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EXHIBIT 99.2.1
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA OF
RICHMOND-NORFOLK PCS
You should read "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Richmond-Norfolk PCS" and such entity's
financial statements and notes thereto included in this document for a further
explanation of the financial data summarized below.
We have set forth below selected historical financial data of Richmond-
Norfolk PCS:
. as of December 31, 1998 and 1999, and for the three years in the
period ended December 31, 1999, derived from the audited financial
statements and notes thereto of Richmond-Norfolk PCS, which have
been audited by PricewaterhouseCoopers LLP; and
. as of June 30, 1999 and 2000, and for the six-month periods then
ended, derived from the unaudited financial statements and notes
thereto of Richmond-Norfolk PCS, which, in the opinion of its
management, include all adjustments necessary for a fair
presentation of the financial position and results of operations
for these periods. Operating results for six-month periods are not
necessarily indicative of results that might be expected for the
entire fiscal year.
We have also included the balance sheet data of Richmond-Norfolk PCS as
of December 31, 1997, which is unaudited.
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<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
---------------------------------------------------- -----------------------------
1997 1998 1999 1999 2000
------------ ------------- ----------------- -----------------------------
(in thousands, except operating data)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Operating revenues:
Service revenues ................. $ 6,963 $ 24,808 $ 41,015 $ 20,203 $ 23,454
Product sales .................... 3,728 5,546 7,671 3,662 2,465
Other ............................ 481 916 1,770 766 1,072
--------- --------- --------- --------- ---------
Total operating
revenues ......................... 11,172 31,270 50,456 24,631 26,991
--------- --------- --------- --------- ---------
Operating costs and expenses:
Cost of service .................. 167 489 941 420 877
Cost of products sold ............ 4,018 5,714 7,217 3,568 2,443
Operating expenses ............... 32,418 41,355 50,497 26,527 25,102
Depreciation and
amortization ..................... 8,333 11,125 13,866 6,785 6,925
--------- --------- --------- --------- ---------
Total operating costs and
expenses ......................... 44,936 58,683 72,521 37,300 35,347
--------- --------- --------- --------- ---------
Loss from operations .............. (33,764) (27,413) (22,065) (12,669) (8,356)
Other income expenses):
Interest expense ................. (1,951) (1,678) (1,462) (750) (688)
Gain (loss) on disposal of
assets ........................... (174) 44 (806) (197) (43)
Other loss ....................... -- -- (171) -- --
--------- --------- --------- --------- ---------
Net loss ........................ $ (35,889) $ (29,047) $ (24,504) $ (13,616) $ (9,087)
========= ========= ========= ========= =========
Balance Sheet Data (at period end):
Cash and cash equivalents ........ $ 79 $ -- $ 422 $ 132 $ 188
Total assets ..................... 127,192 145,281 143,214 144,290 148,278
Long-term debt ................... 25,571 25,539 23,034 24,331 21,955
PrimeCo equity investment ........ 89,032 94,904 104,097 105,170 114,579
Operating Data (at period end):
PCS subscribers .................. 23,732 56,840 78,854 73,644 87,955
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RICHMOND MAJOR TRADING AREA
Management's Discussion And Analysis Of Financial Conditions And
Results Of Operations Of Richmond-Norfolk PCS
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial and Operating Data" and other financial
statements and the notes thereto included elsewhere in this document. Much of
the discussion in this section involves forward-looking statements. Actual
results may differ significantly from the results suggested by these
forward-looking statements
Overview
PrimeCo Personal Communications, L.P. ("PrimeCo") was formed in 1995 as
a limited partnership between Bell Atlantic Corporation, NYNEX, Air Touch
Communications and US West for the purpose of acquiring licenses issued by the
Federal Communications Commission ("FCC"), pursuant to Subpart E of Part 24 of
the FCC rules ("PCS License") and to design, build, own, and operate broadband
personal communication services ("PCS Business") in certain Major Trading Areas
("MTA") in Virginia, Texas, Florida, Louisiana, Alabama, Illinois and Wisconsin.
An MTA is an urban market within the United States, as defined by the FCC to
determine geographic coverage areas for Personal Communication System ("PCS")
networks. The Richmond, Virginia Major Trading Area (The Richmond MTA or market)
covers most of central and eastern Virginia, including the Richmond and Hampton
Roads metropolitan areas and the Outer Banks of North Carolina.
Effective April 3, 2000, and in order to comply with certain Federal
Communications Commission ("FCC") regulations regarding overlap properties,
three markets (operating in the Houston, Chicago and Richmond MTA's) were
contributed to by PrimeCo to PrimeCo PCS, a separate legal entity jointly
controlled by Bell Atlantic Corporation and Vodaphone Airtouch.
The Richmond market's strategy is to be the premier local wireless
provider in the areas it serves and to grow a profitable customer base. The
Richmond market has implemented this strategy through the deployment of leading
edge technology (Code Division Multiple Access-- CDMA), maintaining high network
performance standards and creating simplified and competitively-priced products
and services. Rate plans include features at no additional charge, such as
Caller ID, voice mail, first incoming minute free and nationwide long distance.
The Richmond market has become a market leader in prepay calling services with
its MyMinutes service options.
The following discussion of the financial condition and results of the
operations of the Richmond MTA for the six months ended June 30, 2000 and 1999
should be read in conjunction with the financial statements of the company, the
notes thereto and information included elsewhere in this document. References to
quarterly periods refer to the company's six-month periods ended June 30.
This discussion contains forward-looking statements that involve risks
and uncertainties. The actual results could differ materially from the results
anticipated in these forward-looking statements as a result of factors
including, but not limited to, those under "Risk Factors" and "Forward-Looking
Statements".
Revenues
Our revenues are generated from the following categories:
. service revenues, including monthly access fees for bundled
minutes, excess airtime, prepay activation fees, roaming revenue,
long distance revenue, and revenue from features such as call
forwarding and directory assistance;
. product sales, including revenue from the sale of handsets and
related accessories; and
. other revenue, including monthly rent and fees received from other
carriers who collocate on Richmond MTA owned towers, revenue
received from non-Richmond MTA customers roaming on the Richmond
MTA network.
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Operating Costs and Expenses
Our direct operating costs and expenses are generally incurred from the
following categories:
. cost of service, including expenses related to long distance,
roaming usage, and directory assistance usage by subscribers;
. cost of products sold, including the retail price of handsets sold,
which are generally sold below cost and the difference between cost
and the retail price of handsets (subsidy) is recognized as an
operating expense, and the cost of accessories;
. operating expenses, including all costs related to network
operations, customer acquisition, customer care, finance, human
resource, legal, information technology, and executive management,
including corporate overhead allocations; and
. depreciation expense recognized on network fixed assets, leasehold
improvements on stores and kiosks, company owned switch buildings,
information technology assets, and furniture and fixtures. The PCS
license and microwave clearing costs are amortized on a straight-
line basis over a 40-year life.
Other Income (Expenses)
Our other income (expenses) are generated (incurred) from interest
expense, less any capitalized portion, gain (loss) on the disposal of assets,
and other income (loss).
Results of Operations
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net loss decreased $2.2 million, or 39%, from a loss of $5.7 million for
the three months ended June 30, 1999 to a loss of $3.5 million for the three
months ended June 30, 2000. Net loss decreased $4.5 million, or 33%, from $13.6
million for the six months ended June 30 1999 to $9.1 million for the six months
ended June 30, 2000.
These operating results reflect an increase in the ending customer base
of 19% from 73,644 as of June 30, 1999 to 87,955 as of June 30, 2000.
Operating Revenues
Operating revenues increased $1.0 million, or 8%, from $12.7 million for
the three months ended June 30, 1999 to $13.7 million for the three months ended
June 30, 2000. Operating revenues increased $2.4 million, or 10%, from $24.6
million for the six months ended June 30, 1999 to $27.0 million for the six
months ended June 30, 2000.
Service Revenue. Service revenues increased $1.2 million, or 11%, and
$3.3 million, or 16%, for the respective three and six month periods ended June
30, 2000 as compared to June 30, 1999. Service revenues were $12.0 million and
$23.5 million for the three and six months ended June 30, 2000, as compared to
$10.8 million and $20.2 million for the three and six months ended June 30,
1999. The increase was primarily due to subscriber growth. The MTA had 87,955
subscribers as of June 30, 2000, which represented an increase of 14,311, or
19%, compared to June 30, 1999. The increase in subscribers was offset in part
by a decrease in average revenues per unit, or ARPU, of $4.13, or 8.2%, from
$50.16 for the six months ended June 30, 1999 to $46.03 for the six months ended
June 30, 2000. ARPU declined $4.53, or 9%, from $50.48 for the three months
ended June 30, 1999 to $45.95 for the three months ended June 30, 2000. The
decrease in ARPU is primarily the result of pricing pressures caused by new PCS
operators who entered the market in June 1999. We expect some price declines to
continue, but intend to continue to increase revenues by adding additional
subscribers and increasing the service and minutes of use we provide.
Product Sales. Product sales decreased $.4 million, or 28%, from $1.5
million to $1.1 million, and $1.2 million, or 33%, from $3.7 million to $2.5
million for the respective three and six month periods ended June 30, 2000 as
compared to 1999. This decrease was primarily due to lower retail handset prices
during the three and six months ended June 30, 2000 compared to the three and
six months ended June 30, 1999.
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Other Revenue. Other revenue increased $.2 million, or 59%, and $.3
million, or 40%, for the respective three and six month periods ended June 30,
2000 as compared to 1999. Other revenue was $.6 million and $1.1 million for the
three and six months ended June 30, 2000 compared to $.4 million and $.8 million
for the three and six months ended June 30, 1999. This growth was due to
additional collocation rent and fees we received from other carriers. After the
transaction, CFW may dispose of the towers that generate these revenues.
Operating Costs and Expenses
Operating costs and expenses decreased $1.2 million, or 7%, from $18
million to $16.8 million, and $2.0 million, or 5%, from $37.3 million to $35.3
million for the respective three and six months ended June 30, 2000 compared to
1999.
Cost of Service. Cost of service increased $.3 million, or 129%, from
$0.2 million to $0.5 million, and $.5 million, or 109%, from $.4 million to $.9
million for the respective three and six months ended June 30, 2000 compared to
1999. This increase was the result of higher long distance and roaming usage
from the growth in the subscriber base. Additionally, long distance use per
subscriber increased as approximately 65% of current subscribers have price
plans that include free long distance. Free long distance was not available in
the second quarter of 1999. Competitors, such as Sprint, that have a national
long distance network have a substantial cost advantage in providing free long
distance services. Additionally, roaming use per subscriber has increased in
2000 as a result of a decrease in our minimum roaming rate to $.15 per minute in
December 1999. Prior to the decrease, our minimum roaming rate was $.39 per
minute.
Cost of Products Sold. Cost of products sold decreased $.5 million, or
32%, from $1.5 million to $1.0 million, and $1.1 million, or 32%, from $3.5
million to $2.4 million for the respective three and six months ended June 30,
2000 as compared to 1999. This decrease was the result of a 30% decrease in
retail handset prices for the six months ended June 30, 2000 compared to June
30, 1999.
Operating Expenses. Operating expenses decreased $1.4 million, or 11%,
from $12.8 million to $11.4 million, and $1.4 million, or 5 %, from $26.5
million to $25.1 million for the respective three and six months ended June 30,
2000 as compared to June 30, 1999. Decreases in corporate overhead, payroll,
general and administrative, and promotion expenses contributed to the decrease
in total operating expenses.
Depreciation and Amortization. Depreciation and amortization increased
$0.4 million, or 11%, and $.1 million, or 2%, for the respective three and six
months ended June 30, 2000 as compared to June 30, 1999. Depreciation and
amortization was $3.8 million and $6.9 million for the three and six months
ended June 30, 2000. Depreciation and amortization was $3.4 million and $6.8
million for the three and six months ended June 30, 1999. The increase is due to
additional capital spending in the third and fourth quarters of 1999 and the
first six months of 2000.
Other Income (Expenses)
Interest expenses decreased $.1 million, or 13%, from $.4 million to $.3
million, and $.1 million, or 8%, from $.8 million to $.7 million for the
respective three and six months ended June 30, 2000 as compared to June 30,
1999. Loss on the disposal of assets increased $.039 million from $.028 million
to $.067 million for the three months ended June 30, 2000. Loss on the disposal
of assets decreased $.2 million, or 78%, from $.2 million to $.043 million for
the six months ended June 30, 2000 compared to June 30, 1999.
