed price to be paid in the Merger, which
process continued for several weeks. During the course of such negotiations in
October 1994, the GTE Financial Advisors furnished to GTE's management a
preliminary draft of their background analysis and furnished to Lazard Freres a
portion of such preliminary draft. A final version of such preliminary draft
background analysis was never furnished to GTE or Lazard Freres by the GTE
Financial Advisors. See "-- Opinions of Financial Advisors to GTE -- Draft
Preliminary Analysis of GTE Financial Advisors". The GTE Financial Advisors
based their fairness opinions to GTE on the analyses described below in
"-- Opinions of Financial Advisors to GTE -- Summary of PaineWebber's Opinion to
the Board of GTE Corporation" and "-- Opin-
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ions of Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the
Board of GTE Corporation".
On November 7, 1994 Lazard Freres furnished to the GTE Financial Advisors a
preliminary draft of the Lazard Freres Report referred to below under
"-- Opinion of Financial Advisor to the Special Committee". On November 10, 1994
the GTE Financial Advisors and Lazard Freres met to review their respective
preliminary analyses. Thereafter, in November 1994, GTE indicated that it might
be willing to increase its offer to $25.00 per Class A Share. As a result of
continued negotiations between Lazard Freres and the GTE Financial Advisors, and
negotiations with counsel for certain stockholders who brought suit against the
Company and certain of its affiliates in connection with the proposed
transaction described below under "-- Certain Litigation", the price per Class A
Share proposed to be given in the Merger was increased by GTE to $25.50.
In December 1994, counsel for the Special Committee requested several
changes to the draft Merger Agreement. Counsel for the Special Committee
indicated that because GTE controlled the Company, it would be appropriate to
add GTE as a party to the agreement and delete a covenant that the Company
conduct its business in the ordinary course until the date of the Merger. GTE
agreed to those changes. After discussions with counsel for the Special
Committee, GTE, in recognition of the fact that it controlled the Company and
did not intend to delay or avoid closing the Merger, also agreed to delete
certain conditions to the closing of the Merger, relating to material adverse
changes in the business, properties or conditions or prospects of the Company,
third party consents and litigation in connection with the Merger. GTE also
agreed to remove a provision allowing termination of the agreement for breach of
covenants or representations and warranties. Certain other non-material changes
were also made as a result of these discussions.
DETERMINATION OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE MERGER
At a meeting on December 22, 1994 (the "December 22 Special Committee
Meeting"), Lazard Freres informed the Special Committee that it would be
prepared to deliver a written opinion to the effect that the proposed price of
$25.50 per Class A Share to be received by the holders of the Class A Shares
(other than GTE, Contel or any of their affiliates) in the Merger would be fair
to such holders from a financial point of view. Subsequently, on December 30,
1994, Lazard Freres delivered its written opinion to the Special Committee that,
as of such date, the consideration to be received by the holders of the Class A
Shares (other than GTE, Contel or any of their affiliates) in the Merger is fair
to such holders from a financial point of view. On December 22, 1994 the Special
Committee reviewed a draft of the Merger Agreement, pursuant to which (i) each
outstanding Class A Share (other than Class A Shares as to which appraisal
rights have been properly exercised under the DGCL) would be converted into the
right to receive the Merger Consideration, (ii) each Class A Share held by the
Company and each outstanding share of the common stock of CCI Acquisition would
be cancelled, and no payment would be made with respect thereto and (iii) each
outstanding Class B Share would continue to be outstanding. At a meeting held on
December 27, 1994, the Special Committee unanimously decided that the
acquisition of Class A Shares pursuant to the Merger was substantively and
procedurally fair to the holders of the outstanding Class A Shares, including
from a financial point of view, and, therefore, unanimously recommended to the
Board of Directors of the Company that it approve the Merger at a price of
$25.50 per Class A Share. Based on the recommendation of the Special Committee,
the Company's Board of Directors unanimously found that the Merger was
substantively and procedurally fair to the Class A Stockholders, including from
a financial point of view and approved the Merger Agreement and approved the
Merger at a price of $25.50 per Class A Share. In finding that the Merger was
substantively and procedurally fair to the Class A Stockholders, the Board of
the Company relied on the factors relied on by the Special Committee and the
determinations of the Special Committee.
In determining to recommend to the Board of Directors of the Company that
it approve the Merger and the Merger Agreement, the Special Committee considered
a number of factors. The material factors considered by the Special Committee
were:
(a) the Special Committee's evaluation of the Company's business,
properties and future prospects (which evaluation was substantially the
same as the evaluation by Lazard Freres summarized hereinafter under the
caption "-- Opinion of Financial Advisor to the Special Committee");
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(b) that the price of $25.50 per Class A Share represents (i) a
premium of 43.7% over the closing sales price of the Class A Shares on the
Nasdaq National Market on September 7, 1994, the last trading day prior to
the public announcement of the proposed Merger, (ii) a premium of 37.8%
over the closing sales price of the Class A Shares on the Nasdaq National
Market one week prior to September 8, 1994, and (iii) a premium of 39.7%
over the closing sales price of the Class A Shares on the Nasdaq National
Market one month prior to September 8, 1994;
(c) that the sales price of the Class A Shares on the Nasdaq National
Market had not exceeded the price of $25.50 per Class A Share since October
10, 1989;
(d) presentations by Lazard Freres regarding the financial condition,
results of operations, business and prospects of the Company, including the
possible dislocation and competitive uncertainty that could result from
major changes in the cellular communication industry;
(e) presentations by Lazard Freres regarding the industry in which the
Company operates and the financial, operating and stock price history of
the Company in comparison to certain companies operating in the Company's
industry, including the Company's competitors as summarized below in
"-- Opinion of Financial Advisor to the Special Committee";
(f) statements by Lazard Freres at the December 22 Special Committee
Meeting that it would be prepared to deliver to the Special Committee a
written opinion to the effect that the price of $25.50 per Class A Share
was fair to the Class A Stockholders (other than GTE, Contel or any of
their affiliates) from a financial point of view, which written opinion
dated as of December 30, 1994 was in fact delivered to the Special
Committee by Lazard Freres; and
(g) the Special Committee's belief that GTE would not increase the
price above $25.50 per Class A Share.
In view of the variety and nature of the factors considered by the Special
Committee, the Special Committee did not attempt to assign relative weights to
the specific factors considered in reaching its determination, except that the
Special Committee placed particular emphasis on the opinion of Lazard Freres and
the fact that the price of $25.50 per Class A Share represented a substantial
premium over the price at which the Class A Shares had recently and historically
traded. The Special Committee did not consider book value to be a material
factor as it believed that the financial analysis by Lazard Freres provided more
accurate implied values of the Class A Shares. The Special Committee did not
consider liquidation value as the holders of Class A Shares do not have the
power to liquidate the Company. GTE had not purchased any Class A Shares and
there were no firm offers of which the Special Committee was aware made by any
unaffiliated person, so the Special Committee did not consider such factors.
Moreover, the quantifiable per share value of the factors considered did
not exceed the price being offered except to the extent that Lazard Freres'
financial analyses produced estimated ranges of values that in some cases
partially exceeded or exceeded $25.50. The Special Committee determined that the
Merger is fair despite such higher values for two reasons. First, in the case of
the private market transaction analysis summarized below under "-- Opinion of
Financial Advisor to the Special Committee" which produced an estimated range of
implied full private market valuations of the Class A Shares higher than $25.50,
Lazard Freres advised the Special Committee that, in acquisition transactions
where an acquiror already owned a controlling position in the company to be
acquired (as in the case of GTE's existing ownership of the Company), the public
stockholders would not obtain the full private market valuation for their shares
since full private market valuation would only be paid in order to obtain
control of a company. Second, the price of $25.50 exceeded the mid-point and
approached the high end of those other ranges that included a higher value.
The approval of the Merger by a majority of the Class A Stockholders is not
required and is not being sought. Notwithstanding this fact, the Special
Committee believed that the acquisition of Class A Shares pursuant to the Merger
is substantively and procedurally fair to the holders of Class A Shares because
the Special Committee of independent directors of the Company was established to
evaluate the transaction and
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<PAGE> 16
because GTE and its financial advisors negotiated in good faith with the Special
Committee and its financial advisor. Moreover, the Special Committee,
unanimously approved the Merger.
With the exception of the members of the Special Committee and the Board of
Directors of the Company, no director, executive officer or affiliate of the
Company, GTE, Contel or CCI Acquisition has made a recommendation in support of
or opposed to the Merger.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
General. Lazard Freres delivered its written opinion to the Special
Committee that, as of December 30, 1994, the consideration to be received by the
holders of the Class A Shares (other than GTE, Contel or any of their
affiliates) in the Merger is fair to such holders from a financial point of
view.
The full text of the written opinion of Lazard Freres, dated as of December
30, 1994, which sets forth the assumptions made, matters considered and the
review undertaken with regard to such opinion, is attached to this Information
Statement as Exhibit B. The summary of the opinion of Lazard Freres set forth
below is qualified in its entirety by reference to the full text of the opinion.
Class A Stockholders are urged to read this opinion in its entirety. Additional
copies of such opinion are available for inspection and copying at the principal
executive offices of GTE during regular business hours and are also available
upon request directed to GTE Corporation, One Stamford Forum, Stamford, CT
06904, Attention: Ronald J. Tuccillo, Assistant Secretary.
In rendering its opinion on December 30, 1994, Lazard Freres, among other
things, (i) reviewed the terms and conditions of a December 29, 1994 draft of
the Merger Agreement (the "Draft Merger Agreement"); (ii) analyzed certain
historical business and financial information relating to the Company, including
the Annual Report to Stockholders and Annual Reports on Form 10-K of the Company
for each of the fiscal years ended December 31, 1991 through 1993, and Quarterly
Reports on Form 10-Q of the Company for the quarters ended March 31, June 30 and
September 30, 1994; (iii) reviewed certain financial forecasts and other data
provided by the Company relating to the Company; (iv) held discussions with
members of the senior managements of the Company and GTE with respect to the
businesses and prospects of the Company and its strategic objectives; (v)
reviewed public information with respect to certain other companies in lines of
business Lazard Freres believes to be generally comparable to the businesses of
the Company; (vi) reviewed the financial terms of certain recent business
combinations involving companies in lines of businesses Lazard Freres believes
to be generally comparable to those of the Company, and in other industries
generally; (vii) reviewed the financial terms of certain recent business
combinations Lazard Freres believes to be comparable in certain respects to the
proposed Merger; (viii) reviewed the historical stock prices and trading volumes
of the Class A Shares; and (ix) conducted such other financial studies, analyses
and investigations as Lazard Freres deemed appropriate.
In arriving at its opinion and making its presentation to the Special
Committee at the December 22 Special Committee Meeting, Lazard Freres was
advised that the Company and an affiliate of GTE propose to exchange certain
cellular assets owned by each of them for certain cellular assets owned by a
publicly held company (the "Cellular Exchange"). Lazard Freres received a copy
of a letter dated December 19, 1994 from GTE's Senior Vice President - Finance
addressed to the GTE Financial Advisors regarding the Cellular Exchange to the
effect that it is an exchange of equivalent assets and, accordingly, is value
neutral to the Company. Lazard Freres has neither received nor reviewed any
other information regarding the Cellular Exchange, including any financial
projections or any other non-public financial information prepared by GTE or the
Company. With the consent of the Special Committee, Lazard Freres has assumed
that the Cellular Exchange involves the exchange of assets with substantially
equivalent value and, accordingly, would have an immaterial effect, if any, on
the Company. For a discussion of the agreement entered into in February 1995 by
the Company and certain affiliates of GTE relating to the Cellular Exchange, see
"BUSINESS OF THE COMPANY -- The Company's Cellular Operations -- Cellular
Exchange Transaction".
For purposes of its opinion, Lazard Freres, with the Special Committee's
concurrence, has ascribed no value to the Company's rights under either (i) the
Competition Agreement or (ii) the Services Agreement.
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<PAGE> 17
In rendering its opinion, Lazard Freres did not review this Information
Statement or any similar document that may be prepared for use in connection
with the proposed Merger. In addition, Lazard Freres was not asked by the
Special Committee to solicit third party indications of interest in acquiring
all or any part of the Company, nor did Lazard Freres seek any such offers.
In connection with its review, Lazard Freres relied upon the accuracy and
completeness of the financial and other information concerning the Company
received by Lazard Freres and did not assume any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets of the Company. With respect to the financial
forecasts provided to it by the Company, Lazard Freres assumed that such
financial forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of management of the Company as to
the future financial performance of the Company. Lazard Freres assumed no
responsibility for and expressed no view as to such forecasts or the assumptions
upon which they were based. Lazard Freres' opinion was based on economic,
monetary, market and other conditions as in effect on, and information made
available to it as of, the date of the opinion.
In rendering its opinion, Lazard Freres assumed that the Merger Agreement
entered into among the parties thereto would be identical in all material
respects to the Draft Merger Agreement, and that the Merger would be consummated
on the terms described in the Draft Merger Agreement, without any waiver of any
material terms or conditions by the Company. Lazard Freres also assumed that
obtaining any necessary regulatory approvals for the Merger would not have an
adverse effect on the Company. Lazard Freres has since advised the Special
Committee that the changes included in the Merger Agreement from the Draft
Merger Agreement on which its opinion was based would not have effected Lazard
Freres' ability to deliver its opinion set forth therein.
In arriving at its opinion and making its presentation at the December 22
Special Committee Meeting, Lazard Freres considered and discussed certain
financial analyses and other factors. In connection with its presentation,
Lazard Freres presented the Special Committee with a summary of its analyses
(the "Lazard Freres Report"), which had been discussed in preliminary form at
prior meetings of the Special Committee. The following is a brief summary of the
analyses performed by Lazard Freres in connection with rendering its opinion and
discussed with the Special Committee at the December 22 Special Committee
Meeting.
In reviewing the background of GTE's initial offer to acquire the Class A
Shares at $22.50 per share (the "GTE Initial Offer") and GTE's revised offer of
$25.50 per share (the "GTE Revised Offer"), Lazard Freres noted the GTE Initial
Offer implied a value for the Company's approximately 23.9 million POPs of
approximately $194 of market capitalization (defined as the total market value
of the Company's equity plus its net debt) per net POP, $181 of cellular asset
value per net POP (which excludes from market capitalization the value of the
Company's non-cellular assets), and $156 of cellular license value per net POP
(which excludes from cellular asset value the value of the Company's net
cellular property, plant and equipment and working capital). Lazard Freres
explained that the GTE Initial Offer also represented a 26.8% premium over the
closing price per share of the Class A Shares on September 7, 1994, one day
prior to GTE's announcement of the GTE Initial Offer, on which date the closing
price per share of the Class A Shares was $17.75. In addition, Lazard Freres
noted that the Revised GTE Offer recommended by the Special Committee implied a
value of approximately $207 of market capitalization per net POP, $193 of
cellular asset value per net POP, and $169 of cellular license value per net
POP; the GTE Revised Offer also represented a 43.7% premium over the closing
price per share of the Class A Shares one day prior to GTE's announcement of the
GTE Initial Offer, and a 13.3% increase over the GTE Initial Offer.
Lazard Freres explained that in arriving at its opinion, Lazard Freres
performed a number of financial analyses, including: (i) a private market
transaction analysis, in which Lazard Freres reviewed publicly available
information on twenty-six private market sale transactions announced since July
1993, involving cellular operations in MSAs; (ii) a comparable public company
analysis, in which Lazard Freres reviewed certain financial, operating, and
stock market trading information of selected publicly traded companies engaged
primarily in the cellular business; and (iii) a discounted cash flow analysis,
in which Lazard Freres
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<PAGE> 18
estimated the present value of the future cash flows that the management of the
Company expects its businesses to generate.
The material portions of the foregoing analyses (which are all of the
material valuation methodologies performed by Lazard Freres) are summarized
below.
Private Market Transaction Analysis. Lazard Freres reviewed publicly
available information on twenty-six private market sale transactions that were
announced and consummated since July 1993, involving cellular operations in MSAs
(the "Comparable Transactions"). Using regression analysis, private market value
for cellular properties in the Comparable Transactions were estimated as a
function of MSA ranking (e.g., New York City, as the largest MSA, ranked number
1). These results were then applied to the Company's MSA net POPs, with
adjustments made to the resulting valuations depending upon whether (i)
population growth in each such MSA is expected to increase at a faster rate than
average population growth expected for the United States, as a whole; (ii)
median household income in each such MSA is greater than median household income
for the United States, as a whole; (iii) average commuting time for each such
MSA is greater than average commuting time for the United States, as a whole;
and (iv) each such MSA is contiguous to other MSAs or RSAs serviced by the
Company. Such adjustments were calculated by applying to the valuation of each
of the Company's MSA markets a 5% premium for each of the foregoing factors
which applied to such MSA market, and a 5% discount for each of the foregoing
factors which did not apply to such MSA market. Utilizing this methodology, the
implied values of the Company's controlled MSA net POPs and non-controlled MSA
net POPs were estimated at $211 per POP and $280 per POP, respectively.
In view of the Company's substantial holdings of non-controlled MSA net
POPs in large MSA markets, including non-controlling interests in four of the
country's ten largest MSA markets (Los Angeles, San Francisco, Washington, D.C.
and Houston), implied private market values for the Company's non-controlled MSA
net POPs were also estimated utilizing a cash flow based comparable public
company analysis to estimate the value of such non-controlled MSA net POPs as if
such interests were held by a stand-alone company. In this analysis, which
Lazard Freres analyzed for selected publicly traded companies in the cellular
communications business (the "Comparable Companies") the stock prices, market
capitalizations, cellular asset values and publicly available estimates of
projected operating cash flows for 1994 through 1996. This analysis showed an
average ratio of market capitalization to projected cash flow in 1994 for the
Comparable Companies of 23.9. Applying this multiple to the projected 1994
operating cash flow of the Company's non-controlled MSA net POPs provided by
management, the implied value of such non-controlled MSA net POPs was estimated
at $341 per POP. The Comparable Companies reviewed by Lazard Freres in this
analysis included AirTouch Communications Inc., BCE Mobile Communications, Inc.,
Centennial Cellular Corp., Rogers Cantel Mobile Communications, Inc., United
States Cellular Corporation, and Vanguard Cellular Systems, Inc.
Implied private market valuations for the Company's net MSA POPs were then
calculated for the Company's approximately 12.9 million controlled MSA net POPs
(estimated at $211 per MSA net POP utilizing the regression analysis referred to
above) and the Company's approximately 5.9 million non-controlled MSA net POPs
(estimated ranging from $280 per MSA net POP utilizing the regression analysis
referred to above to $341 per MSA net POP utilizing the comparable public
company analysis referred to above). After adding (i) an assumed value of $130
per net POP for each of the Company's approximately 3.3 million controlled and
clustered RSA net POPs (where "clustered RSA net POPs" refers to the POPs
serviced by the Company in RSAs that are contiguous to other MSAs or RSAs
serviced by the Company), (ii) an assumed value of $105 per net POP for each of
the Company's approximately 0.5 million controlled and non-clustered RSA net
POPs (where "non-clustered RSA net POPs" refers to the POPs that are not
clustered RSA net POPs), (iii) an assumed value of $77 per net POP for each of
the Company's approximately 1.2 million non-controlled RSA net POPs, (iv) an
implied value of $300 million for the Company's wireless data business,
estimated utilizing a discounted cash flow analysis described below, and (v) an
assumed value of $30 million for the Company's international assets, and
subtracting net debt, Lazard Freres arrived at estimated ranges of value for the
common equity of the Company, including the Class A Shares. The assumed values
referred to in clauses (i), (ii), (iii) and (v) above were derived based on
consultations with management of the Company and Lazard Freres' experience with
similar properties in
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other transactions. Utilizing this methodology, the implied full private market
valuation of the Class A Shares was estimated at between $32.36 and $36.00 per
share. While the estimated range of implied full private market valuations of
the Class A Shares utilizing this methodology was higher than the GTE Revised
Offer, the Lazard Freres Report noted that in acquisition transactions where an
acquiror already owned a controlling position in the company to be acquired (as
in the case of GTE's existing equity ownership of the Company), public
stockholders would not obtain full private market valuation as a result of such
acquisitions.
Comparable Public Company Analysis. Lazard Freres compared certain
publicly available financial data of selected publicly traded companies in the
cellular communications business with the historical financial performance of
the Company. Lazard Freres analyzed on a per net POP basis for each of the
Company and such selected publicly traded companies, among other things, the
market values (defined as the total market value of a company's equity), market
capitalizations, cellular asset values and cellular license values. This
analysis showed that the cellular asset values per net POP for such publicly
traded companies ranged from an estimated low of $117 to an estimated high of
$194, which compared to an implied value in the GTE Revised Offer of
approximately $193 of cellular asset value per net POP. The publicly traded
companies reviewed by Lazard Freres in this analysis included the Comparable
Companies, Commnet Cellular, Inc. and PriCellular Corp. Utilizing this
methodology, the implied value of the Class A Shares was estimated at between
$23.29 and $25.68 per share, compared to $25.50 in the GTE Revised Offer.
Discounted Cash Flow Analysis. Lazard Freres performed a discounted cash
flow analysis of the Company based upon estimates of financial performance of
the Company provided by management. Utilizing these projections, Lazard Freres
discounted to the present (i) the projected stream of the Company's unlevered
cash flows for its cellular business through the year 2004, and (ii) the
projected terminal value of the Company's cellular business at such year based
upon a range of multiples of cash flow in year 2004. Lazard applied several
discount rates (ranging from 11% to 13%) and multiples of cash flow in year 2004
(ranging from 12.0 to 14.0). Similarly, for the Company's wireless data
business, Lazard Freres discounted to the present projected streams of the
Company's cash flows for its wireless data business and arrived at an estimated
valuation by applying several discount rates (ranging from 12.0% to 16.0%) and
multiples of cash flow in year 2004 (ranging from 13.5 to 15.5).
After adding an assumed value of $30 million for the Company's
international assets and subtracting net debt, Lazard Freres arrived at
estimated ranges of value for the common equity of the Company, including the
Class A Shares. Utilizing this methodology, the implied value of the Class A
Shares was estimated at between $19.99 and $28.60 per share, compared to $25.50
in the GTE Revised Offer.
The analyses contained in the preliminary draft of the Lazard Freres Report
presented to the Special Committee on November 7, 1994 did not materially differ
from the final Lazard Freres Report presented to the Special Committee at the
December 22 Special Committee Meeting, except that the final Lazard Freres
Report included: (i) an updated summary of the negotiations with the GTE
Financial Advisors and an analysis of the GTE Revised Offer of $25.50 per Class
A Share, (ii) a revised private market transaction analysis and comparable
public company analysis of the Company that took into account (A) the sale by
the Company of certain POPs during the period following the date of the
preliminary draft of the Lazard Freres Report, and (B) the then-current publicly
available financial data of the publicly traded companies reviewed by Lazard
Freres in such analyses, and (iii) a discounted cash flow analysis of the
Company based upon a revised projected stream of the Company's unlevered cash
flow for its cellular business. Such revised cash flow projections excluded
projected unlevered cash flows for the Company's wireless data business, since a
separate discounted cash flow analysis was performed for such business in both
the preliminary draft of and in the final Lazard Freres Report.
In the preliminary draft of the Lazard Freres Report, the implied full
private market valuation of the Class A Shares utilizing a private market
transaction analysis was estimated at between $32.56 and $37.20 per share
(compared to an estimated range of $32.36 and $36.00 per share set forth in the
final Lazard Freres Report), the implied value of the Class A Shares utilizing a
comparable public company analysis was estimated at between $23.53 and $25.92
per share (compared to an estimated range of $23.29 and $25.68 per share set
forth in the final Lazard Freres Report), and the implied value of the Class A
Shares utilizing a
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discounted cash flow analysis was estimated at between $23.05 and $32.37 per
share (compared to an estimated range of $19.99 and $28.60 per share set forth
in the final Lazard Freres Report).
In arriving at its written opinion and in presenting the Lazard Freres
Report to the Special Committee, Lazard Freres performed various financial
analyses, portions of which are summarized above. The summary set forth above
does not purport to be a complete description of Lazard Freres' analyses. Lazard
Freres believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all such analyses, could
create an incomplete view of the process underlying its analyses set forth in
the opinion and the Lazard Freres Report. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. However, the Lazard Freres Report noted that the GTE
Revised Offer fell within the range of implied values of the Class A Shares for
each of the analyses performed and described above other than the private market
transaction analysis, for which the Lazard Freres Report noted that since GTE
already held a controlling position in the Company through its existing equity
ownership, the Company's public stockholders would not obtain full private
market valuation for the Class A Shares. With regard to the private market
transaction analysis and the comparable public company analyses summarized
above, Lazard Freres selected comparable public companies on the basis of
various factors, including the size of the public company and similarity of the
line of business; however, no public company utilized as a comparison is
identical to the Company. Accordingly, an analysis of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the acquisition or
public trading value of the comparable companies to which the Company is being
compared. In performing its analyses, Lazard Freres made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company.
The analyses performed by Lazard Freres are not necessarily indicative of
actual past or future results or values, which may be significantly more or less
than such estimates. Additionally, analyses relating to the values of businesses
do not purport to be appraisals or to reflect the price at which such companies
may actually be sold, and such estimates are inherently subject to uncertainty.
Lazard Freres regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions and for other purposes.
The Special Committee selected Lazard Freres to act as its financial advisor on
the basis of Lazard Freres' qualifications, expertise and reputation in
investment banking, in general, and mergers and acquisitions, specifically.
The Company has paid Lazard Freres a retainer fee of $250,000 and an
additional fee of $500,000 upon delivery of its written opinion. The Company has
also agreed to reimburse Lazard Freres for its out-of-pocket expenses, including
reasonable fees and disbursements of counsel, and to indemnify Lazard Freres and
its partners, employees, agents, affiliates and controlling persons against
certain liabilities under the federal securities laws, relating to or arising
out of its engagement.
DETERMINATION OF THE FAIRNESS OF THE MERGER BY GTE, CONTEL AND CCI ACQUISITION
GTE, Contel and CCI Acquisition reasonably believe that the Merger is fair
to the Class A Stockholders. GTE, Contel and CCI Acquisition have concluded that
the price to be paid to the Class A Stockholders is fair based solely on the
previously described determinations of the Special Committee. The material
factors considered in making such a determination are those that were considered
by the Special Committee. See " -- Determination of the Special Committee and
the Board; Fairness of the Merger". GTE, Contel and CCI Acquisition also believe
that the Merger is procedurally fair because, in addition to the appraisal
rights granted to the Class A Stockholders under the DGCL described below in
"DISSENTERS' RIGHTS OF APPRAISAL", the final price and terms were negotiated in
good faith by GTE and its financial advisors and the Special Committee and the
Merger was unanimously approved by the Company's Board including the independent
directors of the Company. GTE retained its financial advisors to assist in the
negotiation and determine whether the transaction was fair to GTE's
shareholders.
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OPINIONS OF FINANCIAL ADVISORS TO GTE
GTE was assisted in its negotiations with the Special Committee and Lazard
Freres by its financial advisors, Merrill Lynch and PaineWebber. Merrill Lynch
and PaineWebber regularly value businesses and their securities and provide
advice in connection with merger and acquisition transactions. Merrill Lynch and
PaineWebber previously served as financial advisors to GTE in connection with
the merger of a wholly owned subsidiary of GTE with and into Contel. As part of
the agreements with Merrill Lynch and PaineWebber with respect to that
transaction, GTE agreed to retain Merrill Lynch and PaineWebber as financial
advisors in connection with any related restructuring. Based upon that agreement
and the expertise of both Merrill Lynch and PaineWebber in evaluating
transactions similar to the Merger, GTE decided to retain Merrill Lynch and
PaineWebber as its financial advisors in connection with the Merger.
PaineWebber has provided investment banking and other services to GTE from
time to time, including serving as underwriter in connection with the issuance
of GTE's debt and equity financings. During the last two years, PaineWebber has
earned compensation with respect to all such services, other than fees in
connection with the Merger, of approximately $5.0 million. In the future, GTE
may retain PaineWebber from time to time for similar services. In the ordinary
course of its business, PaineWebber actively trades debt and equity securities
of GTE for its own account and the accounts of its customers, and PaineWebber
therefore may, from time to time, hold a long or short position in such
securities. A director of GTE is engaged as a consultant to PaineWebber. See
"RELATED PARTY TRANSACTIONS -- Relationship between GTE Director and
PaineWebber."
Merrill Lynch has also provided investment banking and other services to
GTE from time to time, including serving as a dealer in connection with the
issuance of GTE's commercial paper and as an underwriter in connection with its
issuance of its debt and equity financings. During the last two years, Merrill
Lynch has earned compensation with respect to all such services, other than fees
in connection with the Merger, of approximately $7.4 million. Merrill Lynch is
presently providing GTE with financial and strategic advice in connection with a
matter other than the Merger, for which it is receiving a fee of $150,000 per
month which commenced in August 1994 and will continue until such matter is
completed. In the future, GTE may retain Merrill Lynch from time to time for
similar services. In the ordinary course of its business, Merrill Lynch actively
trades debt and equity securities of GTE for its own account and the accounts of
its customers, and Merrill Lynch therefore may, from time to time, hold a long
or short position in such securities.
In connection with the transaction, the GTE Financial Advisors rendered
opinions to GTE to the effect that the price to be paid for the Class A Shares
in the Merger is fair to GTE from a financial point of view. A copy of the
fairness opinions of the GTE Financial Advisors are attached to this Information
Statement as Exhibits C-1 and C-2. Additional copies of such opinions are
available for inspection and copying at the principal executive offices of GTE
during regular business hours and are also available upon request directed to
GTE, One Stamford Forum, Stamford, CT 06904, Attention: Ronald J. Tuccillo,
Assistant Secretary.
The GTE Financial Advisors believe that their analyses must be considered
as a whole and that selecting portions of their analyses and of the factors
considered by them without considering all factors and analyses, could create an
incomplete view of the processes underlying their analyses and opinion. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analyses or summary descriptions.
In rendering their opinions, the GTE Financial Advisors did not make or
seek to obtain appraisals of the Company's assets in connection with their
analyses of the valuation of the Company and did not determine the amount of
consideration to be paid in the Merger. In addition, the GTE Financial Advisors
were not requested to and did not solicit third parties who might be interested
in acquiring all or any part of the Company. In their respective analyses, the
GTE Financial Advisors made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's control. Any estimates of value contained therein
are not necessarily indicative of actual values, which may be significantly more
or less favorable than as set forth therein. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which
companies may actually be sold.
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<PAGE> 22
Because such estimates are inherently subject to uncertainty, none of the
Company, GTE or the GTE Financial Advisors or any other person assumes
responsibility for their accuracy.
In arriving at their opinions, the GTE Financial Advisors (a) reviewed the
Company's Annual Reports, Forms 10-K and related financial information for the
five fiscal years ended December 31, 1993 and the Company's Forms 10-Q and the
related unaudited financial information for the quarterly periods ending March
31, June 30, and September 30, 1994; (b) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets and
prospects of the Company, furnished to them by the Company; (c) conducted
discussions with members of senior management of the Company concerning its
businesses and prospects; (d) reviewed the historical market prices and trading
activity for the Class A Shares and compared them with that of certain publicly
traded companies which they deemed to be reasonably similar to the Company; (e)
compared the results of operations of the Company with that of certain companies
which they deemed to be reasonably similar to the Company; (f) compared the
proposed financial terms of the transactions contemplated by the Merger
Agreement with the financial terms of certain other mergers and acquisitions
which they deemed to be relevant; (g) considered the pro forma effect of the
Merger on GTE's capitalization ratios, earnings and cash flow; (h) considered a
discounted cash flow analysis on future cash flows that management of the
Company expects the Company to generate; (i) reviewed a draft of the Merger
Agreement; and (j) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
they deemed necessary, including their assessments of general economic, market
and monetary conditions.
The GTE Financial Advisors will each receive an aggregate fee of $500,000
in connection with the transaction. A retention fee of $50,000 each was paid at
the time the GTE Financial Advisors were retained and a fee of $450,000 each
will be paid at the time of the Merger. In addition, GTE has agreed to reimburse
the GTE Financial Advisors for all of their reasonable out-of-pocket expenses,
including but not limited to, legal fees and travel expenses. GTE also agreed to
indemnify and hold harmless the GTE Financial Advisors against certain
liabilities, including liabilities under the federal securities laws or arising
out of or in connection with their rendering of services.
In preparing their opinions, the GTE Financial Advisors relied on the
accuracy and completeness of all information supplied or otherwise made
available to them by the Company, and the GTE Financial Advisors have not
assumed any responsibility to independently verify such information. With
respect to the financial forecasts furnished by the Company, the GTE Financial
Advisors assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of the Company's management as to the
expected future performance of the Company. The opinions of the GTE Financial
Advisors do not address the relative merits of the Merger and any other
transactions or business strategies which may have been discussed by the Board
of Directors of GTE as alternatives to the Merger or the decision of the Board
of Directors of GTE to proceed with the Merger. In rendering their opinions, the
GTE Financial Advisors were not engaged to act as an agent or fiduciary of GTE's
equity holders or any other third party.
The opinions rendered by each of the GTE Financial Advisors contain the
following provision: "In rendering this opinion, we have not been engaged to act
as an agent or fiduciary of . . . [GTE's] equity holders or any other third
party." This language was included by each GTE Financial Advisor to make it
clear that with respect to their respective opinions, they were each engaged to
advise only the GTE Board of Directors and that they were not acting on behalf
of GTE's stockholders or any other third party (including, without limitation,
the Company's stockholders or the Special Committee). If any person other than
the addressee of such an opinion (including, without limitation, any stockholder
of the Company) were to bring any action against either of the GTE Financial
Advisors based on its opinion, such GTE Financial Advisor might seek to cite
such language as a defense to such action, although the law in this area is
unsettled.
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Summary of PaineWebber's Opinion to the Board of GTE Corporation
The following paragraphs summarize the material financial and comparative
analyses performed by PaineWebber in arriving at the PaineWebber opinion. The
following does not purport to be a complete description of the analyses
performed, or the matters considered by PaineWebber in arriving at the
PaineWebber opinion.
PaineWebber delivered its December 1994 Opinion Letter (the "PaineWebber
Opinion Letter") to the Board of Directors of GTE at a meeting held on December
27, 1994. The PaineWebber Opinion Letter relied on the valuation methods
described below to determine a range of values for the Company.
Discounted Cash Flow Analysis. PaineWebber prepared and reviewed the
results of an unlevered discounted cash flow analysis of the Company based on
certain operating and financial assumptions. The assumptions were based on two
sets of financial projections provided to PaineWebber by the management of the
Company: a five year strategic plan and a ten year projection. For a discussion
of these projections, see "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE
COMPANY".
The purpose of the discounted cash flow analysis was to determine the
present value of each of the Company's unlevered after-tax free cash flows over
the projected periods. To calculate the value of a business using a discounted
cash flow analysis, the projected cash flows for each year together with the
estimated value of the business in the final year of the projected period
("Terminal Value") are discounted to the present using various assumed discount
rates. PaineWebber estimated the Terminal Value for the Company in two
components. First, PaineWebber applied an earnings before interest, taxes,
depreciation and amortization ("EBITDA") multiple to the Company's EBITDA,
before minority interest and equity in unconsolidated affiliates, in the final
year of the projected period. PaineWebber then applied a price/earnings multiple
("P/E multiple") to the net tax-affected amount of minority interests and equity
in earnings of unconsolidated affiliates (discounted by 30% to reflect a
minority interest). After discounting the projected cash flows and the Terminal
Value, PaineWebber added the value of the Company's 10% interest in licenses in
the states of Sonora and Sinaloa, Mexico, calculated as $48 per POP for the
Company's approximately 0.4 million POPs. The sum of these components derived
the implied total market capitalization of the Company at December 31, 1994.
PaineWebber then subtracted the Company's estimated net debt at December 31,
1994 of $2,114.5 million and divided by the number of shares outstanding at
December 31, 1994 of 100.0 million to determine the implied equity value per
Class A Share.
PaineWebber considered exit EBITDA multiples ranging from 10.5x to 12.5x
for both sets of projections and exit P/E multiples ranging from 18.0x to 22.0x
for the five year projections and 16.0x to 20.0x for the ten year projections.
For the purposes of determining the appropriate discount rate to be applied in
the discounted cash flow analyses, PaineWebber considered weighted average costs
of capital ranging from 13.0% to 15.0% to discount all values from December 31,
1999 to January 1, 1995 and 10.0% to 12.0% to discount all values from December
31, 2004 to January 1, 2000.
This analysis resulted in a range of equity values per share for the Class
A Shares of between $19.56 to $30.46 using the five year projections and $13.57
to $24.31 using the ten year projections. PaineWebber noted that the per share
price of $25.50 fell within the range implied by the five year projections. Due
to the inherently less certain nature of the ten year projections, and the fact
that the Company had advised PaineWebber that it had not prepared the ten year
projections as part of its normal planning process, PaineWebber relied more
heavily on the analysis derived from the five year projections.
Comparable Transaction Analysis. PaineWebber reviewed several publicly
announced merger and acquisition transactions in the cellular communications
industry, together with information regarding certain transactions that GTE
furnished to PaineWebber. The publicly announced transactions examined by
PaineWebber included the following: McCaw Cellular Communications Inc.'s private
market value guarantee of LIN Broadcasting Corp.; AirTouch Communications Inc.'s
private market value guarantee of Cellular Communications Inc.; Compagnie
Generale des Eaux's indirect acquisition of cellular properties from SBC
Communications Inc.; Independent Cellular Network, Inc.'s acquisition of
cellular properties from C-TEC Corp.; Southwestern Bell Corp.'s acquisition of
Associated Communications Corp.; Southwestern Bell Corp.'s
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acquisition of cellular properties from GTE Mobilnet; Southwestern Bell Corp.'s
acquisition of cellular properties from Syracuse Telephone, Utica Telephone and
Finger Lakes Telephone; Century Telephone Enterprises Inc.'s acquisition of
Celutel Inc.; AT&T Corp.'s then pending acquisition of McCaw Cellular
Communications Inc.; InterCel Inc.'s acquisition of cellular properties from
Unity Cellular Systems, Inc.; ALLTEL Corp.'s acquisition of cellular properties
from Contel Cellular Inc.; Associated Communications Corp.'s acquisition of
cellular properties from McCaw Cellular Communications Inc.; ALLTEL Corp.'s
acquisition of cellular properties from SLT Communications Inc.; Sprint Corp.'s
acquisition of cellular properties from Centel Corp.; Bell Atlantic Corp.'s
acquisition of cellular properties from Metro Mobile CTS Inc.; McCaw Cellular
Communications Inc.'s acquisition of cellular properties from Crowley Cellular
Telecommunications Inc.; Ameritech Corp.'s acquisition of cellular properties
from Cybertel Financial and Cybertel RSA Cellular L.P.; Comcast Corporation's
acquisition of cellular properties from Metromedia Inc.; BellSouth Corp.'s
acquisition of cellular properties from McCaw Cellular Communications Inc.; and
US WEST, Inc.'s acquisition of the minority interest in US WEST NewVector Group,
Inc. Certain information regarding the comparable transactions is contained in a
preliminary draft of a background analysis prepared by the GTE Financial
Advisors, a copy of which has been filed with the Commission. The background
analysis was preliminary in nature and the PaineWebber Opinion Letter is not
based on such analysis. See "-- Opinions of Financial Advisors to GTE -- Draft
Preliminary Analysis of GTE Financial Advisors".
Using information regarding the MSA rank of the target's POPs in the
comparable transactions, the percentage ownership purchased in the comparable
transactions and PaineWebber's experience with similar transactions, PaineWebber
developed ranges of assumed private market values for controlled positions in
the various categories of MSA market rank. In determining the assumed ranges of
values, PaineWebber noted that the per POP values for the transactions were, in
certain cases, affected by economic factors in the applicable region, such as
population density, population growth, median household income, local interstate
traffic density, and certain general market factors, such as general financing
conditions and the state of the mergers and acquisitions market. Certain of the
private transactions involving subsidiaries of GTE were consummated at prices
per MSA POP above or below the applicable range of assumed values for the
relevant market size. These value ranges were: MSA markets ranked 1 to 25: $250
per POP to $350 per POP; MSA markets ranked 26 to 75: $175 per POP to $250 per
POP; MSA markets ranked 76 to 125: $150 per POP to $200 per POP; MSA markets
ranked 126 to 175: $125 per POP to $175 per POP; MSA markets ranked 176 to 275:
$125 per POP to $150 per POP; and MSA markets ranked 276 and above: $75 per POP
to $125 per POP. Based on the RSA transactions examined, PaineWebber developed a
valuation assumption for RSA POPs of $90 per POP. PaineWebber then applied these
per POP valuation ranges to the Company's POPs. PaineWebber applied a range of
discounts between 0% and 30% to the Company's non-controlled POPs. PaineWebber
selected this range of discounts based on its experience with similar
transactions and its analysis of publicly disclosed information regarding other
transactions. This methodology resulted in a range of values per Class A Share
of $12.75 to $30.30. PaineWebber noted that the per share price of $25.50 fell
within this range.
Comparable Public Companies Analysis. PaineWebber compared selected
historical stock and earnings data and financial ratios for the Company to the
corresponding data and ratios of certain publicly-traded companies which
PaineWebber deemed to be comparable to the Company. For the purposes of the
PaineWebber Opinion Letter, the set of companies which PaineWebber deemed
comparable to the Company was comprised of AirTouch Communications Inc.,
Cellular Communications, Inc., Cellular Communications of Puerto Rico, Inc.,
Centennial Cellular Corporation, Commnet Cellular, Inc., InterCel Inc., LIN
Broadcasting Corporation, United States Cellular Corporation and Vanguard
Cellular Systems, Inc. (the "Comparable Group").
This analysis resulted in a range of market capitalization of cellular
assets (defined as total market capitalization, less minority interests, less
estimated public market value of non-cellular assets) per POP of $330 to $111
with a median of $170 and a range of market capitalization of MSA cellular
assets (defined as market capitalization of cellular assets less the value of
RSA cellular assets at $90 per RSA POP) per POP from $451 to $133 with a median
of $212. PaineWebber noted that the proposed price of $25.50 implied a
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market capitalization of cellular assets per POP for the Company of $198 and a
market capitalization of MSA cellular assets per POP of $224.
Minority Buy Out Analysis. PaineWebber examined the seventy-seven minority
buy out transactions since January 1, 1988 for which PaineWebber was able to
find adequate public information. Due to the limited information available
regarding minority buy out transactions in the cellular communications industry,
the analysis of transactions was not limited to those in the cellular
communications industry. PaineWebber examined the transactions on the basis of
percentage change from initial offer price to final offer price and percentage
premium of the offer price to the trading price per share at six months prior to
announcement, one month prior to announcement, one day prior to announcement,
one day after announcement, the latest twelve months ("LTM") high and the LTM
low. This analysis resulted in average premiums of 11.7% (percent change from
initial offer price to final offer price) and 39.8%, 43.3%, 31.5%, 10.9%, 1.8%
and 85.4%, respectively and resulted in median premiums of 4.6% (percent change
from initial offer price to final offer price) and 33.3%, 33.3%, 20.4%, 7.4%,
2.2% and 58.9%, respectively. PaineWebber examined the premiums paid in the only
minority buy out in the cellular communications industry included as one of the
seventy-seven minority buy out transactions since January 1, 1988 for which
PaineWebber was able to find adequate public information, US WEST, Inc.'s
purchase of the minority interest in US WEST NewVector Group, Inc. on November
12, 1990, which resulted in premiums of 22.2% (percent change from initial offer
price to final offer price) and 47.9%, 74.3%, 44.3%, 28.0%, 2.9% and 122.8%,
respectively. PaineWebber noted that the per share price of $25.50 implied
premiums to the trading price per share of the Class A Shares of 13.3% (percent
change from initial offer price to final offer price) and 56.9%, 39.7%, 43.7%,
10.3%, 6.3% and 96.2%, respectively. PaineWebber noted that these implied
premiums were within the range of transactions examined.
Historical Market Valuation and Ownership Analysis. PaineWebber reviewed
the daily performance of the intra-day and closing market prices per share and
trading volumes of the Class A Shares from April 21, 1988 to December 2, 1994.
This analysis was utilized to provide historical background for the manner in
which the public trading market had valued the Class A Shares since their
initial public offering. PaineWebber also reviewed the volume of the Class A
Shares which traded and the prices at which the Class A Shares traded for the
period January 1, 1994 to December 5, 1994 and since the announcement of the
Merger on September 8, 1994 to December 5, 1994. The implied premiums to the
market price of the Class A Shares at specified intervals is set forth above in
"-- Opinions of Financial Advisors to GTE -- Summary of PaineWebber's Opinion to
the Board of GTE Corporation -- Minority Buy Out Analysis".
Summary of Merrill Lynch's Opinion to the Board of GTE Corporation
The following paragraphs summarize the material financial and comparative
analyses performed by Merrill Lynch in arriving at the Merrill Lynch Opinion.
The following does not purport to be a complete description of the analyses
performed, or the matters considered by Merrill Lynch in arriving at the Merrill
Lynch Opinion.
Merrill Lynch delivered its December 1994 Opinion Letter (the "Merrill
Opinion Letter") to the Board of Directors of GTE at a meeting held on December
27, 1994. The Merrill Opinion Letter relied primarily upon two valuation methods
to determine a range of values for the Company: a discounted cash flow analysis
and a private market transaction analysis. In addition, the Merrill Opinion
Letter relied upon analysis of comparable public companies, premiums paid in
similar transactions, pro forma merger consequences, and historical market
valuation and ownership.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis based upon forecasts provided by the Company's management. The
Company's management provided Merrill Lynch with two sets of financial
forecasts: a five year strategic plan projection and a ten year projection. For
a discussion of these projections, see "PROJECTED CONSOLIDATED FINANCIAL DATA OF
THE COMPANY". Due to the inherently less certain nature of the ten year
projections, and the fact that the Company had advised Merrill Lynch that it had
not prepared the ten year projections as part of its normal planning process,
Merrill Lynch relied more heavily on the analysis derived from the five year
projections. The following assumptions were made in the discounted cash flow
analysis: (1) a range of discount rates from 12.0% to 14.0% was used to discount
all values from December 31, 1999 to January 1, 1995 and in the case of the ten
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year discounted cash flow analysis, a range of discounted rates from 10.0% to
12.0% was used to discount all values from December 31, 2004 to January 1, 2000;
and (2) a range of EBITDA exit multiples from 10.0x to 12.0x was used to
determine the terminal value using the EBITDA exit methodology. Merrill Lynch
discounted to present value the projected five year and ten year streams of free
cash flow, the year 1999 terminal value and the year 2004 terminal value based
upon the ranges of discount rates and EBITDA multiples described above. Total
enterprise value was adjusted for the Company's minority interest obligations
and unconsolidated equity investments. Based on the exit multiple methodology, a
P/E multiple of 16.0x to 20.0x was applied to the net amount of the minority
interest obligations and the tax-affected equity income in unconsolidated
subsidiaries (discounted 30% for the minority position) in the terminal year.
Total enterprise value was also adjusted upward by the value of the Company's
10% interest in licenses in the states of Sonora and Sinaloa, Mexico, calculated
as $48 per POP for the Company's approximately 0.4 million POPs.
Utilizing the five year projections Merrill Lynch arrived at a range of
values per Class A Share of approximately $19.63-$30.90 per share, and utilizing
the ten year projections Merrill Lynch arrived at a range of values per Class A
Share of approximately $14.93-$25.97 per share.
Comparable Transaction Analysis. Merrill Lynch reviewed several publicly
announced merger and acquisition transactions in the cellular communications
industry, together with information regarding certain transactions that GTE
furnished to Merrill Lynch. The publicly announced transactions examined by
Merrill Lynch included the following: McCaw Cellular Communications Inc.'s
private market value guarantee of LIN Broadcasting Corp.; AirTouch
Communications Inc.'s private market value guarantee of Cellular Communications
Inc.; Southern New England Telecommunications Corp.'s acquisition of cellular
properties from Bell Atlantic Corp. and NYNEX; Compagnie Generale des Eaux's
indirect acquisition of cellular properties from SBC Communications Inc.;
Independent Cellular Network, Inc.'s acquisition of cellular properties from
C-TEC Corp.; Southwestern Bell Corp.'s acquisition of Associated Communications
Corp.; Southwestern Bell Corp.'s acquisition of cellular properties from GTE
Mobilnet; Southwestern Bell Corp.'s acquisition of cellular properties from
Syracuse Telephone, Utica Telephone and Finger Lakes Telephone; Century
Telephone Enterprises Inc.'s acquisition of Celutel Inc.; AT&T Corp.'s then
pending acquisition of McCaw Cellular Communications Inc.; InterCel Inc.'s
acquisition of cellular properties from Unity Cellular Systems, Inc.; ALLTEL
Corp.'s acquisition of cellular properties from Contel Cellular Inc.; Associated
Communications Corp.'s acquisition of cellular properties from McCaw Cellular
Communications Inc.; ALLTEL Corp.'s acquisition of cellular properties from SLT
Communications Inc.; Sprint Corp.'s acquisition of cellular properties from
Centel Corp.; Bell Atlantic Corp.'s acquisition of cellular properties from
Metro Mobile CTS Inc.; McCaw Cellular Communications Inc.'s acquisition of
cellular properties from Crowley Cellular Telecommunications Inc.; Ameritech
Corp.'s acquisition of cellular properties from Cybertel Financial and Cybertel
RSA Cellular L.P.; Comcast Corporation's acquisition of cellular properties from
Metromedia Inc.; BellSouth Corp.'s acquisition of cellular properties from McCaw
Cellular Communications Inc.; US WEST, Inc.'s acquisition of the minority
interest in US WEST NewVector Group, Inc.; Pacific Telesis Group's acquisition
of cellular properties from Cellular Communications Inc.; GTE Corporation's
acquisition of cellular properties from Providence Journal Co.; McCaw Cellular
Communications Inc.'s acquisition of cellular properties from Cellular
Communications Inc.; McCaw Cellular Communications Inc.'s acquisition of
cellular properties from LIN Broadcasting Corp.; LIN Broadcasting Corp.'s
acquisition of cellular properties from Metromedia Inc.; Contel Cellular Inc.'s
acquisition of cellular properties from McCaw Cellular Communications Inc.; and
British Telecom plc's acquisition of an interest in McCaw Cellular
Communications Inc. Certain information regarding the comparable transactions is
contained in a preliminary draft of a background analysis prepared by the GTE
Financial Advisors, a copy of which has been filed with the Commission. The
background analysis was preliminary in nature and the Merrill Opinion Letter is
not based on such analysis. See "-- Opinions of Financial Advisors to
GTE -- Draft Preliminary Analysis of GTE Financial Advisors".
Using information regarding the MSA rank of the target's POPs in the
comparable transactions, the percentage ownership purchased in the comparable
transactions and Merrill Lynch's experience with similar transactions, Merrill
Lynch developed ranges of assumed private market values for controlled positions
in the various categories of MSA market rank. In determining the assumed ranges
of values, Merrill Lynch noted
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that the per POP values for the transactions were, in certain cases, affected by
economic factors in the applicable region, such as population density,
population growth, median household income, local interstate traffic density,
and certain general market factors, such as general financing conditions and the
state of the mergers and acquisitions market. Certain of the private
transactions involving subsidiaries of GTE were consummated at prices per MSA
POP above or below the applicable range of assumed values for the relevant
market size. These value ranges were: MSA markets ranked 1 to 25: $250 per POP
to $350 per POP; MSA markets ranked 26 to 75: $175 per POP to $250 per POP; MSA
markets ranked 76 to 125: $150 per POP to $200 per POP; MSA markets ranked 126
to 175: $125 per POP to $175 per POP; MSA markets ranked 176 to 275: $125 per
POP to $150 per POP; and MSA markets ranked 276 and above: $75 per POP to $125
per POP. Based on the RSA transactions examined, Merrill Lynch developed a
valuation assumption for RSA POPs of $90 per POP. Merrill Lynch applied a range
of discounts between 0% and 30% to the Company's non-controlled POPs to reflect
reduced value based on absence of control. Merrill Lynch selected this range of
discounts based on its experience with similar transactions and its analysis of
publicly-disclosed information regarding other transactions. This methodology
resulted in a range of values per Class A Share of $12.76 to $30.31 per share.
Comparable Public Companies Analysis. Merrill Lynch compared selected
historical stock and earnings data and financial ratios for the Company to the
corresponding data and ratios of certain publicly traded companies which Merrill
Lynch deemed to be comparable to the Company. For the purposes of the Merrill
Opinion Letter, the set of companies which Merrill Lynch deemed comparable to
the Company was the Comparable Group.
This analysis resulted in a range of market capitalization of cellular
assets (defined as total market capitalization, less minority interests, less
estimated public market value of non-cellular assets) per POP of $331 to $115
with a median of $169 and a range of market capitalization of MSA cellular
assets (defined as market capitalization of cellular assets, less value of RSA
assets at $90 per POP) per POP from $343 to $133 with a median of $215. Merrill
Lynch noted that the price of $25.50 per Class A Share implied a market
capitalization of cellular assets per POP for the Company of $198 and a market
capitalization of MSA cellular assets per POP of $224.
Premiums Paid in Selected Minority Buy Outs; Minority Buy Out
Analysis. Merrill Lynch examined the seventy-seven minority buy out
transactions since January 1, 1988 for which Merrill Lynch was able to find
adequate public information. Due to lack of available information regarding
minority buy out transactions in the cellular communications industry, these
transactions were not limited to the cellular communications industry. Merrill
Lynch examined these transactions on the basis of percentage change from initial
offer price to the final offer price and percentage premium of the offer price
to the trading price per share at six months prior to announcement, one month
prior to announcement, one day prior to announcement, one day after
announcement, the LTM high and the LTM low. This analysis resulted in average
premiums of 11.7% (% change from initial offer price to final offer price) and
39.8%, 43.3%, 31.5%, 10.9%, 1.8% and 85.4%, respectively, and resulted in median
premiums of 4.6% (percent change from initial offer price to final offer price)
and 33.3%, 33.3%, 20.4%, 7.4%, 2.2%, and 58.9%, respectively. Merrill Lynch
examined the premiums paid in the only minority buy out in the cellular
communications industry included as one of the seventy-seven minority buy out
transactions since January 1, 1988 for which Merrill Lynch was able to find
adequate public information, US WEST, Inc.'s purchase of the minority interest
in US WEST NewVector Group, Inc. on November 12, 1990, which resulted in
premiums of 22.2% (percent change from initial offer price to final offer price)
and 47.9%, 74.3%, 44.3%, 28.0%, 2.9% and 122.8%, respectively. Merrill Lynch
noted that the price of $25.50 per Class A Share implied premiums to the trading
price per share of the Class A Shares of 13.3% (percent change from initial
offer price to final offer price) and 56.9%, 39.7%, 43.7%, 10.3%, 6.3% and
96.2%, respectively. Merrill Lynch noted that these implied premiums were within
the range of transactions examined.
Pro Forma Merger Consequences. Merrill Lynch examined the potential impact
of the Merger on the financial results and capitalization of GTE and found it to
be immaterial.
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Historical Market Valuation and Ownership Analysis. Merrill Lynch reviewed
the daily performance of the intra-day and closing market prices per share and
trading volumes of the Class A Shares from April 21, 1988 to December 2, 1994.
This analysis was utilized to provide historical background for the manner in
which the public trading market had valued the Class A Shares since their
initial public offering. Merrill Lynch also reviewed the volume of the Class A
Shares which traded and the prices at which the Class A Shares traded for the
period January 1, 1994 to December 5, 1994 and since the announcement of the
Merger on September 8, 1994 to December 5, 1994. The implied premiums to the
market price of the Class A Shares at specified intervals is set forth above in
"-- Opinions of Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion
to the Board of GTE Corporation -- Premiums Paid in Selected Minority Buy Outs;
Minority Buy Out Analysis".
Draft Preliminary Analysis of GTE Financial Advisors
In advising GTE management in connection with the proposed Merger, the GTE
Financial Advisors performed certain financial and comparative analyses which
were summarized in a draft preliminary report furnished to GTE's management. A
portion of the draft preliminary report was also provided to Lazard Freres in
connection with the negotiations with the Special Committee described above in
"SPECIAL FACTORS -- Background of the Merger -- Special Committee; Negotiations
with GTE Financial Advisors". A final version of such draft preliminary report
was never furnished to GTE or Lazard Freres by the GTE Financial Advisors. The
draft preliminary report was a draft, was preliminary and was intended to be
used as an information document for GTE management which could be used to
establish negotiating strategies, and as such is not necessarily complete,
contains numerous factual and other assumptions which may differ from, and in
the view of the GTE Financial Advisors may not be as appropriate, complete, or
up to date as, those used in the final analyses carried out in connection with
the delivery of their opinions. Thus, the information, assumptions and analyses
contained in such draft preliminary report could be misleading. The opinions
issued by each of the GTE Financial Advisors were based on the final, completed
analyses carried out by each of the GTE Financial Advisors, descriptions of
which are set forth above under "-- Opinions of the Financial Advisors to
GTE -- Summary of PaineWebber's Opinion to the Board of GTE Corporation" and
"-- Opinions of the Financial Advisors to GTE -- Summary of Merrill Lynch's
Opinion to the Board of GTE Corporation".
The analyses performed by the GTE Financial Advisors and summarized in the
draft preliminary report were substantially similar to the analyses ultimately
relied upon by the GTE Financial Advisors in rendering their opinions described
above in "-- Opinions of the Financial Advisors to GTE -- Summary of
PaineWebber's Opinion to the Board of GTE Corporation" and "-- Opinions of the
Financial Advisors to GTE -- Summary of Merrill Lynch's Opinion to the Board of
GTE Corporation". The range of equity values per share for the Class A Shares
generated by the analyses summarized in the draft preliminary report did not
materially differ from the ranges generated by the analyses ultimately relied
upon by the GTE Financial Advisors in rendering their opinions, except to the
extent described below. In the draft preliminary report, the range of equity
values per share for the Class A Shares utilizing a discounted cash flow
analysis was between $18.34 to $31.27 using the five year strategic plan and
$10.37 to $22.79 using the ten year projections (compared to the ranges in the
analyses ultimately relied upon by each of the GTE Financial Advisors in
rendering their opinions, which were $19.56 to $30.46 using the five year
strategic plan and $13.57 to $24.31 using the ten year projections for
PaineWebber and $19.63 to $30.90 using the five year strategic plan and $14.93
to $25.97 using the ten year projections for Merrill Lynch). The difference in
ranges is attributable to both GTE Financial Advisors using the same range of
discount rates and both using those rates over both the five year and ten year
horizons in the discounted cash flow analysis underlying the draft preliminary
report. On further reflection, the GTE Financial Advisors each determined that
differing rates should be used for year 0 to year 5 and year 5 to year 10, and
each selected its own set of rates. Such determinations were reflected in the
analyses ultimately used by the GTE Financial Advisors in rendering their
respective opinions. In addition, the GTE Financial Advisors determined that a
different methodology should be used in determining the exit multiples. The
different methodology, which considered exit multiples in the context of implied
perpetual growth rates, resulted in the use of different and differing exit
multiples in the analyses relied upon by the GTE Financial Advisors in rendering
their respective opinions.
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Utilizing the comparable transaction analysis in the draft preliminary
report, the range of equity values per share for the Class A Shares was between
$12.76 and $24.38 (compared to the ranges in the analyses ultimately relied upon
by each of the GTE Financial Advisors in rendering their opinions, which were
$12.75 to $30.30 for PaineWebber and $12.76 to $30.31 for Merrill Lynch). The
difference in ranges is attributable to the GTE Financial Advisors' use of a
single percentage discount for the Company's non-controlled POPs in the analysis
underlying the draft preliminary report. Subsequent to the preparation of the
draft preliminary report, the GTE Financial Advisors determined that a range of
discounts should be applied to the Company's non-controlled POPs. Additionally,
PaineWebber decided, for purposes of comparability, to further limit the time
period in which comparable transactions would be examined. In the analyses
relied upon by PaineWebber in rendering its opinion, PaineWebber determined to
exclude certain transactions which occurred before January 1, 1991 (with the
exception of US WEST Inc.'s acquisition of the minority interest in US WEST
NewVector Group, Inc. due to the availability of detailed per POP information).
Those transactions which were included in the analysis in the preliminary draft
report, but were not included in the analysis relied upon by PaineWebber in
rendering its opinion were Pacific Telesis Group's acquisition of cellular
properties from Cellular Communications Inc.; GTE Corporation's acquisition of
cellular properties from Providence Journal Co.; McCaw Cellular Communications
Inc.'s acquisition of cellular properties from Cellular Communications Inc.;
McCaw Cellular Communications Inc.'s acquisition of cellular properties from LIN
Broadcasting Corp.; LIN Broadcasting Corp.'s acquisition of cellular properties
from Metromedia Inc.; Contel Cellular Inc.'s acquisition of cellular properties
from McCaw Cellular Communications Inc.; and British Telecom plc's acquisition
of an interest in McCaw Cellular Communications Inc. In the comparable
transaction analysis relied upon by Merrill Lynch in rendering its opinion,
Merrill Lynch examined an additional transaction, Southern New England
Telecommunications Corp.'s acquisition of cellular properties from Bell Atlantic
Corp. and NYNEX.
The comparable public company analysis and historical market valuation
analysis presented in the draft preliminary report utilized stock prices for the
Comparable Group and the Company up to and/or including October 17, 1994. The
comparable public company analysis used in the draft preliminary report resulted
in a range of market capitalization of cellular assets per POP of $316 to $117
with a median of $177 (compared to the ranges in the analyses ultimately relied
upon by each of the GTE Financial Advisors in rendering their opinions, which
were $330 to $111 with a median of $170 for PaineWebber and $331 to $115 with a
median of $169 for Merrill Lynch) and a range of market capitalization of MSA
cellular assets per POP from $412 to $139 with a median of $231 (compared to the
ranges in the analyses ultimately relied upon by each of the GTE Financial
Advisors in rendering their opinions, which were $451 to $133 with a median of
$212 for PaineWebber and $343 to $133 with a median of $215 for Merrill Lynch).
In the draft preliminary report, the minority buy out analysis resulted in
average premiums of 11.7% (percent change from initial offer price to final
offer price) and 40.0%, 43.4%, 31.7%, 10.9%, 1.8% and 85.9%, respectively on the
basis of percentage change from initial offer price to final offer price and
percentage premium of the offer price to the trading price per share at six
months prior to announcement, one month prior to announcement, one day prior to
announcement, one day after announcement, the LTM high and the LTM low (compared
to the average premiums in the analyses ultimately relied upon by the GTE
Financial Advisors in rendering their opinions, which were 11.7% (percent change
from initial offer price to final offer price) and 39.8%, 43.3%, 31.5%, 10.9%,
1.8% and 85.4%, respectively) and resulted in median premiums of 4.6% (percent
change from initial offer price to final offer price) and 33.3%, 33.3%, 21.3%,
7.4%, 2.2% and 60.7%, respectively (compared to the average premiums in the
analyses ultimately relied upon by the GTE Financial Advisors in rendering their
opinions, which were 4.6% (percent change from initial offer price to final
offer price) and 33.3%, 33.3%, 20.4%, 7.4%, 2.2% and 58.9%, respectively). The
difference is attributable to the GTE Financial Advisors' examination of one
additional transaction in the analyses relied upon by the GTE Financial Advisors
in rendering their opinions, PacifiCorp's pending buy out of the minority
holders of Pacific Telecom, Inc.
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CERTAIN LITIGATION
Following the public announcement of the proposed Merger on September 8,
1994, four stockholders of the Company filed separate lawsuits in the Court of
Chancery of the State of Delaware in and for New Castle County (the "Court")
against the Company on behalf of the Class A Stockholders alleging that the
announced purchase price of $22.50 per Class A Share was inadequate. On November
16, 1994 the Court entered an order consolidating the actions for all purposes
as In re Contel Cellular Inc. Shareholders' Litigation. On November 29, 1994
counsel for GTE, Contel and CCI Acquisition began discussions with plaintiffs'
counsel regarding the lawsuits. At a subsequent meeting, counsel for GTE, Contel
and CCI Acquisition suggested that plaintiffs' counsel meet with counsel for the
Special Committee and discuss the status and substance of negotiations between
GTE and the Special Committee.
On December 2, 1994 counsel for the Special Committee reviewed at length
with plaintiffs' counsel the steps taken up to that date by the Special
Committee since its formation on September 9, 1994 to determine the fairness of
the proposed Merger on behalf of the Class A Stockholders. In furtherance of
such discussion, counsel for the Special Committee forwarded to plaintiffs'
counsel on December 5, 1995 certain information on a confidential basis that had
been considered by the Special Committee up to that date, including the press
release of GTE and the Company dated September 8, 1994 announcing the Merger,
minutes of the Company's September 9, 1994 meeting of the Board, the Lazard
Freres engagement letter, correspondence received by the Special Committee and a
preliminary draft of the Lazard Freres Report. Subsequent to additional brief
telephone discussions with counsel for the Special Committee, counsel for Lazard
Freres (at the request of counsel for the Special Committee) delivered certain
additional information on a confidential basis to plaintiffs' counsel on
December 14, 1995, including detailed historical financial information of the
Company and the five year and ten year projections prepared by the Company and
summarized below in "PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY".
Plaintiffs' counsel subsequently reviewed the Lazard Freres Report and met with
counsel for the Special Committee, counsel for Lazard Freres and representatives
of Lazard Freres immediately prior to the Special Committee Meeting on December
22, 1994, at which time plaintiffs' counsel discussed with Lazard Freres the
Lazard Freres Report. Plaintiffs' counsel also was present at the Special
Committee Meeting and discussed with the Special Committee the factors
considered by the Special Committee in its negotiation of the price to be paid
for the Class A Shares. After the Special Committee Meeting, plaintiffs' counsel
contacted counsel for GTE, Contel and CCI Acquisition to negotiate the terms of
a settlement.
On December 23, 1994 a tentative settlement agreement was reached with
plaintiffs, subject to confirmatory discovery. The tentative settlement approves
an increased price of $25.50 per Class A Share and the payment of $525,000 in
plaintiffs' counsel fees and expenses. The tentative settlement agreement is
binding on all Class A Stockholders and does not include provisions permitting
Class A Stockholders to opt out of the settlement agreement. The tentative
settlement agreement does not, however, limit the ability of Class A
Stockholders to otherwise challenge corporate actions or to exercise appraisal
rights pursuant to the DGCL. See "DISSENTERS' RIGHTS OF APPRAISAL".
The confirmatory discovery has been completed by plaintiffs' counsel and
all documentation necessary to effect the settlement has been submitted to the
Court. The Court has scheduled a hearing on June 8, 1995 to approve the
settlement.
WRITTEN CONSENT
The Record Date for stockholders entitled to notice of or entitled to give
consent to the Merger was March 16, 1995. As of the Record Date there were
issued and outstanding 9,970,953 Class A Shares and 90,000,000 Class B Shares.
Each Class A Share is entitled to one vote per share and each Class B Share is
entitled to five votes per share. On the Record Date, Contel owned 90,000,000
Class B Shares, which accounted for approximately 98% of the combined voting
power of the outstanding Class A Shares and Class B Shares. Pursuant to the
DGCL, Contel, as holder of record of more than 50% of the combined voting power
of the Class A Shares and Class B Shares, approved the Merger by written consent
on April 10, 1995. Consequently, no action on the part of any other stockholder
of the Company is necessary to authorize or to
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consummate the Merger and no meeting of stockholders of the Company will be held
in connection with the Merger.
MERGER CONSIDERATION
The aggregate consideration to be paid to Class A Stockholders in
connection with the Merger is approximately $254 million. The acquisition of the
minority interest in the Company will be financed through equity contributions
from GTE. GTE will make an equity contribution to Contel and Contel will in turn
make an equity contribution to CCI Acquisition. GTE will finance such equity
contributions through cash, the issuance of short term debt or a combination of
cash and short term debt. Any short term debt required to fund the transaction
is expected to be issued prior to the Effective Time with terms comparable to
those pursuant to which GTE periodically issues short term debt in the ordinary
course of its business.
GTE plans to issue commercial paper to the extent any short term debt is
required to fund the payment of the Merger Consideration. No specific plans have
been made to refinance or repay the short term debt. Such short term debt will
be either retired through internally generated funds or will remain outstanding
until such time as GTE's total short term debt balance is replaced with long
term funding in accordance with GTE's internal policies.
ACCOUNTING TREATMENT OF THE MERGER
The purchase method of accounting will be used to account for the Merger.
After the Merger, GTE, through its ownership of Contel, will increase its
interest in the Company from 90% to 100%. Because the Company's accumulated
losses exceed the amount attributable to the 10% minority ownership interest,
GTE currently is required to record 100% of the net book value and net income or
net loss of the Company in its financial statements. Accordingly, the Merger
will not alter GTE's present interest in such net book value or net income or
loss of the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of cash for Class A Shares purchased pursuant to the Merger
will be a taxable transaction for federal income tax purposes under the Internal
Revenue Code of 1986, as amended (the "Code"), and may also be a taxable
transaction under applicable state, local, foreign or other tax laws.
Generally, a Class A Stockholder will recognize a gain or loss equal to the
difference between such holder's basis in the Class A Shares held by such holder
and the amount of cash received in exchange therefor pursuant to the Merger.
The gain or loss will be treated as a capital gain or loss if the Class A
Shares are held as capital assets. The gain or loss will be considered to be a
long-term capital gain or loss if, on the date the stockholder receives cash for
the Class A Shares, those shares have been held by such stockholder for more
than one year. For 1995, the maximum federal income tax rate for individuals on
net long-term capital gains is 28%, and the maximum individual marginal tax rate
on net short-term capital gains and on ordinary income is 39.6%. The maximum
federal income tax rate for corporations is 35% on all capital gains and
ordinary income. If a Class A Stockholder recognizes a capital loss as a result
of receiving cash for the Class A Shares pursuant to the Merger, such loss will
only be deductible to the extent of other capital gains, plus, in the case of an
individual Class A Stockholder, $3,000 per year.
The federal income tax consequences described in the preceding paragraph
may not apply to (i) Class A Shares acquired upon exercise of incentive stock
options, non-qualified stock options, or otherwise as compensation, (ii) certain
tax-exempt stockholders, (iii) stockholders that are subject to special tax
provisions, such as banks and insurance companies and (iv) certain nonresident
aliens and foreign corporations.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS
INFORMATION STATEMENT. EACH CLASS A STOCKHOLDER IS URGED TO
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CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
HIM OR HER OF THE MERGER (INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS).
The Merger will not cause additional federal tax liability for the Company,
GTE, Contel or CCI Acquisition.
PLANS FOR THE COMPANY; CERTAIN EFFECTS OF THE MERGER
Plans for the Company. Over time GTE intends to combine the operations of
the Company and its other cellular subsidiary, GTE Mobilnet. A merger transition
team has been formed to develop plans for the consolidation. The merger
transition team has recommended that certain functions be centralized in Atlanta
and that area operations focus on tactical operational issues, network planning,
construction/maintenance, revenue goals and sales activities. The merger
transition team is continuing to examine both the nature of GTE's cellular
communications business and the structure of the cellular communications market.
As part of the consolidation process most of the intercompany arrangements
between GTE, Contel and the Company will be restructured or eliminated. For a
description of the material intercompany arrangements see "RELATED PARTY
TRANSACTIONS". It is expected that the Competition Agreement will be terminated
immediately. The details of how other intercompany arrangements will be treated
in the consolidation have not been determined at this time.
Terry S. Parker who served as Chairman of the Company as well as Senior
Vice President of GTE and President of Personal Communications Services -- GTE
Service Corporation, will retire from GTE and resigned from those offices
effective March 1, 1995. GTE plans to consolidate its cellular businesses under
Personal Communications Services -- GTE Service Corporation. Mark S. Feighner
has been named President of Personal Communications Services -- GTE Service
Corporation.
Certain Effects of the Merger on the Class A Stockholders. As a result of
the transaction, the Class A Stockholders will no longer have an equity interest
in the Company and, accordingly, will not continue to participate in the results
of the Company as an equity holder. However, they will receive cash for their
interest. For a discussion of the tax consequences of the Merger on the Class A
Stockholders see "-- Certain Federal Income Tax Consequences of the Merger".
Certain Effects of the Merger on GTE, Contel and the Company. As a result
of the Merger, CCI Acquisition will merge into the Company and cease to exist
and the Company will become wholly owned by Contel. The Merger will permit GTE
to consolidate and realign its cellular businesses over time as described above
under "-- Plans for the Company". The Company's Class A Shares will be
deregistered and delisted as described below. The Merger will permit GTE and
Contel to obtain certain operating efficiencies but will otherwise have no
material effect on the operations of GTE, Contel or the Company.
Deregistration and Delisting. The Company is currently subject to the
informational filing requirements of the Securities Exchange Act of 1934 (the
"Exchange Act"), and is required to file reports and other information with the
Securities and Exchange Commission (the "Commission") relating to its business,
financial statements and other matters. As a result of the Merger, there will
cease to be any public market for the Class A Shares, and after the Effective
Time (as defined below), the Class A Shares will cease to be quoted on the
Nasdaq National Market. When the Merger occurs, the Surviving Corporation is
expected to file with the Commission a Certification and Notice of Termination
of Registration of the Class A Shares under the Exchange Act (the
"Certification"). Upon filing of the Certification, the Surviving Corporation
will no longer be required to file reports and other information under the
Exchange Act. Once the Certification has been filed, the Exchange Act (including
the proxy solicitation provisions of Section 14(a), the periodic reporting
requirements of Section 13 and the short swing trading provisions of Section
16(b)) will no longer apply to the Surviving Corporation. Additionally, upon the
termination of the registration of the Class A Shares, the shares will no longer
constitute "margin securities" under the regulations of the Board of Governors
of the Federal Reserve System.
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THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the provisions of the Merger Agreement, the full text of which
is attached hereto as Exhibit A and incorporated by reference herein.
GENERAL
CCI Acquisition is a wholly owned subsidiary of Contel formed for the
purpose of the Merger. Contel, a wholly owned subsidiary of GTE, has adopted a
plan of liquidation. The Merger Agreement provides, upon the terms and subject
to the conditions set forth therein, that CCI Acquisition will be merged with
and into the Company and that the Company will be the Surviving Corporation.
Pursuant to the Merger, (i) each Class A Share outstanding immediately prior to
the time of the filing of a certificate of merger with the Secretary of State of
the State of Delaware (the "Effective Time"), other than any Class A Shares as
to which appraisal rights have been properly exercised under the DGCL, will be
converted into the right to receive the Merger Consideration, (ii) each Class A
Share held by the Company and each share of common stock of CCI Acquisition
outstanding immediately prior to the Effective Time will be cancelled, and no
payment will be made with respect thereto and (iii) each outstanding Class B
Share will continue to be outstanding.
DESIGNATION OF DIRECTORS; CERTIFICATE OF INCORPORATION AND BY-LAWS
The Merger Agreement provides that the directors of the Company at the
Effective Time will be the directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the certificate of
incorporation and by-laws of the Surviving Corporation. The certificate of
incorporation and by-laws of the Company shall be the certificate of
incorporation and by-laws of the Surviving Corporation.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains standard representations and warranties on
the part of GTE, Contel, CCI Acquisition and the Company relating to, among
other things, due organization and qualification and authority to enter into and
perform the respective obligations of the parties under the Merger Agreement. In
addition, CCI Acquisition represents in the Merger Agreement that it has not
engaged in any business activities other than those related to the acquisition
of the Company.
INDEMNIFICATION AND OTHER COVENANTS
Pursuant to the Merger Agreement, the Company has agreed that it will
indemnify and hold harmless, and, after the Effective Time, the Surviving
Corporation and GTE will indemnify and hold harmless, each present and former
director and officer of the Company (each an "Indemnified Party") against any
losses, claims, damages, liabilities, costs, expenses, judgments and amounts
paid in settlement arising out of or pertaining to any action or omission
occurring prior to the Effective Time (including without limitation, any actions
or omissions which arise out of or relate to the transactions contemplated by
the Merger Agreement) to the full extent permitted under the DGCL, provided that
any determination required to be made with respect to whether an Indemnified
Party's conduct complied with the standards set forth in the DGCL shall be made
in accordance with the DGCL. GTE has agreed to maintain in place the current
policy of insurance covering officers and directors of the Company (or an
equivalent policy) for a period of three years after the Effective Time.
The Company also covenants that, from the date of the Merger Agreement to
the Effective Time, the Company will conduct its business in the ordinary
course.
The Company and CCI Acquisition each covenant that, promptly after the
execution of the Merger Agreement, they will cooperate in the preparation of all
materials necessary to be filed with the Commission in connection with the
Merger. Additionally, each of the parties to the Merger Agreement agrees to use
its commercially reasonable efforts to take all action and to do all things
necessary to consummate the
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transactions contemplated by the Merger Agreement, including using commercially
reasonable efforts to (i) obtain all necessary contractual waivers and consents,
(ii) obtain all necessary consents and authorizations as are required to be
obtained under any federal, state or foreign law or regulations, (iii) defend
all lawsuits or other legal proceedings challenging the Merger Agreement or the
consummation of the transactions contemplated thereby, (iv) lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated by the Merger
Agreement and (v) effect all registrations and filings necessary to consummate
the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, Contel agreed to execute a written
consent as majority stockholder of the Company approving the Merger and the
Merger Agreement.
CONDITIONS TO THE MERGER
The respective obligations of CCI Acquisition, the Company, Contel and GTE
to effect the Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions: (i) the Merger Agreement and the
transactions contemplated by the Merger Agreement shall have been approved by
any necessary vote of the stockholders of the Company and CCI Acquisition in
accordance with applicable law and the terms of the Merger Agreement; (ii) no
statute, rule, regulation, executive order, decree or injunction (preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by any
federal or state court of competent jurisdiction in the United States or other
governmental authority which prohibits the consummation of the Merger remains in
effect after GTE, CCI Acquisition and the Company shall have used all
commercially reasonable efforts to lift any injunction; (iii) no consents of or
filings with any governmental entity shall be required for consummation of the
Merger which have not been obtained or filed and (iv) the Special Committee
shall not have modified or rescinded its recommendation with respect to the
Merger.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company: (i) by mutual written consent of each of the
Company and CCI Acquisition, (ii) by the Company or CCI Acquisition if any court
of competent jurisdiction in the United States or other United States
governmental body has issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the Merger
and such order, decree, judgment, injunction, ruling or other action has become
final and nonappealable or (iii) by the Company or CCI Acquisition if the Merger
does not occur within 120 days of the date of the Merger Agreement unless such
delay is caused by regulatory review of required filings.
AMENDMENT
The Merger Agreement provides that any provision of the Merger Agreement
may be amended by action taken by the Company and CCI Acquisition at any time
prior to the Effective Time, provided that following approval of the Merger
Agreement by the stockholders of the Company or CCI Acquisition any amendment of
the Merger Agreement will be subject to compliance with Section 251(d) of the
DGCL. The prior approval of a majority of the members of the Special Committee
shall also be required in connection with any amendment or modification of the
Merger Agreement by or on behalf of the Company. The Merger Agreement may not be
amended, modified or supplemented except by an instrument in writing signed on
behalf of the party against whom enforcement is sought.
EXTENSION; WAIVER
The Merger Agreement provides that at any time prior to the Effective Time,
the Company, CCI Acquisition, GTE and Contel may (i) extend the time for the
performance of any of the obligations or other acts of the other parties, (ii)
waive any inaccuracies in the representations and warranties of the other
parties contained therein or in any document, certificate or writing delivered
pursuant to the Merger Agreement or (iii) waive compliance by the other parties
with any of the agreements or conditions contained in the Merger Agreement other
than those relating to indemnification. Any agreement on the part of any party
to any such
33
<PAGE> 35
extension or waiver shall be valid only if set forth in writing and signed on
behalf of such party, and, in the case of an extension or waiver by the Company,
if such extension or waiver has been approved by a majority of the members of
the Special Committee.
PAYMENT OF THE MERGER CONSIDERATION
In order to receive $25.50 per Class A Share (less any applicable
withholding taxes) (the "Merger Consideration"), Class A Stockholders must
return certificates representing their Class A Shares along with a completed
Letter of Transmittal that is being mailed to the Class A Stockholders with this
Information Statement. The Letter of Transmittal is being mailed to the Class A
Stockholders with the Information Statement on April 21, 1995. After the Merger
has been consummated, the Disbursing Agent will issue payment of the Merger
Consideration when it receives a holder's Class A Shares and a validly completed
Letter of Transmittal for those shares. Class A Stockholders should not send
their Class A Shares without a completed Letter of Transmittal. Class A
Stockholders who wish to exercise appraisal rights must not surrender their
certificates representing Class A Shares pursuant to the Letter of Transmittal
and must comply with the provisions of Section 262 of the DGCL. See "DISSENTERS'
RIGHTS OF APPRAISAL".
When a Class A Stockholder properly surrenders certificates for Class A
Shares to the Disbursing Agent, those shares will be canceled and the Class A
Stockholder will receive the Merger Consideration. No interest will be paid with
respect to the Merger Consideration. Class A Stockholders who wish to receive
the Merger Consideration promptly after the Merger should send their Class A
Shares along with a properly completed and executed Letter of Transmittal to the
Disbursing Agent as soon as possible.
If the Merger is not consummated within 120 days of the date of this
Information Statement, the Disbursing Agent will return all certificates
representing Class A Shares to the Class A Stockholders.
Any Class A Stockholder who has lost certificates representing their Class
A Shares should make arrangements (which may include the posting of a bond or
other satisfactory indemnification) to replace lost certificates. These
arrangements should be made with the Disbursing Agent, which is also the
transfer agent for the Class A Shares.
The method of delivery of all required documents is at the option and risk
of the Class A Stockholder. If a Class A Stockholder elects to mail certificates
representing Class A Shares, the Company recommends properly insuring such
certificates and sending them by registered mail with return receipt requested.
Under Federal Income Tax Backup and Withholding Rules, unless an exception
applies under applicable laws and regulations, the Disbursing Agent will be
required to withhold and remit to the United States Treasury 31% of the cash
payment for Class A Shares made to a stockholder, a dissenting stockholder or
any other payee pursuant to the Merger, unless such stockholder or other payee
provides his taxpayer identification number (employer identification number or
social security number) and certifies that such number is correct. THEREFORE,
EACH CLASS A STOCKHOLDER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM, AND
IF APPLICABLE, EACH PAYEE SHOULD COMPLETE AND SIGN THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL, IN ORDER TO PROVIDE THE
INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING. FOREIGN
STOCKHOLDERS MAY BE REQUIRED TO SUBMIT A FORM W-8 AND A FURTHER CERTIFICATION IN
ORDER TO AVOID BACKUP WITHHOLDING.
All questions as to the form of all documents and the validity, form and
acceptance of any certificates representing Class A Shares for payment will be
determined by the Disbursing Agent and the Company, whose determination will be
final and binding.
ALL QUESTIONS AND REQUESTS FOR INFORMATION RELATING TO THE PROCEDURE FOR
PAYMENT OF THE MERGER CONSIDERATION FOR THE CLASS A SHARES SHOULD BE DIRECTED TO
THE DISBURSING AGENT -- CHEMICAL BANK, REORGANIZATION DEPARTMENT, P.O. BOX 1916,
GPO STATION, NEW YORK, NY 10116-1916.
34
<PAGE> 36
DISSENTERS' RIGHTS OF APPRAISAL
Under Section 262 of the DGCL ("Section 262"), Class A Stockholders who do
not wish to accept the Merger Consideration have the right to seek appraisal of
the fair value of their Class A Shares in the Delaware Court of Chancery.
Section 262 is set forth in its entirely as Exhibit D to this Information
Statement and incorporated by reference herein. The following discussion is not
a complete statement of the law relating to appraisal rights and is qualified in
its entirety by reference to Exhibit D. This discussion and Exhibit D should be
reviewed carefully by any holder who wishes to exercise statutory appraisal
rights or who wishes to preserve the right to do so, as failure to comply with
the procedures set forth therein will result in the loss of appraisal rights.
Moreover, because of the complexity of the procedures for exercising the right
to dissent and seek appraisal rights, the Company believes that Class A
Stockholders who consider exercising such rights should seek the advice of
counsel. CLASS A STOCKHOLDERS WHO DESIRE TO EXERCISE THEIR APPRAISAL RIGHTS MUST
NOT SURRENDER THEIR CERTIFICATES REPRESENTING CLASS A SHARES PURSUANT TO THE
LETTER OF TRANSMITTAL AND MUST SATISFY ALL THE CONDITIONS SET FORTH IN THE
FOLLOWING PARAGRAPHS.
In order to exercise appraisal rights, a holder must deliver a written
demand for appraisal of Class A Shares to the General Counsel of the Company
within 20 days after the date of the mailing of this Information Statement. This
Information Statement is being mailed on April 21, 1995. The address of the
General Counsel of the Company is Contel Cellular Inc., 245 Perimeter Center
Parkway, Atlanta, Georgia 30346, Attention: General Counsel. The telephone
number of the General Counsel is (404) 804-3400.
A demand for appraisal must be executed by or for the Class A Stockholder
of record, fully and correctly, as such Class A Stockholder's name appears on
the certificate or certificates evidencing such stockholder's Class A Shares. If
the Class A Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, such demand must be executed by the fiduciary.
If the Class A Shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by all record owners.
An authorized agent, including an agent for two or more record owners, may
execute the demand for appraisal for a Class A Stockholder of record; however,
the agent must identify the record owner and expressly disclose the fact that,
in exercising the demand, such person is acting as agent for the owner.
A record owner, such as a broker, who holds Class A Shares as a nominee for
others, may exercise appraisal rights with respect to the Class A Shares held
for all or less than all beneficial owners of Class A Shares as to which such
person is the record owner. In such case the written demand must set forth the
number of Class A Shares covered by such demand. Where the number of Class A
Shares is not expressly stated, the demand will be presumed to cover all Class A
Shares outstanding in the name of such record owner. Beneficial owners who are
not record owners and who intend to exercise appraisal rights should instruct
their record owners to comply strictly with the statutory requirements with
respect to the exercise of appraisal rights.
The Effective Time of the Merger shall be May 12, 1995. From and after the
Effective Time, dissenters may not vote their Class A Shares or receive
distributions on such Class A Shares declared after the Effective Time.
Within 120 days after the Effective Time, but not thereafter, either the
Surviving Corporation or any Class A Stockholder entitled to appraisal rights
under Section 262 (who has notified the Company as described above within 20
days after the date of the mailing of this Information Statement) may file a
petition in the Delaware Court of Chancery demanding a determination of the
value of the Class A Shares of all Class A Stockholders entitled to appraisal,
provided that during the first 60 days after the Effective Time any Class A
Stockholder has the right to withdraw his demand for appraisal and accept the
cash payment of the Merger Consideration provided for in the Merger Agreement.
Within such 120 day period, any dissenting shareholder who has perfected his or
her rights may, by written request to the Surviving Corporation, obtain a list
of the aggregate number of holders of Class A Shares for which appraisal demands
have been received. Such list must be delivered by the Surviving Corporation to
the requesting Stockholder within 10 days of the date on which the request is
received by the Surviving Corporation or the expiration of the period for
delivery of demands under Section 262(d) of the DGCL, whichever is later.
35
<PAGE> 37
Within 20 days after the service upon the Surviving Corporation of a copy
of a petition filed in the Delaware Court of Chancery demanding an appraisal,
the Surviving Corporation is obligated to file in the office of the Register in
Chancery a verified list of all Class A Stockholders who have demanded appraisal
and have not reached agreement as to the value of their Class A Shares with the
Surviving Corporation or withdrawn the demand for appraisal of their Class A
Shares. After notice to such Class A Stockholders, the Court of Chancery is
empowered to conduct a hearing upon the petition of any such Class A
Stockholder. The court shall then determine those Class A Stockholders entitled
to appraisal and appraise the fair value of the Class A Shares held by them,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest to be paid, if any, upon
the amount determined to be the fair value. In determining fair value, the Court
of Chancery is to take into account all relevant factors. In Weinberger v. UOP
Inc., et al., decided February 1, 1983, the Delaware Supreme Court discussed the
considerations that could be considered in determining fair value in an
appraisal proceeding, stating the "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company". The Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger which throw any light on future
prospects of the corporation. Section 262 provides that fair value is to be
"exclusive of any element of value arising from the accomplishment or
expectation of the merger". In Weinberger, the Delaware Supreme Court construed
Section 262 to mean that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered".
Class A Stockholders considering seeking appraisal should bear in mind that
the fair value of their Class A Shares determined under Section 262 could be
more than, the same as or less than the consideration they are to receive
pursuant to the Merger Agreement if they do not seek appraisal of their Class A
Shares, and that an opinion of an investment banking firm as to fairness is not
an opinion as to fair value under Section 262. Costs of the appraisal proceeding
may be taxed upon the parties thereto by the court as the court deems equitable
in the circumstances. Upon application of a dissenting stockholder, the Delaware
Court of Chancery may order that all or a portion of the expenses incurred by
any dissenting Class A Stockholder in connection with the appraisal proceeding,
including without limitation reasonable attorney's fees and the fees and
expenses of experts, be charged pro rata against the value of all Class A Shares
entitled to appraisal.
If a Class A Stockholder does not file a petition for an appraisal within
120 days after the Effective Time, then the right of such Class A Stockholder to
an appraisal shall cease. In addition, if any Class A Stockholder shall deliver
to the Surviving Corporation a written withdrawal of such holder's demand for an
appraisal and an acceptance of the Merger Consideration, either within 60 days
after the Effective Time or thereafter with the written approval of the
Surviving Corporation, then the right of such Class A Stockholder to an
appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in
the Delaware Court of Chancery shall be dismissed as to any Class A Stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
The class action suits brought on behalf of the Class A Stockholders
described in "SPECIAL FACTORS -- Certain Litigation" do not affect the appraisal
rights summarized above.
36
<PAGE> 38
MARKET PRICES AND DIVIDENDS
ON THE COMMON STOCK OF THE COMPANY
The Class A Shares are publicly traded in the over the counter market and
quoted on the Nasdaq National Market under the symbol "CCXLA". There is no
established trading market for the Class B Shares. As of April 18, 1995, the
Company had 371 Class A Stockholders of record. The Company has not paid any
cash dividends on the Class A Shares or Class B Shares, and it is not
anticipated that the Company will pay any cash dividends in the foreseeable
future.
The following table indicates the high and low sales prices for the Class A
Shares during the designated periods:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------ --------
<S> <C> <C> <C> <C>
1994
High.............................. $ 18.75 $ 17.25 $24.00 $ 25.25
Low............................... 14.00 13.00 16.00 23.50
1993
High.............................. $ 18.63 $ 16.25 $18.75 $ 22.00
Low............................... 13.25 13.50 15.50 15.00
1992
High.............................. $ 23.25 $ 18.50 $16.50 $ 19.00
Low............................... 17.25 13.00 13.50 13.25
</TABLE>
On September 7, 1994, the last full day of trading prior to the
announcement of GTE's intention to acquire the Class A Shares, the high, low and
closing sales prices per Class A Share on the Nasdaq National Market were
$18.25, $17.75 and $17.75, respectively.
For the first quarter of 1995, the high and low sales prices per Class A
Share quoted on the Nasdaq National Market were $25.375 and $24.875,
respectively. For the second quarter of 1995 through April 18, 1995, the high
and low sales prices per Class A Share quoted on the Nasdaq National Market were
$25.375 and $25.25, respectively.
37
<PAGE> 39
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The selected consolidated financial data presented below as of December 31,
1990-1994 and for each of the years then ended have been derived from the
audited consolidated financial statements of the Company. The consolidated
financial statements as of December 31, 1994 and 1993, and for each of the years
in the three-year period ended December 31, 1994, have been incorporated by
reference into this Information Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE". This financial information should be read in
conjunction with such financial statements and notes thereto.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues and sales................................. $ 167,178 $ 235,107 $ 286,999 $ 374,014 $ 562,955
Operating income (loss)(1)......................... (38,143) (68,577) (50,113) (28,305) 41,011
Loss from consolidated operations.................. (158,865) (223,726) (196,347) (188,011) (143,332)
Equity in earnings of unconsolidated
partnerships..................................... 19,069 15,687 29,027 37,351 62,792
Gains on sales of partnership interests............ -- 18,387 60,806 48,023 96,607
Net income (loss) before cumulative effect of
change in accounting principles.................. (102,794) (118,900) (73,061) (74,918) 1,871
Cumulative effect of change in accounting
principles(2).................................... -- -- (2,080) (241) --
Net income (loss).................................. (102,794) (118,900) (75,141) (75,159) 1,871
Net income (loss) per share before cumulative
effect of change in accounting principles........ (1.03) (1.19) (0.73) (0.75) 0.02
Net income (loss) per share........................ (1.03) (1.19) (0.75) (0.75) 0.02
Number of weighted average shares outstanding (in
thousands)....................................... 99,931 99,942 99,943 99,948 99,953
OTHER OPERATING DATA:
Capital expenditures............................... 70,841 107,792 183,504 130,042 255,174
Number of ending subscribers....................... 155,285 236,282 327,645 521,226 789,580
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................................... $1,665,395 $1,870,669 $1,930,469 $2,052,984 $2,346,466
Long-term obligations
Notes payable -- affiliates...................... 1,540,000 1,735,034 1,814,327 1,901,726 2,136,263
Other............................................ 14,280 42,280 36,280 36,792 30,792
Stockholders' equity (deficit)..................... 27,525 (91,085) (166,084) (241,221) (238,920)
Book value per share............................... 0.28 (0.91) (1.66) (2.41) (2.39)
</TABLE>
- ---------------
(1) The operating loss in 1991 includes approximately $12 million of integration
costs associated with the merger of Contel with a wholly owned subsidiary of
GTE.
(2) In 1993, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits." In 1992, the
Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
No. 109, "Accounting for Income Taxes."
Earnings were not adequate to cover fixed charges in 1992, 1993 or 1994.
The amount of such deficiency was $128 million, $129 million and $19 million for
the years ended December 31, 1992, 1993 and 1994, respectively.
38
<PAGE> 40
PROJECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY(1)
The Company does not, as a matter of course, publicly disclose projections
as to future revenues or earnings. The following five year projections for the
period 1995-1999 were prepared by management for GTE and internal planning
purposes. These five year projections are included in this Information Statement
because such projections were made available to the Special Committee's
financial advisor and the GTE Financial Advisors. These projections, while
presented with numerical specificity, are based upon a variety of estimates and
assumptions. Such estimates and assumptions, some of which are described below,
involve judgments with respect to, among other things, future economic and
competitive conditions, the ability of the Company to continue operations, and
future business decisions. These judgments, though considered reasonable by the
Company at the time, may not be realized, and are inherently subject to
significant business, economic and competitive uncertainties, many of which are
beyond the control of the Company.
There can be no assurance that the results of operations set forth in such
projections will be realized. Actual results may vary materially from those
shown. In light of the uncertainties inherent in projections of any kind, the
inclusion of projections herein should not be regarded as a representation by
the Company or any other person that the projections will be achieved. The
Company's independent auditors have not examined or compiled the projections
presented herein and accordingly, assume no responsibility for them. Class A
Stockholders are cautioned not to place undue reliance on these projections.
Management has not and does not intend to update or otherwise revise the
projections to reflect changing circumstances existing after the preparation of
the projections included herein or to reflect the occurrence of unanticipated
events that may have occurred.
The significant assumptions underlying these projections are described in
the footnotes following the projections. The projections provided to the Special
Committee's financial advisor and the GTE Financial Advisors were based on
forecasted results for 1994 since actual 1994 results were not available at the
time.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Service revenues(2)................................... $ 679 $ 831 $ 984 $1,140 $1,282
Depreciation and amortization(3)(4)(6)................ 152 181 201 215 228
Operating income...................................... 116 186 263 325 431
Net income (loss)(5).................................. (36) (1) 40 81 153
OTHER OPERATING DATA:
Capital expenditures(3)(6)............................ 298 220 158 135 145
Operating cash flow(6)................................ 268 367 464 540 659
Return on investment(7)............................... 5.4% 7.3% 9.7% 12.1% 16.5%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,(1)
------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................... $2,541 $2,614 $2,602 $2,548 $2,488
Long-term liabilities(8).............................. 2,135 2,183 2,233 2,185 1,983
Stockholders' deficit(9).............................. (289) (290) (250) (169) (16)
</TABLE>
- ---------------
(1) Basis of presentation: The five year projections do not include the effect
of the proposed Merger. The five year projections include the effect of the
1994 acquisitions of 100% of the cellular system serving the Huntsville,
Alabama MSA and Alabama RSA 2, a controlling interest in a company with
interim operating authority to provide cellular service in Alabama RSA 1 and
the acquisition of a controlling interest in California RSA 4. Prior to
completion of these five year projections, ten year projections were
prepared that did not include the effects of the acquisitions referred to
above. These ten year projections were prepared outside of the Company's
normal planning process and therefore, in addition to being inherently less
certain, they received less management review than the five year
projections. The ten year projections, as presented below, were made
available to the Special Committee's financial advisor, GTE
39
<PAGE> 41
and the GTE Financial Advisors. Both the ten year and five year projections
include the effect of the proposed sales in 1994 of certain properties to
NYNEX Mobile Communications Company, including the Company's cellular
interests in the MSAs of Binghamton and Elmira, New York, and New York RSA
3. These sales are expected to close sometime in 1995. Additionally, the
California RSA 4 acquisition is not expected to close until sometime in
1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Service revenues......... $ 656 $ 799 $ 945 $1,092 $1,228 $1,270 $1,287 $1,285 $1,315 $1,347
Depreciation and
amortization........... 148 176 196 210 223 233 248 270 294 315
Operating income......... 103 182 257 316 421 432 425 411 408 404
Net income (loss)........ (37) 4 43 83 154 181 198 216 239 266
OTHER OPERATING DATA:
Capital expenditures..... 298 214 156 134 143 123 135 127 126 100
Operating cash flow...... 251 358 453 526 644 665 673 681 702 719
Return on investment..... 5.4% 7.9% 10.4% 12.8% 17.3% 19.0% 19.7% 20.5% 22.4% 25.6%
</TABLE>
(2) Service revenues: Service revenues include airtime, access, roaming,
long-distance and other service revenues, but do not include revenues for
the sale or rental of cellular equipment. The projections generally assume
that service revenues will increase over prior years due to increasing
volumes; however, revenue per subscriber will continue to decline as an
increasing number of casual users are added to the base and as new entrants
in the wireless communication market compete for subscribers.
(3) Capital expenditures/depreciation: The projections assume that increased
capital will be required to provide high quality, portable network coverage,
to accommodate volume and provide for economies of scale.
(4) Amortization: The five year projections include the amortization of
intangibles related to the acquisitions described in Note 1 above.
(5) Net income: The projections assume a federal income tax rate of 35% for all
periods presented.
(6) Wireless data business: The business plan for the Company's wireless data
business was approved during the process of preparation of the five year
projections. As a result, the parties who received the five year projections
also received data that backed out the wireless data business from the five
year projections. Excluding the wireless data business, projected operating
cash flow is $270, $362, $446, $509 and $616 in 1995-1999, respectively,
projected capital expenditures are $284, $215, $153, $130 and $139 in
1995-1999, respectively, and projected depreciation and amortization is
$151, $177, $196, $209 and $220 in 1995-1999, respectively.
(7) Return on investment: Represents net income (loss) plus interest expense,
net of tax benefit, and minority interest, divided by average investment.
(8) Long term liabilities: The projections assume increases in long-term debt
between 1995 and 1997 reflecting the expected increase in required capital
as described in Note 3. Thereafter, the projections assume that operating
cash flow will be sufficient to satisfy operating requirements and capital
expenditures and enable the Company to gradually repay outstanding debt.
(9) Stockholders' deficit: Stockholders' deficit includes the par value of the
Class A Shares and Class B Shares, additional paid-in capital, the cost of
the Class A treasury stock and the accumulated deficit all as of December
31, 1993, adjusted for the projected net results for the year ended December
31, 1994 and for each of the years included in the above projections.
40
<PAGE> 42
BUSINESS OF THE COMPANY
OVERVIEW
The Company, through its subsidiaries and through partnerships, provides or
participates in the provision of cellular telephone service in various MSAs and
RSAs throughout the United States. As of December 31, 1994, the Company had
interests in cellular telephone systems in the United States representing
approximately 23.9 million "POPs". ("POPs" refer to the population of a market
area multiplied by the Company's percentage ownership in the cellular system
serving that market.)
The Company's 23.9 million POPs include cellular systems which the Company
controls or manages and cellular systems operated by partnerships in which the
Company is not the controlling partner. As of December 31, 1994, approximately
19.5 million of the Company's 23.9 million POPs were located in 59 MSAs. The
Company owned a controlling interest in and managed cellular systems servicing
32 of these 59 MSAs (representing approximately 69% of the Company's MSA POPs).
The Company owned a non-controlling interest in cellular systems servicing the
remaining 27 MSAs.
The remaining 4.4 million of the Company's 23.9 million POPs were located
in 52 RSAs. As of December 31, 1994, the Company owned controlling interests in
entities licensed to provide cellular service in 24 RSAs, owned non-controlling
interests in and managed 10 RSA markets and held non-controlling interests in 18
RSAs. Most of the Company's RSA POPs are in areas adjacent to MSAs currently
served by the Company.
CELLULAR INTERESTS
The Company's controlled MSA interests, non-controlled MSA interests,
controlled RSA interests, managed, non-controlled RSA interests and
non-controlled RSA interests, are set forth below.
<TABLE>
<CAPTION>
COMPANY COMPANY
PERCENTAGE 1994 ESTIMATED POPULATION
MARKET MSA RANK OWNERSHIP POPULATION(1) EQUIVALENTS
- ------------------------------------------- -------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
CONTROLLED MSA INTERESTS
Memphis, TN................................ 36 100.00% 1,030,496 1,030,496
Louisville, KY............................. 37 100.00% 931,413 931,413
Birmingham, AL............................. 41 100.00% 904,436 904,436
Norfolk, VA................................ 43 95.01% 1,020,794 969,856
Nashville, TN.............................. 46 100.00% 1,051,872 1,051,872
Richmond, VA............................... 59 95.01% 797,942 758,125
Fresno, CA................................. 74 92.00% 735,494 676,654
Knoxville, TN.............................. 79 94.12% 544,045 512,055
El Paso, TX................................ 81 100.00% 652,655 652,655
Mobile, AL................................. 83 100.00% 510,599 510,599
Johnson City, TN........................... 85 100.00% 452,809 452,809
Chattanooga, TN............................ 88 100.00% 451,120 451,120
Bakersfield, CA............................ 97 92.00% 618,209 568,752
Davenport, IA.............................. 98 100.00% 362,249 362,249
Newport News, VA........................... 104 95.01% 474,518 450,840
Huntsville, AL............................. 115 100.00% 393,160 393,160
Lexington, KY.............................. 116 100.00% 367,623 367,623
Evansville, IN............................. 119 88.87% 318,396 282,959
Binghamton, NY............................. 122 41.00% 309,418 126,861
Pensacola, FL.............................. 127 100.00% 374,969 374,969
Rockford, IL............................... 131 59.00% 301,026 177,605
Visalia, CA................................ 150 92.00% 347,899 320,067
Roanoke, VA................................ 157 40.00% 239,829 95,932
Clarksville, TN............................ 209 100.00% 172,410 172,410
</TABLE>
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<TABLE>
<CAPTION>
COMPANY COMPANY
PERCENTAGE 1994 ESTIMATED POPULATION
MARKET MSA RANK OWNERSHIP POPULATION(1) EQUIVALENTS
- ------------------------------------------- -------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Tuscaloosa, AL............................. 222 80.40% 161,333 129,705
Florence, AL............................... 226 91.09% 138,073 125,771
Petersburg, VA............................. 235 95.01% 130,585 124,069
Anniston, AL............................... 249 100.00% 116,063 116,063
Gadsden, AL................................ 272 90.00% 101,153 91,038
Elmira, NY................................. 284 100.00% 95,612 95,612
Las Cruces, NM............................. 285 100.00% 153,838 153,838
Owensboro, KY.............................. 293 88.87% 89,993 79,977
-------------- -----------
32 TOTAL CONTROLLED MSAs.................................. 14,350,031 13,511,590
=========== =========
NON-CONTROLLED MSA INTERESTS
Los Angeles, CA............................ 2 11.20% 14,718,542 1,648,477
San Francisco, CA.......................... 7 11.25% 3,832,050 431,106
Washington, DC............................. 8 35.27% 3,783,479 1,334,433
Houston, TX................................ 10 4.40% 3,897,637 171,496
Minneapolis, MN............................ 15 30.00% 2,569,391 770,817
San Jose, CA............................... 27 11.25% 1,541,573 173,427
San Antonio, TX............................ 33 30.00% 1,382,982 414,895
Sacramento, CA............................. 35 0.98% 1,479,697 14,501
Jacksonville, FL........................... 51 14.24% 1,003,832 142,946
Greenville, SC............................. 67 10.83% 667,011 72,237
Oxnard, CA................................. 73 11.20% 697,369 78,105
Austin, TX................................. 75 3.00% 874,277 26,228
Albuquerque, NM............................ 86 49.00% 590,335 289,264
Beaumont, TX............................... 101 4.40% 384,136 16,902
Stockton, CA............................... 107 0.98% 517,135 5,068
Vallejo, CA................................ 111 11.25% 489,096 55,023
Santa Rosa, CA............................. 123 11.25% 411,058 46,244
Santa Barbara, CA.......................... 124 39.00% 378,431 147,588
Salinas, CA................................ 126 11.25% 372,027 41,853
Modesto, CA................................ 142 0.98% 415,482 4,072
Galveston, TX.............................. 170 4.40% 237,243 10,439
Reno, NV................................... 171 0.98% 279,735 2,741
Santa Cruz, CA............................. 174 11.25% 230,417 25,922
Chico, CA.................................. 215 0.98% 197,623 1,937
Anderson, SC............................... 227 10.83% 146,845 15,903
Redding, CA................................ 254 0.98% 167,321 1,640
Yuba City, CA.............................. 274 0.98% 135,636 1,329
-------------- -----------
27 TOTAL NON-CONTROLLED MSAs.............................. 41,400,360 5,944,593
=========== =========
59 TOTAL MSAs............................................. 55,750,391 19,456,183
=========== =========
</TABLE>
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<TABLE>
<CAPTION>
COMPANY COMPANY
PERCENTAGE 1994 ESTIMATED POPULATION
MARKET OWNERSHIP POPULATION(1) EQUIVALENTS
- ------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C>
CONTROLLED RSA INTERESTS
Alabama 2.............................................. 100.00% 127,611 127,611
California 6........................................... 100.00% 28,183 28,183
California 9........................................... 100.00% 140,612 140,612
Kentucky 2............................................. 100.00% 127,813 127,813
Kentucky 7............................................. 100.00% 166,424 166,424
Tennessee 1............................................ 100.00% 297,449 297,449
Tennessee 2............................................ 100.00% 159,071 159,071
Tennessee 3............................................ 100.00% 329,746 329,746
Tennessee 5............................................ 100.00% 336,480 336,480
Tennessee 6............................................ 100.00% 156,906 156,906
Tennessee 7............................................ 100.00% 248,005 248,005
Tennessee 9............................................ 100.00% 67,581 67,581
Virginia 7............................................. 100.00% 38,853 38,853
Virginia 8............................................. 95.01% 84,513 80,296
Virginia 9............................................. 95.01% 87,028 82,685
Virginia 11............................................ 95.01% 111,650 106,079
Virginia 12............................................ 95.01% 33,536 31,863
California 12.......................................... 92.00% 110,515 101,674
Illinois 1............................................. 91.50% 316,168 289,294
Virginia 5............................................. 77.00% 63,347 48,777
Texas 10............................................... 75.00% 29,489 22,117
New Mexico 6-I......................................... 71.43% 60,988 43,564
Virginia 3............................................. 51.00% 183,153 93,408
Virginia 4............................................. 51.00% 66,772 34,054
-------------- -----------
24 TOTAL CONTROLLED RSAs................................. 3,371,893 3,158,545
=========== =========
MANAGED, NON-CONTROLLED RSA INTERESTS
Kentucky 1............................................. 50.00% 187,079 93,540
New Mexico 3........................................... 50.00% 78,980 39,490
New Mexico 5........................................... 43.00% 56,850 24,446
Iowa 4................................................. 38.10% 155,924 59,407
Indiana 7.............................................. 38.09% 220,819 84,119
Indiana 8.............................................. 38.09% 252,283 96,105
Indiana 9.............................................. 38.09% 142,859 54,421
New York 3............................................. 22.50% 492,406 110,791
California 4........................................... 20.83% 338,983 70,610
Iowa 5................................................. 14.29% 108,063 15,442
-------------- -----------
10 TOTAL MANAGED RSAs.................................... 2,034,246 648,371
=========== =========
</TABLE>
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<TABLE>
<CAPTION>
COMPANY COMPANY
PERCENTAGE 1994 ESTIMATED POPULATION
MARKET OWNERSHIP POPULATION(1) EQUIVALENTS
- ------------------------------------------------------- ---------- -------------- -----------
<S> <C> <C> <C>
NON-CONTROLLED RSA INTERESTS
New Mexico 1........................................... 44.44% 251,919 111,953
Illinois 8............................................. 41.13% 331,629 136,399
Illinois 9............................................. 41.13% 152,791 62,843
Illinois 2............................................. 40.00% 145,844 58,338
California 5........................................... 39.00% 218,249 85,117
California 3........................................... 27.73% 143,187 39,706
California 1........................................... 16.67% 212,401 35,407
New Mexico 6-II........................................ 12.50% 123,267 15,408
Illinois 3............................................. 11.77% 204,375 24,055
Virginia 6............................................. 10.00% 213,307 21,331
Minnesota 1............................................ 6.60% 51,014 3,367
Minnesota 2............................................ 6.60% 62,994 4,158
Minnesota 3............................................ 6.60% 57,315 3,783
Minnesota 5............................................ 6.60% 203,906 13,458
Minnesota 6............................................ 6.60% 244,817 16,158
Virginia 10............................................ 1.00% 231,404 2,314
Pennsylvania 3......................................... 0.10% 95,755 96
Pennsylvania 4......................................... 0.10% 97,172 97
-------------- -----------
18 TOTAL NON-CONTROLLED RSAs............................. 3,041,346 633,988
=========== =========
52 TOTAL RSAs............................................ 8,447,485 4,440,904
=========== =========
111 TOTAL MSAs and RSAs.................................. 64,197,876 23,897,087
=========== =========
</TABLE>
- ---------------
(1) Population figures are derived from the 1994 Donnelly marketing population
estimates for counties comprising FCC defined MSAs and RSAs. POP figures
discussed in "SPECIAL FACTORS -- Opinion of Financial Advisor to the Special
Committee" and "SPECIAL FACTORS -- Opinions of Financial Advisors to GTE"
are based on 1993 population estimates which differ, although not materially
in the aggregate, from the figures set forth in the table above.
THE CELLULAR TELEPHONE INDUSTRY
Background. In 1983, the FCC issued the first license to provide cellular
telephone service in the United States. Since that time, cellular telephone
service has become available to all 305 MSAs and 428 RSAs and is available to
most of the population of the United States.
Cellular telephone service was developed as a response to the shortcomings
of conventional mobile telephone systems. By providing high quality, high
capacity communication to and from vehicle-mounted telephones ("mobiles") and
hand-held radio telephones ("portables"), the cellular telephone industry has
grown at a very rapid pace and, as of year-end 1994, exceeded 22 million
subscribers. In 1994, the cellular telephone industry recorded an overall growth
rate of approximately 37%.
Technology. Cellular telephone service achieves its high quality and
capacity capability by dividing the radio spectrum allocated to it by the FCC
into smaller groups or "sets" of frequencies and re-using those frequencies many
times in geographically distant parts of the network. Each set of frequencies is
allocated to a specific geographic area called a "cell." Adjacent cells must use
a different set of frequencies to avoid cell-to-cell frequency interference.
Cells which are sufficiently distant from one another may use the same
frequencies because the radio signals naturally decay over distance until they
reach a low enough level that does not cause interference. Therefore, by use of
frequency planning techniques, the radio spectrum allocated to a cellular
44
<PAGE> 46
provider can be re-used many times in various parts of the system to achieve
high overall call capacities and very low call interference rates.
The cells in a system are connected to a computer-controlled switch called
a mobile telephone switching office ("MTSO"). The MTSO monitors all calls to all
cell sites within the system and routes them to their intended destinations.
Once a call request is received, it is directed to the cell site where the
signal strength is greatest, and is then continuously monitored for quality
signal strength. If the signal strength begins to decline as a vehicle travels
through the radio coverage area of one cell, the MTSO recognizes the cell which
is getting weaker in signal strength and which is the next cell in the path of
the vehicle where signal strength is increasing. At the appropriate point in
time, the MTSO instructs the new cell to take over the call and the original
cell to release the call. This allows an in-process call to achieve a
cell-to-cell handoff with no interruption in the conversation. The MTSO is
capable of achieving this handoff as many times as necessary for each call.
Today's cellular systems utilize digital switching equipment, digital
connections between the switch and the cells, and analog radio frequency ("RF")
technology between the cells and the mobile units. The analog RF technology is
limited because a finite number of channels can be used at any one cell within a
system without causing system problems. The capacity of the system can be
increased in areas with heavy call traffic by either cell splitting or cell
sectoring. Cell splitting involves constructing numerous cells to serve the
coverage area of the original cell. If a large cell is split into four smaller
cells, the total channels available within the original coverage area is
increased up to four times. Cell sectoring is accomplished by replacing a cell's
omni-directional antennas with either three or six directional antennas. This
allows for different sets of channels to be used in each sector. The advantage
of this method is that capacity can be increased in the cell without increasing
system interference and that the same frequency sets can be reused at closer
spacing.
The cellular telephone industry is moving toward implementing digital RF
technology in existing cellular systems. Two technologies are currently under
consideration by major cellular providers -- Time Division Multiple Access
("TDMA") and Code Division Multiple Access ("CDMA"). Either technology will
offer a considerable capacity increase over today's technology.
Market Structure. Historically, FCC regulations provided that licenses
would be granted to two cellular service providers in each MSA and RSA; a
wireline licensee and a non-wireline licensee. Each of the two licensees has 25
MHz of radio spectrum allocated to it, and each further subdivides this spectrum
into 415 two-way channels. Each license is granted for a period of ten years and
is subject to renewal at the end of that period. FCC rules require all cellular
system operators to provide, on a nondiscriminatory basis, cellular service to
resellers who may purchase blocks of numbers at a wholesale rate and resell such
service to the public.
The FCC is in the process of auctioning additional licenses for the
provision of personal communications services in the 1.8 GHz to 1.99 GHz
frequency band. These auctions will not be completed until later this year and
will result in new licensees in each of the Company's service areas. The first
part of the auction was completed on March 13 and resulted in the purchase of 99
licenses by 18 entities. A GTE subsidiary, GTE Macro Communications Corporation,
purchased four licenses (Atlanta, Seattle, Cincinnati and Denver).
THE COMPANY'S CELLULAR OPERATIONS
General. The Company, or partnerships which the Company controls or
manages, provides cellular service in 32 MSAs and 34 RSAs ("Company Controlled
Systems" or "Company Controlled Markets"). Company Controlled Systems represent
approximately 72% of the Company's total POPs. The information provided below
with respect to the Company's cellular operations applies only to the Company
Controlled Systems because these are the only systems whose operations the
Company controls. The Company's non-controlled cellular interests are described
below in "-- Non-Controlled Systems".
The Company obtained the right to provide cellular service in the Company
Controlled Markets either (i) as the result of the FCC's licensing process, or
(ii) through an acquisition program. Since the Company
45
<PAGE> 47
was an affiliate of a wireline telephone company, it had the right to apply for
the wireline cellular license in any area served by its landline affiliate. As a
result of this licensing process, the Company is the wireline licensee in 43
Company Controlled Markets (approximately 8.7 million POPs). As a result of its
acquisition program, the Company is the non-wireline licensee in 23 Company
Controlled Markets (approximately 8.6 million POPs).
In acquiring and developing these cellular telephone systems, the Company
has utilized a strategy of focusing on coastal and sun belt areas where the
Company believes the demographics and business climate are favorable to the
development of cellular systems. In addition, the Company has attempted to
develop cellular systems in regional clusters of significant size.
The cellular telephone systems originally licensed to the Company as part
of the FCC licensing process for MSAs and RSAs are generally located in 5
geographic areas: Virginia, California, the Midwest, Texas/New Mexico, and the
Gulf of Mexico. The cellular telephone systems acquired by the Company are
located in Tennessee, Alabama and Kentucky.
Acquisitions and Divestitures. To further its strategy of acquiring and
developing large regional clusters in economically strong areas, the Company has
developed and followed a program of selling certain properties which are not
strategically located and purchasing certain other properties which are
strategic.
In 1994, the Company purchased 100% of the cellular system serving
Tennessee RSA 2, the remaining 51% interest in the cellular system serving
Tennessee RSA 3, and 100% of the cellular systems serving the Huntsville,
Alabama MSA and Alabama RSA 2, representing an aggregate increase of
approximately 831,000 POPs. Through the purchase of the Huntsville, Alabama MSA,
the Company gained an 80% interest in the partnership that currently operates
the cellular system in Alabama RSA 1A pursuant to an interim operating license.
Additionally, the Company increased its ownership interests in the cellular
systems serving the Tuscaloosa, Alabama MSA, Indiana RSAs 7, 8 and 9, and
Alabama RSA 1B, representing an aggregate increase of approximately 33,000 POPs.
Also during 1994, the Company sold its interest in several northeastern
cellular properties (the "Northeast Properties"), pursuant to the agreement
signed in December 1993 with NYNEX Mobile Communications Company ("NYNEX"),
including the cellular systems serving Manchester, New Hampshire and Burlington,
Vermont MSAs; New Hampshire RSA 2, Vermont RSAs 1 and 2A, and New York RSA 2.
Additional sales completed during 1994 include the Company's interest in Iowa
RSAs 1, 8 and 14, Oregon RSA 5, South Dakota RSAs 5B1 and 6B1, North Carolina
RSA 1, Kentucky RSA 11, California RSA 7 and Alabama RSA 1B. The Company
recognized an aggregated pretax gain of approximately $94.3 million with respect
to the 1994 sales, representing approximately 1,445,000 POPs.
Additionally, as part of the agreement, NYNEX will purchase the Company's
interests in the Binghamton and Elmira, New York MSAs, Pennsylvania RSAs 3A and
4A, and New York RSA 3 pending certain regulatory approvals, which are expected
to be completed in 1995.
After the acquisitions and dispositions described above and the cellular
exchange transaction described below, the Company will provide or participate in
the provision of cellular services in 56 MSA markets and 49 RSA markets with
total combined POPs of approximately 23.3 million.
Cellular Exchange Transaction. The Company, GTE Mobilnet Incorporated, GTE
Mobilnet of Oregon Limited Partnership, GTE Mobilnet of Northwest Oregon Limited
Partnership and GTE Mobile Communications Service Corporation (the "GTE
Parties") have entered into an Asset Exchange Agreement dated February 3, 1995
(the "Asset Exchange Agreement") with US WEST NewVector Group, Inc.
("NewVector"). Pursuant to the Asset Exchange Agreement, the GTE Parties will
exchange certain cellular assets currently owned by them for 100% of the assets,
including the non-wireline cellular license, currently owned by NewVector in San
Diego, California. The Company's assets included in the exchange are its 49%
interest in the cellular assets, including the wireline cellular license, in
Albuquerque, New Mexico, and its 30% interest in the cellular assets, including
the wireline cellular license, in Minneapolis, Minnesota. The assets of the
other GTE Parties consist of (i) 91.4% of the assets of the cellular system
serving the MSAs of Portland
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<PAGE> 48
and Salem, Oregon, (ii) 100% of the assets of the cellular system serving Oregon
RSA 1, and (iii) either a 10% partnership interest in the partnership providing
cellular service in Seattle, Bremerton and Tacoma, Washington or a 10% interest
in the assets of that system. The Company will acquire a 28% interest, as a
tenant-in-common, in the San Diego assets received from NewVector, representing
the equivalent market value of assets exchanged, and will operate the system
pursuant to a management agreement with the other GTE Parties.
Operations
Partnerships. A substantial number of the Company's cellular systems in
MSAs are owned by limited partnerships in which the Company is a general partner
("MSA Partnerships"). Most of these partnerships are governed by partnership
agreements with similar terms, including, among other things, customary
provisions concerning capital contributions, sharing of profits and losses, and
dissolution and termination of the partnership. Most of these partnership
agreements vest complete operational control of the partnership with the general
partner. The general partner typically has the power to manage, supervise and
conduct the affairs of the partnership, make all decisions appropriate in
connection with the business purposes of the partnership, and incur obligations
and execute agreements on behalf of the partnership. The general partner also
may make decisions regarding the timing and amount of cash contributions and
distributions, and the nature, timing and extent of construction, without the
consent of the other partners. The Company owns more than fifty percent (50%) of
almost all of the MSA Partnerships.
A substantial number of the Company's cellular systems in RSAs are also
owned by limited or general partnerships in which the Company is either the
general or managing partner (the "RSA Partnerships"). These partnerships are
governed by partnership agreements with varying terms and provisions. In many of
these partnerships, the noncontrolling partners have the right to vote on major
issues such as the annual budget and system design. In addition, in certain of
these partnerships, the partners have the right to build, under certain
circumstances, independent cells in areas of the RSA not served by the
partnership. Finally, in a few of these partnerships, the Company's management
position is for a limited term (similar to a management contract) and the other
partners in the partnership have the right to change managers, with or without
cause. The Company owns less than fifty percent (50%) of many of the RSA
Partnerships.
The partnership agreements for both the MSA Partnerships and RSA
Partnerships generally contain provisions granting all partners a right of first
refusal in the event a partner desires to transfer a partnership interest. This
restriction on transfer can make these partnership interests difficult to sell
to a third party.
Provision of Services by GTE Personal Communications Services. During
1993, the Company maintained a headquarters staff and two regional staffs which
provided strategic as well as day-to-day operational support to the Company's
operations in its 66 Company Controlled Markets. In 1994, the Company
implemented a new organizational structure pursuant to which the two regional
staffs were replaced with eight area staffs which are located in the Company's
eight clusters of MSAs and RSAs. These eight areas are Virginia, Tennessee,
Kentucky, Alabama, the Midwest, Texas/New Mexico, the Gulf of Mexico and
California. The purpose of this reorganization was to move essential, customer
impacting resources closer to the marketplace to enhance the Company's
competitive advantage and position the Company for future growth.
The Company also receives general and administrative as well as functional
support from GTE Personal Communications Services ("GTE PCS"), a division of
GTE. Pursuant to the Services Agreement, GTE PCS provides finance, accounting,
tax, human resources, legal, regulatory and information management services to
the Company. The Services Agreement provides that the Company is allocated a
portion of GTE PCS expenses based on a two-step process. The first step is the
designation of GTE PCS expenses as cellular or non-cellular. The second step is
the allocation of cellular expenses between the Company and GTE Mobilnet (a GTE
subsidiary also engaged in the cellular communications business) based on a
cost-causative allocation methodology. Under this methodology, pools of costs
are allocated to operating units based on one of several factors. The factors
were developed and applied to cost categories in an effort to allocate the cost
to areas in proportion to the use and benefit of the cost. Under this Services
Agreement, the Company was allocated
47
<PAGE> 49
approximately 34% of GTE PCS's cellular expenses for the twelve months ended
December 31, 1994. See "RELATED PARTY TRANSACTIONS -- Arrangements and
Transactions with Contel and GTE".
Construction and Maintenance. The construction and maintenance of cellular
systems is capital intensive. Although all of the Company's MSA and RSA systems
were operational in 1994, the Company continually adds cells to increase
coverage, provide additional capacity and improve the quality of these systems.
In 1994, the Company completed construction of 153 new cells in Company
Controlled Systems. In addition the Company completed a replacement program for
most of its older technology cell site equipment. The newer technology equipment
provides higher quality and increased flexibility in providing analog services,
as well as positions a platform that supports deployment of future digital
technologies. Total capital expenditures related to Company Controlled Systems
were approximately $253 million in 1994 and are anticipated to be approximately
$315 million in 1995.
Marketing
General. The Company markets its cellular telephone services through
several distribution channels, including independent agents, its direct sales
force and retail outlets. Agents are independent contractors who solicit
customers on a commission basis exclusively for the Company. The Company's
agents are diverse in size and type of business. Most are agents for the Company
within a limited geographic area, while a few agents sell the Company's cellular
service regionally or nationally. Some of the Company's agents sell cellular
products and services exclusively, while others sell a variety of products (such
as radio and electronics equipment). Finally, some of the Company's agents are
small shops, while others are large retail stores. The Company's agents
generally receive a commission payment for each cellular subscriber they add to
the Company's systems.
The Company's direct sales force is made up of sales people who are
employees of the Company and are compensated on an incentive basis. These
employees earn a portion of their compensation as a guaranteed salary and
receive additional payments for each subscriber added. These employees are
required to meet certain quotas set by the Company. Another distribution channel
utilized by the Company is retail outlets, including kiosks and retail stores.
The retail outlets are staffed by salaried employees, part-time employees and
temporary employees who receive a base salary and incentive compensation for
each unit sold. Finally, the Company is constantly attempting to develop new
distribution channels, including telemarketing, co-promotions with various other
industry leaders and door-to-door sales.
National Industry Alliance. During the past several years, cellular
providers have been forming industry alliances to market cellular service
nationwide. Many cellular providers holding non-wireline licenses have become
Cellular One(R) franchisees. Many cellular providers holding wireline licenses
have joined a consortium to market under the brand name, MobiLink(R), a
registered mark of B-Side Carriers L.P. Because the Company holds both wireline
and non-wireline licenses, it participates in both of these alliances. GTE
Mobile is an equity owner in B-Side Carriers L.P. See "RELATED PARTY
TRANSACTIONS".
Subscribers
Total Number. The Company had 789,580 subscribers at December 31, 1994, an
increase of 51.5% over its subscribers at December 31, 1993. The Company's
subscribers at December 31, 1994 were distributed as follows: 33% in Tennessee,
21% in Virginia and 46% in all other markets combined.
Cost of Acquisition. The sales and marketing costs of obtaining new
subscribers are substantial. The Company not only has to pay for advertising,
but also incurs a direct expense for most new subscribers, either in the form of
a commission payment to an agent or a salary/incentive payment to a direct sales
person. In addition, the Company periodically runs promotions which discount the
cost of cellular telephone equipment, or provide some amount of initial access
or airtime free to new subscribers. Each of these promotions results in costs to
the Company. Although the Company has continued to lower the cost of acquisition
per subscriber, it remains one of the Company's single largest expenses.
48
<PAGE> 50
Churn. A factor common throughout the cellular industry is that many
subscribers either completely discontinue cellular service or switch from one
cellular provider to another. In 1994, this monthly turnover or "churn" in the
Company's subscribers averaged 2.7% of all subscribers per month.
Subscriber Revenue. The Company charges its subscribers for access to its
systems, for minutes of use and for enhanced services, such as voice mail and
Mr. RescueSM. A subscriber may purchase each of these services separately for a
set price or may purchase any number of rate plans which bundle these services
in different ways. For example, a high usage subscriber may purchase a
pre-determined number of minutes of use per month for a set fee rather than pay
a fixed amount per minute. Similarly, a user who purchases cellular service for
security reasons may choose a plan with a low monthly access fee but higher per
minute usage fees. Rates charged by the Company and the number and type of rate
plans vary from market to market.
The average monthly revenue the Company receives per subscriber has been
declining over the last several years. The Company believes that this industry
trend is caused in part by an increase in the number of casual and security
cellular users. The Company expects this trend to continue in 1995 and future
years.
Roaming
Roamers. The Company also provides cellular service to cellular users who
are customers of other carriers but who are visiting and wish to use their
cellular phone in the Company's service area ("roamers"). When roamers enter the
Company's service area and attempt to use their cellular phones, the Company,
through participation in an industry clearinghouse, establishes the identity and
validity of the roamer and provides cellular service. The Company then bills the
roamer's home cellular carrier for the service. Likewise, subscribers of the
Company use their cellular phones in areas outside the Company's service areas.
Roaming Revenue. The charges applicable to roamers are determined by
agreements between the Company and other carriers in the industry and vary among
markets and carriers. Roaming revenue has increased over the last several years
and for the year ending December 31, 1994 represented approximately 18.6% of the
Company's total service revenues. This increase is a result of the higher number
of cellular subscribers nationwide and the Company's larger service areas due to
an increasing number of cell sites. The Company believes that roaming will
become more frequent in future years due to advances in intelligent networking
which will simplify roaming procedures and make roaming transparent to the
roamer.
Roamer Fraud. Roamer fraud remains a cellular industry problem. Roamer
fraud occurs when cellular telephone equipment is programmed to conceal the true
identity and location of the user. While the Company and the industry have
implemented an extensive fraud control process, they have not been able to
eliminate fraud altogether.
Employees
At December 31, 1994, the Company had 2,387 employees. Of these, 230 were
employed in the Company's headquarters offices in Atlanta and the remaining
2,157 were employed throughout the Company's Controlled Markets.
NON-CONTROLLED SYSTEMS
The Company participates as a non-controlling general or limited partner in
27 MSAs and 18 RSAs. These interests represent approximately 28% of the
Company's total POPs and are typically limited partnership interests in
partnerships providing cellular service to the larger MSAs, such as Los Angeles,
San Francisco, Washington D.C., Minneapolis and Houston. The partnership
agreements which govern these partnerships are similar to those described under
the heading "-- Operations -- Partnerships". Since these partnership agreements
vest the power to manage, supervise and conduct the affairs of the partnership
with someone other than the Company, there can be no assurance that decisions
made by these partnerships would be the same as those made by the Company under
similar circumstances.
49
<PAGE> 51
INTERNATIONAL INTERESTS
The Company owns a 10% interest in a corporation which provides cellular
service in the Sonora and Sinaloa regions of Mexico. The Company currently
receives services related to international ventures from GTE PCS.
COMPETITION
The cellular telephone industry is part of the much broader
telecommunications industry. Direct competition is in the form of the other
cellular licensee in any given market. Competition between the two cellular
licensees is principally on the basis of service quality, price and coverage
area. In addition to the direct cellular competitor in each market, there will
also be competition from newly emerging Enhanced Specialized Mobile Radio
("ESMR") operators who generally provide dispatch and other private radio
systems. With new digital technology it may be possible for ESMR operators to
provide services in the future that may be difficult to distinguish from
traditional cellular service.
In 1993 the FCC announced that it would license additional frequencies in
the 1.8 GHz to 1.99 GHz frequency band to enable up to six additional wireless
competitors to enter each market. These new licenses consist of two licenses in
each of 51 large, often multi-state, geographical areas known as Major Trading
Areas ("MTAs") and four licenses in each of 492 smaller geographical areas known
as Basic Trading Areas ("BTAs"). Auctions for such licenses began in 1994 and
will continue in 1995. The first part of the auction was completed on March 13
and resulted in the purchase of 99 licenses by 18 entities. A GTE subsidiary,
GTE Macro Communications Corporation, purchased four licenses (Atlanta, Seattle,
Cincinnati and Denver).
REGULATION
General. The FCC regulates the licensing, construction, operation, sale
and acquisition of cellular carriers as well as interconnection arrangements
between cellular carriers. In addition, certain aspects of cellular system
operation, also may be subject to public utility regulation in the state in
which service is provided. Changes in federal or state regulation of the
Company's and its competitors' activities, such as increased rate regulation or
deregulation of interconnection arrangements, could adversely affect the
Company's results. A brief summary of federal and applicable state regulation of
cellular service is set forth below.
Federal Regulation. The FCC initially authorized cellular telephone
service in 1981 by allocating 40 MHz of spectrum for two competing cellular
systems in each market. A 20 MHz block of spectrum was given to each carrier.
Due to cellular's rapid growth, the FCC allocated to each carrier an additional
5 MHz of spectrum in 1986.
The initial cellular licenses granted by the FCC expire ten years from
their date of issuance and are renewable upon application to, and approval by,
the FCC. The FCC has established the criteria under which existing licensees may
have their cellular licenses renewed. Basically, a comparative preference will
be given to any current cellular licensee who can prove that it substantially
used its spectrum for its intended purpose, complied with applicable FCC rules,
and did not engage in substantial relevant misconduct. This preference will be
the most important factor to be considered by the FCC during its hearing on each
license renewal request in comparing the current licensee's application with any
competing applications. Failure to comply with FCC rules can be raised as an
issue during the license renewal proceedings and could result in termination of
the license.
The first of the Company's cellular licenses came up for renewal in October
1994. The Company filed renewal applications for its licenses in Mobile,
Alabama, El Paso, Texas and Richmond and Norfork, Virginia in August 1994. No
entity filed competing applications or oppositions to any of those renewal
applications. The remainder of the Company's licenses will expire over the next
several years, including two which expire in 1995, seven which expire in 1996
and eleven which expire in 1997. All of the licenses expiring between 1995
50
<PAGE> 52
and 1997 are MSA licenses. The Company expects to file renewal applications for
such licenses upon their expiration.
The FCC is currently in the process of auctioning additional licenses in
the 1.8 GHz to 1.99 GHz range for the provision of personal communications
services. Existing cellular companies are eligible to bid at auction for new
licenses. Existing cellular companies may bid for an MTA license where they have
no current substantial cellular holdings and one BTA license in all BTA's,
including areas where they are currently the cellular provider. The first part
of the auction was completed on March 13 and resulted in the purchase of 99
licenses by 18 entities. A GTE subsidiary, GTE Macro Communications Corporation,
purchased four licenses (Atlanta, Seattle, Cincinnati and Denver).
In addition to regulating cellular service, the FCC also regulates
point-to-point microwave facilities which are often utilized by cellular
providers to link base stations to each other and to the MTSO. The Company holds
certain microwave licenses for these purposes. Such licenses, which are issued
for a ten year period, were all renewed by the Company in 1991 for an additional
ten year period. The FCC has issued regulations pursuant to which a significant
portion of the Company's microwave licenses may have to be relocated to a higher
spectrum at the request of a party receiving a license to use such spectrum for
a new technology. The regulations currently provide that incumbent microwave
licensees will be reimbursed for expenses associated with this relocation by the
new licensee.
State Regulation. In 1981, the FCC preempted the states from exercising
jurisdiction in the areas of cellular technical standards and market structure.
Under the Communications Act of 1934, as amended, however, certain aspects of
the economic regulation of common carriers were reserved to the states. The
states had exclusive jurisdiction with respect to charges, classifications,
practices and service or facilities for or in connection with intrastate
communications. Although many states have deregulated cellular service, some
still require the filing of tariffs and operational reports pursuant to statutes
governing public utilities.
In August 1994, certain provisions of the Omnibus Budget Reconciliation Act
of 1993 (the "Omnibus Act") became effective. These provisions prohibited the
states from continuing to exercise jurisdiction over rates and entry into the
wireless telecommunications business. The Omnibus Act did, however, provide that
states could file a petition with the FCC to continue rate jurisdiction. Only
two states in which the Company provides service, California and New York, filed
to continue such regulation. All states may continue to regulate other aspects
of cellular service not preempted by federal law, although it is unclear at this
time the extent to which the other states will continue to do so.
RELATED PARTY TRANSACTIONS
ARRANGEMENTS AND TRANSACTIONS WITH CONTEL AND GTE
The Company, Contel and GTE have a number of financial, operating and other
arrangements and have engaged in certain transactions believed to be of mutual
benefit. The terms of these arrangements have been established by Contel and GTE
in consultation with the Company but are not the result of arms-length
negotiations. The following is a summary of the principal arrangements and
transactions among the Company, Contel and GTE.
Taxes. The Company and GTE have a tax sharing arrangement under which the
Company and its subsidiaries are included in the consolidated federal income tax
returns and in certain state income and franchise tax returns of GTE. Tax
payments, if applicable, are made by the Company to GTE on a quarterly basis
using methods prescribed by GTE. When the Company and its subsidiaries generate
a federal tax loss or excess credits (credits exceeding tax liability), the
Company is reimbursed by GTE on a quarterly basis based on the actual loss or
credit which may be utilized in the consolidated GTE federal tax returns.
With respect to states permitting unitary or combined tax filings, GTE
includes the Company and its subsidiaries in its unitary or combined tax filing.
The Company pays to GTE an amount equal to the state income or franchise tax
that would have been payable by the Company or its subsidiaries if a separate
tax return had been filed.
51
<PAGE> 53
Financing and Cash Management. During 1994, the Company relied on GTE for
its short term and long term cash needs. The Company's long term cash needs are
mainly the result of its acquisition in February 1990 of the cellular telephone
properties previously owned by McCaw Cellular Communications, Inc. in Kentucky,
Alabama and Tennessee (the "Southeast Properties") for approximately $1.3
billion and subsequent borrowings to pay interest on such amount. The $1.3
billion was originally funded by a loan from Contel Capital Corporation, which
at that time was a wholly owned subsidiary of Contel, which became due in July
1991. This original loan was replaced in 1991 with (i) a $700 million loan from
GTE to the Company bearing interest at 10.47% and maturing on March 1, 1998,
(ii) a $150 million loan from GTE Finance Corporation ("GTE Finance"), a wholly
owned subsidiary of GTE, bearing interest at 9.22% and maturing on February 15,
1993 (subsequently refinanced as set forth below), and (iii) a variable rate
note from GTE bearing interest at one and one-half percentage points above GTE's
external cost of borrowing these funds. The interest rate on the notes described
in (i) and (ii) above include an additional one and one-half percentage point of
interest in excess of the interest paid by GTE for these funds.
During 1992, the Company began a program of converting a portion of its
variable rate debt, including a portion of the debt incurred in connection with
the acquisition of the Southeast Properties, to fixed rate debt. As a result of
this program, the Company entered into the following loans in 1992, 1993 and
1994: (i) a $150 million loan from GTE Finance to the Company bearing interest
at 8.38% and maturing on September 25, 1997, (ii) a $150 million loan from GTE
Finance to the Company bearing interest at 8.97% and maturing on September 27,
1999, (iii) a $200 million loan from GTE to the Company bearing interest at
8.56% and maturing on December 31, 1996, (iv) a $200 million loan from GTE to
the Company bearing interest at 8.08% and maturing on December 31, 1995, (v) a
$150 million loan from GTE Finance to the Company bearing interest at 7.71% and
maturing on February 25, 1997 and (vi) a $75 million loan from GTE Finance to
the Company bearing interest at 9.90% and maturing on August 17, 2000. The
interest rates on these loans were comparable to rates for United States
Treasury securities of similar maturity plus 3% per annum at the time such loans
were entered into and are the rates which GTE believes approximate the interest
rates the Company could have obtained in the marketplace from nonaffiliated
lenders. These rates exceed the interest paid by GTE for these funds. As of
December 31, 1994, the Company has borrowed approximately $1.63 billion from GTE
and GTE Finance in fixed rate debt.
The Company fulfills its immediate cash needs with an intercompany note
from GTE (the "ICN"). The amount borrowed and the rate of interest on the ICN
fluctuate daily. As of December 31, 1994 the amount of the ICN was approximately
$495 million. During 1994, the interest rate on the ICN was the daily Prime Rate
quoted in The Wall Street Journal plus .75%, which is the interest rate which
GTE believes approximates the interest rate the Company could have obtained in
the marketplace from nonaffiliated lenders and exceeds the interest paid by GTE
for these funds.
During 1994, the Company also received cash management services from GTE.
Trademark License Agreement. The Company and Contel have entered into an
agreement under which the Company has been granted a non-exclusive,
non-transferrable license and right to use the trademark, service mark and
design "CONTEL CELLULAR". This grant may be terminated at the sole discretion of
Contel and will automatically terminate if Contel no longer owns a majority of
the outstanding common stock of the Company.
General Services. During 1994, the Company received numerous services,
both primary and supplemental, from GTE PCS pursuant to the Services Agreement
between the Company and GTE Mobile. These services were also provided to GTE's
wholly owned cellular subsidiary, GTE Mobilnet, and included accounting,
finance, marketing, human resources, legal, regulatory, governmental relations,
international, engineering, network design and maintenance services. In exchange
for these services, the Company reimbursed GTE PCS for its expenses in
accordance with a cost causative allocation formula which allocated pools of
costs to operating units based on one of several factors. These factors were
developed and applied to cost categories in an effort to allocate expenses to
operating units in proportion to the use and benefit of the underlying cost.
Under this Services Agreement, the Company paid GTE PCS approximately $49.8
million in 1994, which was approximately 34% of all of the expenses of GTE PCS.
52
<PAGE> 54
Insurance. The Company and its officers, directors and employees are
insured under a master contract negotiated by GTE with a private insurance
carrier. The premium due the insurance carrier under this master policy is
allocated among all GTE subsidiaries based on the loss history, total payroll
and total number of vehicles owned by each subsidiary. The premium is paid
directly to the private insurance carrier by each subsidiary.
Competition. The Company, Contel and GTE have entered into the Competition
Agreement pursuant to which Contel and GTE have agreed that they will not engage
in the cellular business except in accordance with the terms of the Competition
Agreement. Under the Competition Agreement, GTE Mobilnet may continue to engage
in the cellular business. However, the Company has a right of first refusal with
respect to future acquisitions by GTE of cellular businesses except for (i)
acquisitions of minority interests in cellular properties held by GTE Mobilnet
and (ii) acquisitions contemplated at the time of the Contel Merger which were
specifically listed in the Competition Agreement. After the Merger is effective,
the Competition Agreement will be terminated.
Equity Ownership in B-Side Carriers L.P. GTE Mobile, an affiliate of GTE,
is an equity owner in B-Side Carriers L.P., a consortium of cellular providers
who market under the brand name MobiLink(R). The Company has an agreement with
B-Side Carriers L.P. to market its wireline properties as MobiLink providers.
See "BUSINESS OF THE COMPANY -- The Company's Cellular Operations -- Marketing".
Government Systems Contract. In 1994 the Company entered into an agreement
with GTE Government Systems Corporation ("GTE Systems") pursuant to which GTE
Systems will construct not less than 40 cell sites for the Company in 1994 and
50 cell sites in 1995. The cost to be charged the Company in 1994 will consist
of (i) an administrative fixed fee of $3.1 million, (ii) reimbursement of
materials and equipment estimated to be $7.8 million and (iii) reimbursement of
external labor costs estimated to be $3.0 million. Contract pricing in 1995 will
be agreed upon by the parties.
Cellular Exchange Transaction. The Company and the GTE Parties entered
into an Asset Exchange Agreement dated February 3, 1995. Under the terms of the
Asset Exchange Agreement the Company will receive a 28% interest in the San
Diego MSA in exchange for certain cellular assets in Albuquerque, New Mexico and
Minneapolis, Minnesota. The Company will operate the San Diego system pursuant
to a management agreement with the other GTE Parties. See "BUSINESS OF THE
COMPANY -- The Company's Cellular Operations".
PAYMENTS TO OPTIONHOLDERS
Certain officers and employees of the Company are participants under the
1987 Key Employee Stock Plan of the Company (the "Option Plan"). Options were
granted under the Option Plan at prices ranging from $15.00 to $22.81. In
connection with the Merger, the Company has offered to make cash payments to
those holders of options to purchase Class A Shares issued pursuant to the
Option Plan who agree to surrender all of their options. Each optionholder who
agrees to surrender all of his or her options will receive a cash payment for
each option cancelled, whether or not currently vested (so long as the exercise
period has not lapsed), equal to $25.50 multiplied by the number of Class A
Shares subject to such options, less the exercise price for such option. If the
vesting of the options is accelerated and if all of the options are surrendered
as described above, the largest payment any single optionholder will receive is
$168,388. See footnote 8 to the table in "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT -- Directors and Executive Officers of the
Company".
RELATIONSHIP BETWEEN GTE DIRECTOR AND PAINEWEBBER
Pursuant to a long standing agreement, Mr. Richard W. Jones, a director of
GTE, has been engaged as a consultant to PaineWebber, one of the GTE Financial
Advisors in connection with the Merger. Mr. Jones is entitled to receive from
PaineWebber an annual retainer of $480,000 for the fiscal year ended July 1,
1995 and an annual retainer of $300,000 for each of the following two fiscal
years.
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<PAGE> 55
TRANSITION ARRANGEMENTS
In order to provide a degree of continuity during the merger transition
process GTE has entered into a Transition Bonus Agreement with two executives,
Dennis L. Whipple, President and Chief Executive Officer of the Company, and
Theodore J. Carrier, Treasurer and Chief Financial Officer of the Company. If
Mr. Whipple agrees to remain with GTE from the date of the Merger until December
31, 1995 or such earlier date as the parties may determine, he will be eligible
for a transition bonus equal to 100% of the sum of his final GTE annual base
rate of pay and the average of his GTE Executive Incentive Plan ("EIP") awards
for the 1993 and 1994 plan years. If Mr. Carrier agrees to remain with GTE
through December 31, 1995, he will be eligible for a transition bonus equal to
100% of the sum of his final GTE annual base rate of pay and the average of his
EIP awards for the 1992, 1993, and 1994 plan years. In addition, Mr. Whipple
will receive an initial bonus of $20,000. In 1995, Mr. Whipple will participate
in the 1994-1995 and 1994-1996 GTE Long-Term Incentive Plan performance bonus
award cycles and the 1995-1997 cycle. If Mr. Whipple remains on the payroll to
the end of the agreed upon period then, in lieu of an award for the 1995-1997
bonus award cycle, he will receive an equivalent bonus award prorated to
December 31, 1995.
Any executive officer whose employment is involuntarily terminated will
receive an enhanced retirement benefit paid out of GTE's qualified pension
assets pursuant to the terms of the GTE's Involuntary Separation Plan ("ISEP").
ISEP provides for a benefit based on length of service and/or grade level and
the benefit will not exceed 120% of one year's salary. Mr. Whipple's and Mr.
Carrier's ISEP benefits also include a non-qualified benefit attributable to
their EIP award for the three previous years.
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<PAGE> 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following table contains certain information regarding the only persons
known to the Company as of the date of this Information Statement to be
beneficial owners of more than 5% of any class of the Company's voting
securities:
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
----------------------------- ----------------------------- ---------- ----------
<S> <C> <C> <C>
Class A Common Stock......... CS First Boston, Inc. 551,480(2) 5.54%
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055(1)
Class B Common Stock......... GTE Corporation 90,000,000(4) 100%
One Stamford Forum
Stamford, CT 06904(3)
</TABLE>
- ---------------
(1) This information was obtained from a Schedule 13G filed with the SEC on
February 13, 1995 by CS First Boston, Inc.
(2) The Schedule 13G filed by CS First Boston, Inc. discloses that CS First
Boston, Inc. exercises sole voting power and sole dispositive power over
these shares.
(3) GTE acquired beneficial ownership of these shares as a result of the merger
of a subsidiary of GTE into Contel. Contel remains the holder of record of
these shares. The address of Contel is One Stamford Forum, Stamford,
Connecticut 06904.
(4) GTE, through Contel, exercises sole voting power and sole dispositive power
over these shares.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The number of Class A Shares and shares of GTE Common Stock owned by each
director and executive officer of the Company as of February 13, 1995 is set
forth in the table below. Unless otherwise indicated, all persons shown in the
table have sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF CLASS A COMMON
STOCK NUMBER OF SHARES OF
BENEFICIALLY GTE COMMON STOCK
NAME OF DIRECTOR OWNED(1) BENEFICIALLY OWNED(2)
------------------------------------------------ ----------------- ---------------------
<S> <C> <C>
Leo Jaffe....................................... 2,000 0
James L. Johnson................................ 0 722,085(3)(4)
Robert E. LaBlanc............................... 4,000 0
Charles R. Lee.................................. 0 634,148(3)(4)
Michael T. Masin................................ 0 75,291(3)(5)
Russell E. Palmer............................... 0 2,000(6)
Irwin Schneiderman.............................. 0 0
Nicholas L. Trivisonno.......................... 0 181,956(3)(4)
James W. Walter................................. 0 12,000(7)
Dennis L. Whipple............................... 18,650(8) 9,724(3)(4)
Charles Wohlstetter............................. 0 232,655
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
CLASS A COMMON STOCK NUMBER OF SHARES OF
BENEFICIALLY GTE COMMON STOCK
NAME OF EXECUTIVE OFFICER OWNED(1) BENEFICIALLY OWNED(2)
---------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Dennis L. Whipple............................. 18,650(8) 9,724(3)(4)
Randall L. Crouse............................. 3,100(8) 5,505(4)
Pamela F. Lopez............................... 1,700(8) 2,585(4)
Laura E. Binion............................... 1,700(8) 1,905(3)(4)
Theodore J. Carrier........................... 15,000(8) 216(4)
Jay M. Rosen.................................. 0 47,995(3)
All directors and officers as a group (the
"Executive Group").......................... 46,150 1,928,065(3)(4)
</TABLE>
- ---------------
(1) Each of these amounts, and all of them in the aggregate, represented less
than 1% of the outstanding Class A Shares as of January 31, 1995. Each
director and executive officer is expected to accept the Merger
Consideration and not exercise appraisal rights.
(2) Each of these amounts, and all of them in the aggregate, represented less
than 1% of the outstanding shares of GTE Common Stock as of January 31,
1995.
(3) Included in the number of shares beneficially owned by Messrs. Johnson, Lee,
Masin, Trivisonno, Whipple, and Rosen and Ms. Binion and the Executive Group
are: 633,300; 553,399; 72,599; 170,233; 5,300; 25,632; 816; and 1,461,279
shares, respectively, which such persons have the right to acquire within 60
days pursuant to stock options.
(4) This amount includes shares acquired through participation in GTE's
Consolidated Employee Stock Ownership Plan and/or Savings Plan.
(5) In addition to the shares of GTE Common Stock shown above, Mr. Masin owns
10,088 GTE Common Stock Units, which are payable in cash under the Deferred
Compensation Plan and Phantom Stock Plan for Non-employee Members of the
Board of Directors of GTE Corporation (the "Deferred Compensation Plan").
Mr. Masin was a non-employee director of GTE prior to joining GTE as Vice
Chairman in 1993.
(6) In addition to the shares of GTE Common Stock shown above, Mr. Palmer owns
1,294 GTE Common Stock Units, which are payable in cash under the Deferred
Compensation Plan.
(7) In addition to the shares of GTE Common Stock shown above, Mr. Walter owns
121,116 GTE Common Stock Units, which are payable in cash under the Deferred
Compensation Plan.
(8) Included in the number of shares beneficially owned by Messrs. Whipple,
Crouse and Carrier and Ms. Lopez and Ms. Binion and the Executive Group are
18,650, 3,100, 15,000, 1,700, 1,700 and 40,150 shares, respectively, which
such persons have the right to acquire upon the exercise of certain stock
options. Pursuant to an offer made by the Company in connection with the
Merger, such options, whether or not currently vested, may be surrendered
for a cash payment equal to $25.50 times the number of shares issuable upon
exercise thereof, less the exercise price applicable thereto. See "RELATED
PARTY TRANSACTIONS -- Payments to Optionholders". If Messrs. Whipple, Crouse
and Carrier and Ms. Lopez and Ms. Binion and the Executive Group agree to
surrender the options they hold, the maximum amount payable to those
individuals and the Executive Group is $168,388, $30,425, $59,760, $15,725,
$16,600 and $290,898, respectively.
DIRECTORS AND EXECUTIVE OFFICERS OF GTE, CONTEL AND CCI ACQUISITION
As set forth in Exhibit E, certain directors and executive officers of the
Company are also directors or executive officers of GTE, Contel or CCI
Acquisition. With the exception of the ownership of Class A Shares by certain of
such persons set forth in "-- Directors and Executive Officers of the Company",
no director or executive officer of GTE, Contel or CCI Acquisition owns any
Class A Shares.
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<PAGE> 58
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document which has been filed by the Company with the
Securities and Exchange Commission is incorporated by reference into this
Information Statement: Annual Report on Form 10-K for the fiscal year ended
December 31, 1994. The File Number for the above referenced document is
Commission File No. 0-16714. All documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, and prior to the date the written consent is used to effect the Merger,
shall be deemed to be incorporated by reference into this Information Statement.
Any statement contained herein or in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Information Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Information Statement, except as so modified or
superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Information Statement is delivered,
upon written or oral request of such person and by first class mail or other
equally prompt means within one business day of receipt of such request, a copy
of any and all of the information that has been incorporated by reference in
this Information Statement (not including exhibits to such information unless
such exhibits are specifically incorporated by reference into such information),
including information contained in documents filed subsequent to April 21, 1995.
Such requests for information should be directed to Contel Cellular Inc., 245
Perimeter Parkway, Atlanta, Georgia 30346, Attention: General Counsel. The
telephone number of the General Counsel is (404) 804-3400.
By Order of the Board of Directors
/s/ JAY M. ROSEN
----------------------------------
Secretary
Atlanta, Georgia
April 21, 1995
57
<PAGE> 59
GLOSSARY
"Asset Exchange Agreement" means the agreement between the GTE Parties and
NewVector pursuant to which the GTE Parties will exchange certain cellular
assets currently owned by them for 100% of the assets, including the
non-wireline cellular license, currently owned by NewVector in San Diego,
California.
"Board" means the board of directors of the Company.
"BTAs" means Basic Trading Areas.
"Cahill" means Cahill Gordon & Reindel.
"California Proceeding" means the proceeding pursuant to which the CPUC is
considering the approval of the merger of the California telephone operations of
GTE and Contel in connection with the GTE/Contel Merger.
"CCI Acquisition" means Contel Cellular Acquisition Corporation, a Delaware
corporation.
"CDMA" means Code Division Multiple Access.
"cellular asset value" means market capitalization less the value of the
Company's non-cellular assets.
"Cellular Exchange" means the exchange contemplated by the Asset Exchange
Agreement.
"cellular license value" means cellular asset value less the value of the
Company's net cellular property, plant and equipment and working capital.
"Certification" means the Certification and Notice of Termination of
Registration of the Class A Shares under the Exchange Act.
"Class A Share" means a share of the Class A Common Stock of the Company,
par value $1.00 per share.
"Class A Stockholders" means the holders of outstanding Class A Shares.
"Class B Share" means a share of the Class B Common Stock of the Company,
par value $1.00 per share.
"clustered RSA net POPs" means POPs serviced by the Company in RSAs that
are contiguous to other MSAs or RSAs serviced by the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Company" means Contel Cellular Inc., a Delaware corporation.
"Company Controlled Markets" means the 32 MSAs and 34 RSAs in which the
Company, or partnerships which the Company controls or manages, provides
cellular service.
"Company Controlled Systems" has the same meaning as Company Controlled
Markets.
"Comparable Companies" means selected publicly traded companies in the
cellular communications business which Lazard Freres analyzed in connection with
the opinion rendered by Lazard Freres to the Special Committee.
"Comparable Group" means the set of companies which PaineWebber and Merrill
Lynch deemed comparable to the Company for the purpose of comparing selected
historical stock and earnings data and financial ratios for the Company to the
corresponding data and ratios of such companies in connection with the opinions
rendered by PaineWebber and Merrill Lynch to the board of directors of GTE.
"Comparable Transactions" means the twenty-six private market sale
transactions about which Lazard Freres reviewed publicly available information
in connection with the opinion rendered by Lazard Freres to the Special
Committee.
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<PAGE> 60
"Competition Agreement" means the Third Restated Competition Agreement
dated March 14, 1991 among Contel, GTE and the Company which, among other
things, allocates cellular business opportunities among GTE's cellular
businesses.
"Court" means the Court of Chancery of the State of Delaware in and for New
Castle County.
"Contel" means Contel Corporation, a Delaware corporation.
"CPUC" means the California Public Utilities Commission.
"December 22 Special Committee Meeting" means the meeting of the Special
Committee on December 22, 1994.
"Deferred Compensation Plan" means the Deferred Compensation Plan and
Phantom Stock Plan for Nonemployee Members of the Board of Directors of GTE.
"DGCL" means the General Corporation Law of the State of Delaware.
"Disbursing Agent" means Chemical Bank, as disbursing agent in connection
with the Merger.
"Draft Merger Agreement" means the December 29, 1994 draft of the Merger
Agreement.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization.
"Effective Time" means May 12, 1995.
"EIP" means the GTE Executive Incentive Plan.
"ESMR" means Enhanced Specialized Mobile Radio.
"Exchange Act" means the Securities Exchange Act of 1934.
"FCC" means the Federal Communications Commission.
"GTE" means GTE Corporation, a New York corporation.
"GTE/Contel Merger" means the March 1991 merger of a wholly owned
subsidiary of GTE into Contel, pursuant to which Contel became a wholly owned
subsidiary of GTE.
"GTE Finance" means GTE Finance Corporation, a Delaware corporation.
"GTE Financial Advisors" means Merrill Lynch and PaineWebber.
"GTE Initial Offer" means GTE's initial offer to acquire the Class A Shares
at $22.50 per share.
"GTE Mobile" means GTE Mobile Communications Service Corporation, a
Delaware corporation.
"GTE Mobilnet" means GTE Mobilnet Incorporated, a Delaware corporation.
"GTE Parties" means, in connection with the Asset Exchange Agreement, the
Company, GTE Mobilnet, GTE Mobilnet of Oregon Limited Partnership, GTE Mobilnet
of Northwest Oregon Limited Partnership and GTE Mobile.
"GTE PCS" means GTE Personal Communications Services, a division of GTE.
"GTE Revised Offer" means GTE's revised offer to acquire the Class A Shares
at $25.50 per share.
"GTE Systems" means GTE Government Systems Corporation.
"ICN" means the intercompany note from GTE with which the Company fulfills
its immediate cash needs.
"Indemnified Party" means, in connection with the Merger Agreement, each
present and former director and officer of the Company.
"ISEP" means GTE's Involuntary Separation Plan.
"Lazard Freres" means Lazard Freres & Co.
"Lazard Freres Report" means the report of Lazard Freres presented by
Lazard Freres to the Special Committee at the December 22 Special Committee
Meeting summarizing the analyses performed by Lazard Freres in rendering its
opinion to the Special Committee.
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"LTM" means the latest twelve months.
"market capitalization" means the total market value of the Company's
equity plus its net debt.
"market capitalization of cellular assets" means total market
capitalization, less minority interests, less estimated public market value of
non-cellular assets.
"market capitalization of MSA cellular assets" means market capitalization
of cellular assets less the value of RSA assets at $90 per POP.
"market values" means the total market value of a company's equity.
"Merger" means the merger of CCI Acquisition with and into the Company.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
December 27, 1994, as amended, among the Company, GTE, Contel, and CCI
Acquisition.
"Merger Consideration" means $25.50 per Class A Share in cash, without
interest, subject to backup withholding taxes.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Merrill Opinion Letter" means the opinion letter of Merrill Lynch
presented to the board of directors of GTE on December 27, 1994.
"mobiles" means vehicle-mounted telephones.
"MSAs" means metropolitan statistical areas.
"MSA Partnerships" means limited partnerships of which the Company is a
general partner, which limited partnerships own cellular systems.
"MTAs" means Major Trading Areas.
"MTSO" means a mobile telephone switching office.
"NewVector" means US WEST NewVector Group, Inc.
"New Subsidiary" means, in connection with alternatives considered by GTE
to effectuate a merger of the Company and a subsidiary of Contel, a subsidiary
of Contel into which the Company would merge.
"non-clustered RSA net POPs" means POPs that are not clustered RSA net
POPs.
"NYNEX" means NYNEX Mobile Communications Company.
"Omnibus Act" means the Omnibus Budget Reconciliation Act of 1993.
"Option Plan" means the 1987 Key Employee Stock Plan of the Company.
"PaineWebber" means PaineWebber Incorporated.
"PaineWebber Opinion Letter" means the opinion letter of PaineWebber
presented to the board of directors of GTE on December 27, 1994.
"P/E multiple" means a price/earnings multiple.
"POPs" means the population of a market area multiplied by the Company's
percentage ownership in the cellular system serving that market.
"portables" means hand-held radio telephones.
"Record Date" means March 16, 1995.
"RF" means analog radio frequency.
"roamers" means cellular users who are customers of other carriers but who
are visiting and wish to use their cellular phone in the Company's service area.
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"RSAs" means rural service areas.
"RSA Partnerships" means limited or general partnerships of which the
Company is either the general or managing partner, which partnerships own
cellular systems in RSAs.
"SEC" means the Securities and Exchange Commission.
"Section 262" means Section 262 of the DGCL.
"Services Agreement" means the agreement dated May 1, 1991, as amended,
between GTE Mobile and the Company.
"Southeast Properties" means the cellular telephone properties previously
owned by McCaw Cellular Communications, Inc. in Kentucky, Alabama and Tennessee.
"Special Committee" means a special committee of three independent
directors of the Company appointed by the Board to negotiate the Merger on
behalf of Class A Stockholders and make a recommendation to the Board in
connection with the transaction.
"Stipulation" means the stipulation entered into by GTE and Contel and
approved by the CPUC which resulted in the approval of the GTE/Contel Merger on
an interim basis.
"Surviving Corporation" means the Company, the corporation that will
survive the Merger.
"TDMA" means Time Division Multiple Access.
"Terminal Value" means the estimated value of a business beyond the final
year of a projected period.
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ---------------- ------------------------------------------------------------------ ------------
<S> <C> <C>
EXHIBIT A -- AGREEMENT AND PLAN OF MERGER, AS AMENDED.......................... A-1
EXHIBIT B -- OPINION OF LAZARD FRERES & CO..................................... B-1
EXHIBIT C-1 -- OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED..... C-1-1
EXHIBIT C-2 -- OPINION OF PAINEWEBBER INCORPORATED............................... C-2-1
EXHIBIT D -- DELAWARE GENERAL CORPORATION LAW SECTION 262...................... D-1
EXHIBIT E -- DIRECTORS AND EXECUTIVE OFFICERS OF GTE
CORPORATION, CONTEL CORPORATION, CONTEL CELLULAR
ACQUISITION CORPORATION AND CONTEL
CELLULAR INC...................................................... E-1
</TABLE>
<PAGE> 64
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 27, 1994 (the
"Agreement") among GTE Corporation, a New York corporation ("GTE"), Contel
Corporation, a Delaware corporation and a wholly-owned subsidiary of GTE
("Contel"), Contel Cellular Acquisition Corporation, a Delaware corporation
("Purchaser") and a wholly-owned subsidiary of Contel, and Contel Cellular Inc.,
a Delaware corporation (the "Company").
R E C I T A L S
WHEREAS, Contel has adopted a plan of liquidation;
WHEREAS, GTE, through its wholly-owned subsidiary, Contel, is presently the
beneficial owner of all of the outstanding shares of Class B Common Stock of the
Company (as defined below);
WHEREAS, Contel desires to acquire beneficial ownership of the remaining
equity interest in the Company (the "Acquisition"), and has caused Purchaser to
be formed to accomplish such purpose;
WHEREAS, Contel and Purchaser intend to accomplish the Acquisition through
a merger of Purchaser with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth herein; and
WHEREAS, the respective Boards of Directors of Purchaser and the Company
and the Special Committee appointed by the Board of Directors of the Company to
consider the Acquisition have approved the Merger upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
The following terms used in this Agreement shall have the following
meanings:
"Acquisition" has the meaning set forth in the recitals hereto.
"Actions" has the meaning set forth in Section 6.2 hereof.
"Certificates" has the meaning set forth in Section 3.2(b) hereof.
"Class A Common Stock" means the Class A Common Stock of the Company, par
value $1.00 per share.
"Class B Common Stock" means the Class B Common Stock of the Company, par
value $1.00 per share.
"Commission" means the Securities and Exchange Commission and/or any other
governmental entity which administers either the Securities Act or the Exchange
Act.
"Common Stock" means the Class A Common Stock and Class B Common Stock.
"Company" has the meaning set forth in the preamble hereto.
"Constituent Corporations" has the meaning set forth in Section 2.1 hereof.
"Contel" has the meaning set forth in the preamble hereto.
"Depositary" has the meaning set forth in Section 3.2 hereof.
"DGCL" means the Delaware General Corporation Law.
"Dissenting Shares" has the meaning set forth in Section 3.1 hereof.
"Effective Time" has the meaning set forth in Section 2.2 hereof.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"GTE" has the meaning set forth in the preamble hereto.
"Indemnified Parties" has the meaning set forth in Section 6.2 hereof.
"Indemnitor" has the meaning set forth in Section 6.2 hereof.
"Information Statement" means the information statement on Form 14C
relating to the Merger, as amended or supplemented, to be prepared and
circulated as contemplated by Section 6.3 hereof.
"Merger" has the meaning set forth in the recitals hereto.
"Merger Consideration" has the meaning set forth in Section 2.4 hereof.
"Permitted Investments" has the meaning set forth in Section 3.2 hereof.
"Purchaser" has the meaning set forth in the preamble hereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Stockholder Materials" has the meaning set forth in Section 6.3 hereof.
"Surviving Corporation" has the meaning set forth in Section 2.1 hereof.
"Transaction Statement" means the transaction statement on Form 13e-3
relating to the Merger, as amended or supplemented, to be prepared and
circulated as provided in Section 6.3 hereof.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the applicable provisions of the DGCL, Purchaser
shall be merged with and into the Company. The Company shall continue as the
surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of Purchaser shall cease (Purchaser and the Company
are sometimes referred to herein as the "Constituent Corporations"). From and
after the Effective Time, the Surviving Corporation shall possess all of the
rights, privileges, immunities and franchises, and shall be responsible and
liable for all of the liabilities and obligations, of each of the Constituent
Corporations, all as set forth in Section 259 of the DGCL.
SECTION 2.2 Effective Time. The Merger shall be consummated by filing with
the Secretary of State of Delaware a Certificate of Merger executed in
accordance with the relevant provisions of the DGCL. The Merger shall become
effective at the time of filing with the Secretary of State of Delaware of a
Certificate of Merger. The date and time when the Merger shall become effective
is herein referred to as the "Effective Time."
SECTION 2.3 Closing. Upon the terms and subject to the conditions hereof,
as soon as practicable after the execution of the written consents of
shareholders contemplated by Sections 6.3(b) and (c) hereof, the Company and
Purchaser shall file the Certificate of Merger in accordance with Section 2.2
hereof, and the Company and Purchaser shall take all such other and further
actions as may be required by law to make the Merger effective.
SECTION 2.4 Conversion of Shares of Common Stock. (a) Each share of Class
A Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares, if any, and shares of Class A Common Stock held
by the Company, Purchaser, Contel or GTE) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and shall
cease to exist and shall be converted into the right to receive cash in the
amount of $25.50 in accordance with Section 3.2 hereof. The
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consideration to be paid in respect of each share of Class A Common Stock in
accordance with the foregoing is hereinafter referred to as the "Merger
Consideration."
(b) Each share of Class A Common Stock held by the Company, Purchaser,
Contel or GTE immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and cease to exist, without any conversion thereof and without any Merger
Consideration being paid with respect thereto.
(c) Each share of Class B Common Stock issued and outstanding immediately
prior to the Effective Time shall by virtue of the Merger, and without any
action on the part of the holder thereof, be converted into one newly issued
share of the Class B Common Stock of the Surviving Corporation.
SECTION 2.5 Cancellation of Purchaser Capital Stock. Each share of common
stock of Purchaser issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger, and without any action on the part of the
holder thereof, be cancelled and cease to exist, without any conversion thereof
and without any Merger Consideration being paid with respect thereto.
SECTION 2.6 Certificate of Incorporation. The Certificate of Incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation, until thereafter
amended.
SECTION 2.7 By-Laws. The By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation,
until thereafter amended.
SECTION 2.8 Directors. The directors of the Company at the Effective Time
shall be the directors of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
SECTION 2.9 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, all such officers to
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
SECTION 2.10 Further Assistance. If at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or thing are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, properties or assets of the Constituent Corporations acquired or to
be acquired as a result of the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of the
Constituent Corporations, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, properties or assets of the Constituent Corporations acquired
or to be acquired as a result of the Merger and otherwise to carry out the
purposes of this Agreement.
ARTICLE III
DISSENTING SHARES; EXCHANGE AND PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Class A Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by a stockholder who
has the right (to the extent such right is available by law) to demand and
receive payment of the fair value of such holder's stock pursuant to Section 262
of the DGCL (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration provided for in Section 2.4(a) of this
Agreement (unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost such right under the DGCL, as the case may
be), but the holder thereof shall
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only be entitled to such rights as are granted by Delaware law. If such holder
shall have so failed to perfect or shall have effectively withdrawn or lost such
right, such holder's shares of Class A Common Stock shall thereupon be deemed to
have been converted at the Effective Time into the right to receive the Merger
Consideration without any interest thereon. If the holder of any shares of Class
A Common Stock shall become entitled to receive payment for such shares pursuant
to Section 262 of the DGCL, such payment shall be made by the Surviving
Corporation.
SECTION 3.2 Payment for Shares. Prior to the Effective Time, Purchaser
shall or, in the event Purchaser shall fail to do so, GTE shall:
(a) designate a bank or trust company to act as Depositary in the Merger
(the "Depositary") and Purchaser or GTE shall enter into a mutually acceptable
agreement with the Depositary pursuant to which, after the Effective Time, the
Depositary will distribute the Merger Consideration on a timely basis and (b)
according to the terms of the agreement with Depositary, deposit or cause to be
deposited with the Depositary cash in the aggregate amount required with respect
to the conversion of shares of Class A Common Stock at the Effective Time
pursuant to Section 2.4(a) hereof. Pending distribution of the cash deposited
with the Depositary, Purchaser may from time to time direct the Depositary to
invest such cash, provided that such investments (i) shall be (A) obligations of
(or guaranteed by) the United States of America or its agencies or
instrumentalities, (B) commercial paper obligations receiving the highest rating
from either Moody's Investors Services, Inc. or Standard & Poor's Corporation,
(C) certificates of deposit, bank repurchase agreements or bankers acceptances
on interest bearing accounts of commercial banks with capital exceeding $250
million (collectively, "Permitted Investments") or (D) money market funds that
are required by their most current prospectus to have at least 80% of their
assets invested in Permitted Investments and (ii) shall have maturities that
will not prevent or delay payments to be made pursuant to this section.
(b) As soon as practicable after the Effective Time, the Depositary shall
be instructed to mail to each record holder (other than any holder of Dissenting
Shares, the Company, Purchaser, Contel and GTE) of a certificate or certificates
that immediately prior to the Effective Time represented shares of Class A
Common Stock (the "Certificates") a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss shall pass, only upon
proper delivery of the Certificates to the Depositary) and instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Depositary of a Certificate, together with
such letter of transmittal duly executed and completed in accordance with the
instructions thereon, the holder of such Certificate shall be entitled to
receive in exchange therefor consideration equal to the number of shares of
Class A Common Stock represented by such Certificate multiplied by the Merger
Consideration and such Certificate shall forthwith be cancelled. No interest
will be paid or accrued on the Merger Consideration. All distributions to
holders of Certificates shall be subject to any applicable income tax
withholding. If the Merger Consideration is to be distributed to a person other
than the person in whose name the Certificate surrendered is registered, it
shall be a condition of such distribution that the Certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer (including
signature guarantees if required by Purchaser) and that the person requesting
such distribution shall pay any transfer or other taxes required by reason of
such distribution to a person other than the registered holder of the
Certificate surrendered or, in the alternative, establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
After one hundred and eighty (180) days following the Effective Time, the
Surviving Corporation shall be entitled to require the Depositary to deliver to
it any cash (including any interest received with respect thereto) that it has
made available to the Depositary and that has not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation only as general creditors thereof with respect to the cash
payable upon due surrender of their Certificates. The Surviving Corporation
shall pay all charges and expenses, including those of the Depositary, in
connection with the distribution of the Merger Consideration for shares of Class
A Common Stock. Until surrendered in accordance with the provisions of this
Section 3.2, each Certificate (other than Certificates representing Dissenting
Shares or shares of Class A Stock held by the Company, Purchaser, Contel or GTE)
shall represent for all purposes the right to receive consideration equal to the
Merger Consideration multiplied by the number of shares of Class A Common Stock
evidenced by such
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Certificate. From and after the Effective Time, holders of Certificates
immediately prior to the Merger shall have no right to vote or to receive any
dividends or other distributions with respect to any shares of Class A Common
Stock that were theretofore represented by such Certificates, other than any
dividends or other distributions payable to holders of record as of a date prior
to the Effective Time, and shall have no other rights in respect thereof other
than as provided herein or by law.
(c) From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of Class A
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, other than Certificates in respect of Dissenting Shares, the rights
to which have been perfected or not withdrawn or lost under the DGCL, they shall
be cancelled and exchanged for Merger Consideration as provided in this Article
III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser, Contel and GTE as
follows:
SECTION 4.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has the requisite corporate power to carry on its business as now conducted.
SECTION 4.2 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Company, and no other corporate proceeding on the part of the Company is
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby (other than the approval of
stockholders of the Company required to consummate the Merger). This Agreement
has been duly executed and delivered by the Company and constitutes its valid
and binding obligation, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CONTEL, GTE AND PURCHASER
SECTION 5.1 Representations and Warranties of Purchaser
Purchaser represents and warrants to the Company as follows:
(a) Organization and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite corporate power to carry
on its business as now conducted.
(b) Authority Relative to this Agreement. It has the requisite
corporate power and authority to enter into this Agreement and to perform
its obligations hereunder. The execution and delivery of this Agreement by
it and the consummation by it of the transactions contemplated hereby have
been duly authorized by its Board of Directors, and no other corporate
proceeding on its part is necessary to authorize the execution, delivery
and performance of this Agreement and the transactions contemplated hereby
(other than the approval of its stockholders required to consummate the
Merger). This Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
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(c) No Prior Activities. It has not incurred, nor will it incur,
directly or through any subsidiary, any liabilities or obligations, except
those incurred in connection with its organization or with the negotiation
of this Agreement and the consummation of the transactions contemplated
hereby, including the Merger. Except as set forth in the previous sentence,
it has not engaged, directly or through any subsidiary, in any business
activities of any type or kind whatsoever, or entered into any agreements
or arrangements with any person or entity.
SECTION 5.2 Representations and Warranties of GTE and Contel.
Contel and GTE each represents and warrants to the Company as follows:
(a) Organization and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite corporate power to carry
on its business as now conducted.
(b) Authority Relative to this Agreement. It has the requisite
corporate power and authority to enter into this Agreement and to perform
its obligations hereunder. The execution and delivery of this Agreement by
it and the consummation by it of the transactions contemplated hereby have
been duly authorized by its Board of Directors, and no other corporate
proceeding on its part is necessary to authorize the execution, delivery
and performance of this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by it and constitutes
its valid and binding obligation, enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditors' rights generally or by general equitable
principles.
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Business of the Company. Except as otherwise
expressly provided in this Agreement, from the date of this Agreement to the
Effective Time, the Company will conduct its business in the ordinary course.
SECTION 6.2 Indemnification, Etc. The Company shall indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation and GTE (the
Company, the Surviving Corporation and GTE, for the purpose of this Section 6.2
being the "Indemnitor") will indemnify and hold harmless, each present and
former director and officer of the Company (the "Indemnified Parties") against
any losses, claims, damages, liabilities, costs, expenses, judgments and amounts
paid in settlement in connection with any claim, action, suit, proceeding or
investigation (collectively, "Actions") arising out of or pertaining to any
action or omission occurring prior to the Effective Time (including without
limitation, any Actions which arise out of or relate to the transactions
contemplated by this Agreement) to the full extent permitted under the DGCL (and
the Indemnitor will advance reasonable expenses to each such person to the full
extent so permitted); provided, however, that any determination required to be
made with respect to whether an Indemnified Party's conduct complied with the
standards set forth in the DGCL shall be made in accordance with the DGCL, and
the Indemnitor shall pay the reasonable fees and expenses incurred in connection
with such determination. If any such Action is brought against any Indemnified
Party (whether arising before or after the Effective Time), (a) the Indemnified
Parties may retain counsel reasonably satisfactory to them and the Indemnitor,
(b) the Indemnitor shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received, and
(c) the Indemnitor and the Indemnified Parties will cooperate in the vigorous
defense of any such matter, provided, that the Indemnitor shall not be liable
for any such settlement effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 6.2, upon learning of any such Action
shall notify the Indemnitor thereof and shall deliver to the Indemnitor an
undertaking to repay any amounts advanced pursuant hereto when and if a court of
competent jurisdiction shall ultimately determine, after exhaustion of all
avenues of appeal, that such Indemnified Party was not entitled to
indemnification under this Section. The Indemnified Parties as a group may
retain only one law firm in each jurisdiction to represent
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them with respect to any such matter unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. GTE and Purchaser agree to
cause to be maintained in effect the present policy of directors' and officers'
liability insurance (or an equivalent policy) covering those persons who are
currently covered by such policy for three years from the Effective Time. This
Section 6.2 shall survive consummation of the Merger.
SECTION 6.3 Stockholders' Approval; SEC Filings.
(a) Subject to the terms and conditions contained herein, this
Agreement and the transactions contemplated hereby shall be submitted by
the Company and Purchaser to their respective stockholders for approval.
Promptly after the execution of this Agreement, the Company and Purchaser
shall together, or pursuant to an allocation of responsibility to be agreed
upon between them, (i) use their best efforts to obtain all information
required to be included in the Information Statement, the Transaction
Statement and related materials (the "Stockholder Materials"), (ii) prepare
and file with the Commission the Stockholder Materials, (iii) use all
reasonable efforts to have the Stockholder Materials cleared by the
Commission as promptly as practicable, and (iv) promptly following
clearance by the Commission, mail the Stockholders Materials to
shareholders of the Company. Purchaser and the Company also shall take any
action required to be taken under state blue sky or securities laws or the
rules and regulations of any securities exchanges or markets on which their
securities are listed for trading in connection with transactions
contemplated hereby including the Merger. The Information Statement and the
Transaction Statement shall, when first mailed to the stockholders of the
Company and as amended or supplemented thereafter, comply as to form in all
material respects with all applicable requirements of federal securities
laws. Purchaser and the Company shall each furnish to the other and their
counsel all such information as may be required to prepare the Stockholders
Materials. All such information provided and to be provided by Purchaser
and the Company respectively, for use in the Stockholder Materials shall,
on the date the Information Statement or Transaction Statement is first
mailed to the Company's stockholders and as amended or supplemented
thereafter, be true and correct in all material respects and shall not omit
to state any material fact necessary in order to make such information in
light of the circumstances in which it was given not misleading, and the
Company and the Purchaser each agree to correct any information provided by
it for use in the Information Statement or Transaction Statement which
shall have become false or misleading in any material respect.
(b) Subject to the terms and conditions set forth in the next
sentence, GTE, the Company and Contel agree that Contel shall execute a
written consent as majority shareholder of the Company approving this
Agreement and the Merger. Such consent shall be executed by Contel only
after the passage of any waiting periods, following the mailing of the
Stockholders' Materials to the stockholders of the Company, required for
compliance with the Securities Act, the Exchange Act, the DGCL and any
other laws, rules or regulations applicable to Company.
(c) Contel shall also execute a written consent as majority
shareholder of Purchaser approving this Agreement and the Merger. Such
consent shall be executed concurrently with the execution of the consent
referred to in paragraph (b).
Section 6.4 Consents. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, and to
cooperate with each other in connection with the foregoing, including using
commercially reasonable efforts to (i) obtain all necessary waivers, consents
and approvals from other parties to loan agreements, leases and other contracts,
(ii) obtain all necessary consents, approvals and authorizations as are required
to be obtained under any federal, state or foreign law or regulations, (iii)
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (v)
effect all registrations and filings necessary to consummate the transactions
contemplated hereby.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by any necessary vote of the stockholders of the Company and
Purchaser in accordance with applicable law and Sections 6.3(b) and (c);
(b) No statute, rule, regulation, executive order, decree or
injunction (preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any federal or state court of competent
jurisdiction in the United States or other governmental authority which
prohibits the consummation of the Merger and remains in effect after GTE,
the Company and Purchaser shall have used all commercially reasonable
efforts to lift any injunction;
(c) No consents of or filings with any governmental entity shall be
required for consummation of the Merger which have not been obtained or
filed; and
(d) The Special Committee of the Board of Directors of the Company
shall not have modified or rescinded its recommendation with respect to the
Merger.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of each of Purchaser and the Company; or
(b) by Purchaser or the Company if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and non-appealable; or
(c) by Purchaser or the Company if the Merger does not occur within
120 days of the date of this Agreement unless the Merger shall not have
occurred primarily as the result of a delay occasioned by review of filings
by regulatory agencies.
SECTION 8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without liability on the part of any
party or its directors, officers, stockholders or partners.
SECTION 8.3 Amendment. This Agreement may be amended by action taken by
Purchaser and the Company at any time, provided that following approval of this
agreement by the shareholders of Company or Purchaser any amendment of this
Agreement shall be subject to compliance with Section 251(d) of the DGCL. The
prior approval of a majority of the members of the Special Committee shall be
required in connection with any amendment or modification by or on behalf of the
Company. This Agreement may not be amended, modified or supplemented except by
an instrument in writing signed on behalf of the party against whom enforcement
is sought.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance with any of the agreements or conditions contained herein, except as
otherwise provided by law and except that the provisions of Section 6.2 hereof
shall not be waived.
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Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing on behalf of such party,
and, in the case of an extension or waiver by the Company, if such extension or
waiver has been approved by a majority of the members of the Special Committee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements made herein shall not survive beyond
the Effective Time, except for the agreements set forth in Sections 2.10, 3.1,
3.2 and 6.2.
SECTION 9.2 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties or any of them with respect to the subject
matter hereof, and (b) shall not be assigned by operation of law or otherwise;
provided that Purchaser may assign its rights and obligations to any wholly
owned, direct or indirect subsidiary, but no such assignment shall relieve
Purchaser of its obligations hereunder if such assignor does not perform such
obligations.
SECTION 9.3 Validity. The validity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
SECTION 9.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses or at such other addresses as
shall be specified by the parties by like notice.
(i) if to the Purchaser, to:
Marianne Drost, Secretary
CCI Acquisition Corporation
One Stamford Forum
Stamford, CT 06904
with a copy to:
Jeffrey Rosen
O'Melveny & Myers
555 Thirteenth Street, N.W.
Suite 500 West
Washington, DC 20004
(ii) if to the Company, to:
Marianne Drost
Contel Cellular Inc.
c/o GTE Corporation
One Stamford Forum
Stamford, CT 06904
with a copy to:
W. Leslie Duffy
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
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<PAGE> 73
(iii) if to Contel, to:
Marianne Drost, Secretary
Contel Corporation
One Stamford Forum
Stamford, CT 06904
(iv) if to GTE, to:
Marianne Drost, Secretary
GTE Corporation
One Stamford Forum
Stamford, CT 06904
SECTION 9.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflict of laws
thereof.
SECTION 9.6 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement, except as expressly provided in Section 6.2 (which is intended to be
for the benefit of the persons referred to therein and may be enforced by such
persons).
SECTION 9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.9 Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
SECTION 9.10 Specific Performance. The parties hereto agree that if for
any reason any party hereto shall have failed to perform its obligations under
this Agreement, then any other party hereto seeking to enforce this Agreement
against such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to any other rights that any party hereto may have against
any other party hereto for any failure to perform its obligations under this
Agreement.
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<PAGE> 74
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
CONTEL CELLULAR INC.
By: /s/ DENNIS WHIPPLE
--------------------------------------
Title: President
CONTEL CELLULAR ACQUISITION
CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
CONTEL CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
GTE CORPORATION
By: /s/ JAMES MURPHY
--------------------------------------
Title: Vice President and Treasurer
A-11
<PAGE> 75
FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
First Amendment to the Agreement and Plan of Merger dated as of January 27,
1995 (the "First Amendment") among GTE Corporation, a New York corporation
("GTE"), Contel Corporation, a Delaware corporation and a wholly-owned
subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Contel, and
Contel Cellular Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, GTE, Contel, Purchaser and the Company have entered into an
Agreement and Plan of Merger dated as of December 27, 1994 (the "Agreement");
WHEREAS, GTE, Contel, Purchaser and the Company desire to amend the
Agreement as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms used herein shall have
the meaning ascribed to them in the Agreement.
Section 2. Amendment of Section 2.3. Section 2.3 of the Agreement is
hereby amended in its entirety to read as follows:
Upon the terms and subject to the conditions hereof, as soon as
practicable after the execution of the written consents of shareholders
contemplated by Sections 6.3(b) and (c) hereof and after the passage of
waiting periods required for compliance with the Securities Act, the
Exchange Act, the DGCL and any other rules or regulations applicable to
the Company, the Company and Purchaser shall file the Certificate of
Merger in accordance with Section 2.2 hereof, and the Company and
Purchaser shall take all such other and further actions as may be
required by law to make the Merger effective.
Section 3. Amendment of Section 6.3(b). Section 6.3(b) of the
Agreement is hereby amended in its entirety to read as follows:
(b) GTE, the Company and Contel agree that Contel shall execute a
written consent as majority shareholder of the Company approving this
Agreement and the Merger as soon as practicable after the execution of
this Agreement.
The Agreement, as amended hereby, shall remain in full force and effect and
shall constitute the agreement of the parties.
A-12
<PAGE> 76
IN WITNESS WHEREOF, each of the parties has caused this First Amendment to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
CONTEL CELLULAR INC.
By: /s/ DENNIS WHIPPLE
--------------------------------------
Title: President
CONTEL CELLULAR ACQUISITION
CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
CONTEL CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
GTE CORPORATION
By: /s/ JAMES MURPHY
--------------------------------------
Title: Vice President and
Treasurer
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
A-13
<PAGE> 77
SECOND AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
Second Amendment to the Agreement and Plan of Merger dated as of March 10,
1995 (the "Second Amendment") among GTE Corporation, a New York corporation
("GTE"), Contel Corporation, a Delaware Corporation and a wholly-owned
subsidiary of GTE ("Contel"), Contel Cellular Acquisition Corporation, a
Delaware Corporation ("Purchaser") and a wholly-owned subsidiary of Contel, and
Contel Cellular Inc., a Delaware Corporation (the "Company").
RECITALS
WHEREAS, GTE, Contel, Purchaser and the Company have entered into an
Agreement and Plan of Merger dated as of December 27, 1994, which Agreement was
amended pursuant to the First Amendment to the Agreement and Plan of Merger
dated as of January 27, 1995 (as amended, the "Agreement"); and
WHEREAS, GTE, Contel, Purchaser and the Company desire further to amend the
Agreement as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms used herein shall have
the meanings ascribed to them in the Agreement.
Section 2. Amendment of Section 2.4. Section 2.4 of the Agreement is
hereby amended in its entirety to read as follows:
SECTION 2.4 CONVERSION OF SHARES OF COMMON STOCK. (a) Each share
of Class A common Stock issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares, if any, and shares of
Class A Common Stock held by the company, Purchaser, Contel or GTE)
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be cancelled and retired and shall cease to exist as
issued and outstanding shares and shall be converted into the right to
receive cash in the amount of $25.50 in accordance with Section 3.2
hereof. The consideration to be paid in respect of each share of Class A
Common Stock in accordance with the foregoing is hereinafter referred to
as the "Merger Consideration."
(b) Each share of Class A Common Stock held by the Company,
Purchaser, Contel or GTE immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be cancelled and retired and cease to exist as an issued and
outstanding share, without any conversion thereof and without any Merger
Consideration being paid with respect thereto.
(c) The shares of Class B Common Stock shall not be changed or
converted in the Merger, and each share of Class B Common Stock issued
and outstanding immediately prior to the Effective Time shall continue
to be outstanding subsequent to the Effective Time as one share of Class
B Common Stock of the Surviving Corporation.
The Agreement, as amended hereby, shall remain in full force and effect and
shall constitute the agreement of the parties.
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<PAGE> 78
IN WITNESS WHEREOF, each of the parties has caused this Second Amendment to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
CONTEL CELLULAR INC.
By: /s/ DENNIS WHIPPLE
--------------------------------------
Title: President
CONTEL CELLULAR ACQUISITION
CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
CONTEL CORPORATION
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
GTE CORPORATION
By: /s/ JAMES MURPHY
--------------------------------------
Title: Vice President and
Treasurer
By: /s/ MARIANNE DROST
--------------------------------------
Title: Secretary
A-15
<PAGE> 79
EXHIBIT B
OPINION OF LAZARD FRERES & CO.
[LAZARD FRERES & CO. LETTERHEAD]
As of December 30, 1994
Special Committee of the
Board of Directors
Contel Cellular Inc.
c/o Contel Corporation
375 Park Avenue, 24th Floor
New York, NY 10152
Dear Members of the Special Committee:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the Class A Common Stock, par value $1.00 per share
(the "Common Stock") of Contel Cellular Inc. ("CCI"), other than GTE Corporation
("GTE"), Contel Corporation ("Contel") and their affiliates, of the
consideration to be received by such holders in the proposed merger (the
"Merger") of CCI and a subsidiary of Contel.
We understand that the Merger is to be effected pursuant to an Agreement
and Plan of Merger, to be entered into among GTE, Contel, a subsidiary of
Contel, and CCI, a draft of which, dated December 29, 1994, has been furnished
to us (the "Merger Agreement"). The terms of the Merger Agreement provide, among
other things, that each share of Common Stock (other than any shares of Common
Stock held by stockholders who properly exercise and perfect stockholder
appraisal rights, if any, under the General Corporation Law of the State of
Delaware, and any shares held by CCI, GTE, Contel or such subsidiary of Contel,
all of which shall be canceled), will be converted into the right to receive
cash in the amount of $25.50. We understand that GTE beneficially owns all of
the issued and outstanding shares of Class B Common Stock, par value $1.00 per
share, of CCI, which represents approximately ninety percent (90%) of the issued
and outstanding equity of CCI.
In connection with this opinion, we have, among other things:
(i) reviewed the terms and conditions of the Merger Agreement;
(ii) analyzed certain historical business and financial information
relating to CCI, including the Annual Reports to Stockholders
and Annual Reports on Form 10-K of CCI for each of the fiscal
years ended December 31, 1991 through 1993, and Quarterly
Reports on Form 10-Q of CCI for the quarters ended March 31,
June 30, and September 30, 1994;
(iii) reviewed certain financial forecasts and other data provided to
us by CCI relating to CCI;
(iv) held discussions with members of the senior managements of CCI
and GTE with respect to the businesses and prospects of CCI and
its strategic objectives;
(v) reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the businesses of CCI;
(vi) reviewed the financial terms of certain recent business
combinations involving companies in lines of businesses we
believe to be generally comparable to CCI, and in other
industries generally;
(vii) reviewed the financial terms of certain recent business
combinations we believe to be comparable in certain respects to
the proposed Merger;
(viii) reviewed the historical stock prices and trading volumes of the
Common Stock; and
(ix) conducted such other financial studies, analyses and
investigations as we deemed appropriate.
B-1
<PAGE> 80
We understand that CCI and an affiliate of GTE propose to exchange certain
cellular assets owned by each of them for certain cellular assets owned by a
publicly-held company (the "Cellular Exchange"). We have received a copy of a
letter dated December 19, 1994 from GTE's Senior Vice President -- Finance
addressed to GTE's financial advisors, Merrill Lynch & Co. and PaineWebber
Incorporated, regarding the Cellular Exchange to the effect that it is an
exchange of equivalent assets and, accordingly, is value neutral to CCI. We have
neither received nor reviewed any other information regarding the Cellular
Exchange, including any financial projections or any other non-public financial
information prepared by GTE or CCI. With your consent, we have assumed that the
Cellular Exchange involves the exchange of assets with substantially equivalent
value and, accordingly, will have an immaterial effect, if any, on CCI.
For purposes of this opinion, with your concurrence, we have ascribed no
value to CCI's rights under either (i) that certain Third Restated Competition
Agreement dated March 14, 1991, among Contel, GTE and CCI, or (ii) that certain
Services Agreement dated May 1, 1991, as amended, by and between GTE Mobile
Communications Service Corporation and CCI.
We have not reviewed any proxy or information statement or similar document
that may be prepared for use in connection with the proposed Merger. In
addition, we were not asked by the Special Committee (the "Special Committee")
of the Board of Directors of CCI to solicit third party indications of interest
in acquiring all or any part of CCI, nor did we seek any such offers.
We have relied upon the accuracy and completeness of the foregoing
financial and other information and have not assumed any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets of CCI. With respect to financial forecasts, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of management of CCI as to the
future financial performance of CCI. We assume no responsibility and express no
view as to such forecasts or the assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the actual Agreement and
Plan of Merger entered into among the parties thereto will be identical in all
material respects to the Merger Agreement, that the Merger will be consummated
on the terms described in the Merger Agreement, without any waiver of any
material terms or conditions by CCI and that obtaining the necessary regulatory
approvals for the Merger will not have an adverse effect on CCI.
Lazard Freres & Co. has acted as financial advisor to the Special Committee
in connection with the proposed Merger and will receive a fee for our services,
a substantial portion of which is payable upon rendering this opinion.
Based on and subject to the foregoing, we are of the opinion that the
consideration to be received by the holders of the Common Stock (other than GTE,
Contel or any of their affiliates) is fair to such holders from a financial
point of view.
Very truly yours,
LAZARD FRERES & CO.
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<PAGE> 81
EXHIBIT C-1
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
[MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD]
December 27, 1994
Board of Directors
GTE Corporation
One Stamford Forum
Stamford, CT 06904
Attention: J. Michael Kelly
Gentlemen:
Contel Corporation, a Delaware corporation ("Contel") and a wholly-owned
subsidiary of GTE Corporation (the "Company"), CCI Acquisition Company, a
Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Contel,
and Contel Cellular Inc., a Delaware corporation (the "Subject Company"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which the Purchaser will be merged into the Subject Company in a transaction
(the "Merger") in which each share of the Subject Company's Class A Common
Stock, par value $1.00 per share (the "Shares"), will be converted into the
right to receive $25.50 in cash per Share.
You have asked us whether, in our opinion, the proposed cash consideration
to be paid for the Shares pursuant to the Merger is fair to the Company from a
financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and
related financial information for the five fiscal years ended December 31,
1993 and the Subject Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31, 1994, June
30, 1994 and September 30, 1994;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Subject Company, furnished to us by the Subject Company;
(3) Conducted discussions with members of senior management of the
Subject Company concerning its businesses and prospects;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be reasonably similar to the Subject Company;
(5) Compared the results of operations of the Subject Company with
that of certain companies which we deemed to be reasonably similar to the
Subject Company;
(6) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(7) Considered the pro forma effect of the Merger on the Company's
capitalization ratios, earnings and cash flow;
(8) Considered a discounted cash flow analysis based on future cash
flows that management of the Subject Company expects the Subject Company to
generate;
(9) Reviewed a draft of the Agreement dated December 20, 1994; and
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<PAGE> 82
(10) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Subject
Company, and we have not assumed any responsibility to independently verify such
information or undertaken an independent appraisal of the assets of the Subject
Company. With respect to the financial forecasts furnished by the Subject
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Subject Company's
management as to the expected future financial performance of the Subject
Company. This opinion does not address the relative merits of the Merger and any
other transactions or business strategies discussed by the Board of Directors of
the Company as alternatives to the Merger or the decision of the Board of
Directors of the Company to proceed with the Merger.
In rendering this opinion, we have not been engaged to act as an agent or
fiduciary of the Company's equity holders or any other third party.
We have, in the past, provided financial advisory services to the Subject
Company and have received fees for the meeting of such services.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash consideration to be paid pursuant to the Merger is fair to the
Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ ALAIN LEBEC
------------------------
ALAIN LEBEC
Managing Director
Investment Banking Group
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<PAGE> 83
EXHIBIT C-2
OPINION OF PAINEWEBBER INCORPORATED
[PAINEWEBBER LETTERHEAD]
December 27, 1994 [PAINEWEBBER LOGO]
Board of Directors
GTE Corporation
One Stamford Forum
Stamford, CT 06904
Attention: J. Michael Kelly
Gentlemen:
Contel Corporation, a Delaware corporation ("Contel") and a wholly-owned
subsidiary of GTE Corporation (the "Company"), CCI Acquisition Company, a
Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Contel,
and Contel Cellular Inc,. a Delaware corporation (the "Subject Company"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which the Purchaser will be merged into the Subject Company in a transaction
(the "Merger") in which each share of the Subject Company's Class A Common
Stock, par value $1.00 per share (the "Shares"), will be converted into the
right to receive $25.50 in cash per Share.
You have asked us whether, in our opinion, the proposed cash consideration
to be paid for the Shares pursuant to the Merger is fair to the Company from a
financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and
related financial information for the five fiscal years ended December 31,
1993 and the Subject Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31, 1994, June
30, 1994, and September 30, 1994;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Subject Company;
(3) Conducted discussions with members of senior management of the
Subject Company concerning its businesses and prospects;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be reasonably similar to the Subject Company;
(5) Compared the results of operations of the Subject Company with
that of certain companies which we deemed to be reasonably similar to the
Subject Company;
(6) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(7) Considered the pro forma effect of the Merger on the Company's
capitalization ratios, earnings and cash flow;
(8) Considered a discounted cash flow analysis based on future cash
flows that management of the Subject Company expects the Subject Company to
generate;
(9) Reviewed a draft of the Agreement dated December 20, 1994; and
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<PAGE> 84
(10) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Subject
Company, and we have not assumed any responsibility to independently verify such
information or undertaken an independent appraisal of the assets of the Subject
Company. With respect to the financial forecasts furnished by the Subject
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Subject Company's
management as to the expected future performance of the Subject Company. This
opinion does not address the relative merits of the Merger and any other
transactions or business strategies discussed by the Board of Directors of the
Company as alternatives to the Merger or the decision of the Board of Directors
of the Company to proceed with the Merger.
In rendering this opinion, we have not been engaged to act as an agent or
fiduciary of the Company's equity holders or any other third party.
We have, in the past, provided financial advisory services to the Company
and have received fees for the rendering of such services.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash consideration to be paid pursuant to the Merger is fair to the
Company from a financial point of view.
Very truly yours,
PAINEWEBBER INCORPORATED
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<PAGE> 85
EXHIBIT D
DELAWARE GENERAL CORPORATION LAW SECTION 262
SEC. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except: a. shares of stock of the corporation surviving
or resulting from such merger or consolidation, or depository receipts in
respect thereof; b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository receipts
at the effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market system
security on an inter-dealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders; c.
Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or d.
Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a
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<PAGE> 86
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his share. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1
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<PAGE> 87
week before the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by publications shall be
approved by the Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing of such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such directions, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders, entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of the
shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of the
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-3
<PAGE> 88
EXHIBIT E
DIRECTORS AND EXECUTIVE OFFICERS OF GTE CORPORATION,
CONTEL CORPORATION, CONTEL CELLULAR ACQUISITION
CORPORATION AND CONTEL CELLULAR INC.
1. Directors and Executive Officers of GTE Corporation. The following
table sets forth the name, business address, present principal occupation and
the other material occupations, positions, offices or employments for the past
five years (if applicable) of each director and executive officer of GTE
Corporation, a New York corporation ("GTE"). Each director and executive officer
of GTE is a citizen of the United States. GTE, through its subsidiaries,
provides local telephone service, cellular mobile telephone service,
directories, and other telecommunications related products and services. GTE
also has subsidiaries which offer financial and related services primarily to
GTE operating companies. The address of GTE's principal executive offices is One
Stamford Forum, Stamford, Connecticut 06904.
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
GTE -- DIRECTORS
Edwin L. Artzt..................... Chairman of the Board and Not applicable
The Procter & Gamble Company Chief Executive Officer of The
One Procter & Gamble Plaza Procter & Gamble Company
Cincinnati, OH 45202-3315
James R. Barker.................... Chairman of the Interlake Not applicable
Mormac Marine Group, Inc. Steamship Co.; Vice Chairman
Three Landmark Square of Mormac Marine Group, Inc.;
Stamford, CT 06901 Vice Chairman of Moran Towing
Company
Edward H. Budd..................... Chairman of the Board of the Chairman of Travelers
The Travelers Insurance Companies Executive Committee and Insurance Group, Inc.
One Tower Square Director of The Travelers from January 1994 to
Hartford, CT 06138-1100 Insurance Group, Inc. September 1994. Chairman
of The Travelers, Inc.
since 1982
Kent B. Foster..................... Vice Chairman of GTE and Not applicable
GTE President of GTE Telephone
600 Hidden Ridge, HQE04J17 Operations Group
Irving, TX 75308
James L. Johnson................... Chairman Emeritus of GTE since Chairman and Chief
600 Hidden Ridge 1992 Executive of GTE since
Irving, TX 75038 1988
Richard W. Jones................... Business Consultant, Not applicable
Business Consultant PaineWebber Incorporated
PaineWebber Incorporated
725 S. Figueroa Street
Suite 4100
Los Angeles, CA 90017
James L. Ketelsen.................. Retired Chairman of Tenneco Chairman and Chief
Tenneco Inc. Inc. since 1992 Executive Officer of
Tenneco Building Tenneco Inc. since 1978
1010 Milam Street
Houston, TX 77002
Charles R. Lee..................... Chairman and Chief Executive President and Chief
GTE Officer of GTE since 1992 Operating Officer of GTE
One Stamford Forum since 1989
Stamford, CT 06904
</TABLE>
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<PAGE> 89
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
Michael T. Masin................... Vice Chairman of GTE since Managing Partner of the
GTE 1993 New York office of the
One Stamford Forum law firm of O'Melveny &
Stamford, CT 06904 Myers and a partner with
that firm since 1977
Sandra O. Moose.................... Senior Vice President and Not applicable
The Boston Consulting Group, Inc. Chair of the East Coast as
135 E. 57th Street well as New York Office
New York, NY 10022 Administrator and Director of
The Boston Consulting Group,
Inc.
Russell E. Palmer.................. Chairman and Chief Executive Dean, The Wharton School,
The Palmer Group Officer of The Palmer Group University of
3600 Market Street since 1990 Pennsylvania from 1983
Philadelphia, PA 19104 until 1990
Howard Sloan....................... Private Investor Not applicable
375 Park Avenue
New York, NY 10152
Robert D. Storey................... Partner with the Cleveland law Partner with the
Thompson, Hine & Flory firm of Thompson, Hine & Flory Cleveland law firm of
1100 National City Bank Bldg. since 1993 McDonald, Hopkins, Burke
629 Euclid Avenue & Haber Co., L.P.A. since
Cleveland, OH 44114 1971
James W. Walter.................... Chairman of Walter Industries, Not applicable
Walter Industries, Inc. Inc.
1500 N. Dale Mabry Highway
Tampa, FL 33607
Charles Wohlstetter................ Vice Chairman of GTE since Chairman of the Board of
375 Park Avenue 1991 Contel Corporation since
New York, NY 10152 1960
</TABLE>
GTE -- EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
Charles R. Lee..................... See prior entry See prior entry
GTE
One Stamford Forum
Stanford, CT 06904
Charles Wohlstetter................ See prior entry See prior entry
GTE
375 Park Avenue
New York, NY 10152
Kent B. Foster..................... See prior entry See prior entry
GTE
600 Hidden Ridge
Irving, TX 75308
Michael T. Masin................... See prior entry See prior entry
GTE
One Stamford Forum
Stanford, CT 06904
Nicholas L. Trivisonno............. Executive Vice President - Senior Vice President -
GTE Strategic Planning and Group Finance since 1989
One Stamford Forum President of GTE since 1993
Stamford, CT 06904
</TABLE>
E-2
<PAGE> 90
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
William P. Barr.................... Senior Vice President and Partner in the Washington
GTE General Counsel of GTE since D.C. office of the law
One Stamford Forum 1994 firm of Shaw, Pittman,
Stamford, CT 06904 Potts & Trowbridge since
1993; Attorney General of
the United States from
1991 to 1993; previously
Deputy Attorney General
of the United States
Bruce Carswell..................... Senior Vice President - Human Not applicable
GTE Resources and Administration
One Stamford Forum of GTE
Stamford, CT 06904
J. Michael Kelly................... Senior Vice Vice President and
GTE President - Finance of GTE Controller of GTE since
One Stamford Forum since 1994 December 1991; Vice
Stamford, CT 06904 President - Finance and
Business Development for
GTE Telecommunications
Products and Services
Group since 1991; Vice
President and Controller
for Contel Corporation
since 1990
John P.Z. Kent..................... Vice President - Taxes of GTE Not applicable
GTE
One Stamford Forum
Stamford, CT 06904
James Murphy....................... Vice President and Treasurer Not applicable
GTE of GTE
One Stamford Forum
Stamford, CT 06904
G. Bruce Redditt................... Vice President - Public Vice President - Public
GTE Affairs and Communications of Affairs for the Telephone
One Stamford Forum GTE since 1994 Operations Group of GTE
Stamford, CT 06904 Service Corporation since
1991, previously Vice
President - Corporate
Communications for Contel
Corporation
Samuel F. Shawhan, Jr.............. Vice President - Government Not applicable
GTE Affairs of GTE
1850 M Street, N.W.
Washington, D.C. 20036
William D. Wilson.................. Vice President and Controller Area Vice President -
GTE of GTE since 1994 General Manager for the
One Stamford Forum East Area of the
Stamford, CT 06904 Telephone Operations
Group of GTE Service
Corporation since 1993;
previously Vice
President - Business
Planning for the
Telephone Operations
Group of GTE Service
Corporation
Marianne Drost..................... Secretary of GTE Not applicable
GTE
One Stamford Forum
Stamford, CT 06904
</TABLE>
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<PAGE> 91
2. Directors and Executive Officers of Contel Corporation. The following
table sets forth the name, business address, present principal occupation and
the other material occupations, positions, offices or employments for the past
five years (if applicable) of each director and executive officer of Contel
Corporation, a Delaware corporation ("Contel"). Each director and executive
officer of Contel is a citizen of the United States. Contel, through its
subsidiaries, provides telecommunications products and services. The address of
Contel's principal executive offices is One Stamford Forum, Stamford,
Connecticut 06904.
CONTEL CORPORATION -- DIRECTORS
<TABLE>
<S> <C> <C>
Bruce Carswell..................... See prior entry See prior entry
Contel Corporation
One Stamford Forum
Stamford, CT 06904
Charles R. Lee..................... See prior entry See prior entry
Contel Corporation
One Stamford Forum
Stamford, CT 06904
Nicholas L. Trivisonno............. See prior entry See prior entry
Contel Corporation
One Stamford Forum
Stamford, CT 06904
</TABLE>
CONTEL CORPORATION -- EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
J. Michael Kelly................... See prior entry See prior entry
President
Contel Corporation
One Stamford Forum
Stamford, CT 06904
James Murphy....................... See prior entry See prior entry
Vice President and Treasurer
Contel Corporation
One Stamford Forum
Stamford, CT 06904
Marianne Drost..................... See prior entry See prior entry
Secretary
Contel Corporation
One Stamford Forum
Stamford, CT 06904
</TABLE>
3. Directors and Executive Officers of Contel Cellular Acquisition
Corporation. The following table sets forth the name, business address, present
principal occupation and the other material occupations, positions, offices or
employments for the past five years (if applicable) of each director and
executive officer of Contel Cellular Acquisition Corporation, a Delaware
corporation ("CCI Acquisition"). Each director and executive officer is a
citizen of the United States. CCI Acquisition was incorporated in December 1994
for the purpose of acquiring the Company and has not engaged in any business
activities other than those relating to the Merger. The address of CCI
Acquisition's principal executive office is One Stamford Forum, Stamford,
Connecticut 06904.
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
CCI ACQUISITION -- DIRECTORS
J. Michael Kelly................... See prior entry See prior entry
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
</TABLE>
E-4
<PAGE> 92
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
James Murphy....................... See prior entry See prior entry
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
Marianne Drost..................... See prior entry See prior entry
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
</TABLE>
CCI ACQUISITION -- EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
J. Michael Kelly................... See prior entry See prior entry
President
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
James Murphy....................... See prior entry See prior entry
Vice President and Treasurer
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
Marianne Drost..................... See prior entry See prior entry
Secretary
CCI Acquisition
One Stamford Forum
Stamford, CT 06904
</TABLE>
4. Directors and Executive Officers of Contel Cellular Inc. The following
table sets forth the name, business address, present principal occupation and
the other material occupations, positions, offices or employments (if
applicable) for the past five years of each director and executive officer of
Contel Cellular Inc., a Delaware corporation (the "Company"). Each director and
executive officer of the Company is a citizen of the United States. The Company,
through its subsidiaries and through partnerships, provides or participates in
the provision of cellular telephone service in various areas throughout the
United States. The address of the Company's principal executive offices is 245
Perimeter Center Parkway, Atlanta, Georgia 30346.
COMPANY -- DIRECTORS
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
Leo Jaffe.......................... Chairman Emeritus of Columbia Not applicable
425 East 58th Street Pictures, Inc.
New York, NY 10022
James L. Johnson................... See prior entry See prior entry
600 Hidden Ridge
Irving, TX 75038
Robert LaBlanc..................... President of Robert E. LaBlanc Not applicable
323 Highland Avenue Associates, Inc.
Ridgewood, NJ 07450
Charles R. Lee..................... See prior entry See prior entry
GTE
One Stamford Forum
Stamford, CT 06904
Michael T. Masin................... See prior entry See prior entry
GTE
One Stamford Forum
Stamford, CT 06904
</TABLE>
E-5
<PAGE> 93
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
Russell E. Palmer.................. See prior entry See prior entry
The Palmer Group
3600 Market Street
Philadelphia, PA 19104
Irwin Schneiderman................. Senior Counsel of the law firm Not applicable
Cahill Gordon & Reindel of Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Nicholas L. Trivisonno............. See prior entry See prior entry
GTE
One Stamford Forum
Stamford, CT 06904
James W. Walter.................... See prior entry See prior entry
Walter Industries Inc.
1500 N. Dale Mabry Highway
Tampa, FL 33607
Dennis L. Whipple.................. President and Chief Executive Vice President - Marketing
Contel Cellular Inc. Officer of the Company since and Business Planning for
245 Perimeter Center Parkway 1991 GTE Mobile from April 1990
Atlanta, GA 30346 to March 1991; previously
General Manager - Florida
of GTE Mobilnet
Charles Wohlstetter................ See prior entry See prior entry
375 Park Avenue
New York, NY 10152-0192
COMPANY -- EXECUTIVE OFFICERS
Dennis L. Whipple.................. See prior entry See prior entry
President and Chief Executive
Officer
Contel Cellular Inc.
245 Perimeter Center Parkway
Atlanta, GA 30346
Theodore J. Carrier................ Treasurer and Chief Financial Controller of the Company
Treasurer and Chief Financial Officer of the Company since
Officer 1991
Contel Cellular Inc.
245 Perimeter Center Parkway
Atlanta, GA 30346
Pamela F. Lopez.................... Vice President - Marketing of Marketing and
Vice President - Marketing the Company since 1993 Distribution Manager of
Contel Cellular Inc. the Company's National
245 Perimeter Center Parkway Region since 1991;
Atlanta, GA 30346 previously Regional Agent
Manager in the Company's
Virginia operation
Randall L. Crouse.................. Vice President - Network Director - Technology
Vice President - Network Operations Operations of the Company Projects for GTE Mobile
Contel Cellular Inc. since 1993 from 1991 to 1993;
245 Perimeter Center Parkway previously Director -
Atlanta, GA 30346 Advanced Technology
Planning for GTE Mobile
Jay M. Rosen....................... Vice President, Government Vice President and
Secretary Affairs and General Counsel, Associate General
Contel Cellular Inc. Telecommunications Products Counsel - GTE Electrical
One Stamford Forum and Services Group of GTE Products and Governmental
Stamford, CT 06904 Service Corporation since 1991 Systems Group
</TABLE>
E-6
<PAGE> 94
<TABLE>
<CAPTION>
PREVIOUS MATERIAL
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OCCUPATIONS
- ----------------------------------- ------------------------------ -------------------------
<S> <C> <C>
Laura E. Binion.................... General Counsel and Assistant Corporate Counsel of
General Counsel and Assistant Secretary of the Company since Contel
Secretary 1991
Contel Cellular Inc.
245 Perimeter Center Parkway
Atlanta, GA 30346
</TABLE>
E-7
