<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT Registration Number 33-62787
(To Prospectus dated July 2, 1996)
$650,000,000
LOGO
$250,000,000 7 1/8% NOTES DUE 2001
$400,000,000 7 1/2% NOTES DUE 2006
---------------------------
The 7 1/8% Notes due 2001 (the "7 1/8% Notes") of AirTouch Communications,
Inc. ("AirTouch" or the "Company") will mature on July 15, 2001, and the 7 1/2%
Notes due 2006 (the "7 1/2% Notes" and together with the 7 1/8% Notes, the
"Notes") of the Company will mature on July 15, 2006. Interest on the Notes will
be payable semi-annually on January 15 and July 15 of each year, commencing
January 15, 1997.
The 7 1/8% Notes and the 7 1/2% Notes will be redeemable in whole or in
part at the option of the Company at any time, at a redemption price equal to
the greater of (i) 100% of their principal amount or (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield (as defined
herein) plus 10 basis points in the case of the 7 1/8% Notes, and at the
Treasury Yield plus 15 basis points in the case of the 7 1/2% Notes; plus, for
each of (i) and (ii) above, accrued interest on the Notes to the date of
redemption. The Notes will not be subject to any sinking fund.
The Notes will be represented by one or more Global Notes registered in the
name of a nominee of The Depository Trust Company, as Depositary. Beneficial
interests in the Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described herein or in the accompanying Prospectus,
Notes in certificated form will not be issued. The Notes will trade in the
Depositary's Same-Day Funds Settlement System, and secondary market trading
activity in the Notes will therefore settle in immediately available funds. See
"Description of the Notes--Book-Entry System" and "--Same-Day Settlement and
Payment" herein.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=====================================================================================================
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 7 1/8% Note......................... 99.851% .600% 99.251%
- -----------------------------------------------------------------------------------------------------
Total................................... $249,627,500 $1,500,000 $248,127,500
- -----------------------------------------------------------------------------------------------------
Per 7 1/2% Note......................... 99.425% .650% 98.775%
- -----------------------------------------------------------------------------------------------------
Total................................... $397,700,000 $2,600,000 $395,100,000
=====================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from July 15, 1996 to date of delivery.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933,
as amended.
(3) Before deducting expenses payable by the Company estimated at $300,000.
---------------------------
The Notes offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the Notes will be
made through the facilities of The Depository Trust Company on or about July 16,
1996.
---------------------------
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
July 11, 1996
<PAGE> 2
(Inside front cover page: maps of the United States, Europe and Asia and
AirTouch logo)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. When used
in this Prospectus Supplement, the words "estimate," "project," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements regarding events and financial trends which may affect the Company's
future operating results and financial position. Such statements are subject to
risks and uncertainties that could cause the Company's actual results and
financial position to differ materially. Such factors are described in detail in
"Business -- Investment Considerations" in the Company's Annual Report on Form
10-K for the year ended December 31, 1995, as amended, and in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
each of which is incorporated by reference herein. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
POPS. POPs means the population of a licensed market (based on population
estimates for such market) multiplied by the Company's ownership interest in a
licensee operating in such market as of the date specified, and includes
networks under construction and markets of certain cost-based investments not
included in proportionate financial results. The Company's POPs for United
States markets are based on the 1995 Donnelly Marketing Information Service
population estimates for the markets in which the Company has an interest in a
licensee for that market. POPs for international markets are derived from other
sources deemed reliable by the Company.
PROPORTIONATE ACCOUNTING. The Company uses generally accepted accounting
principles ("GAAP") and includes supplemental information prepared using
proportionate accounting to present certain financial information. Proportionate
financial and operating information is not required by GAAP and is not intended
to replace the consolidated financial statements prepared in accordance with
GAAP and incorporated by reference herein. Because significant assets of the
Company are not consolidated and because of the substantial effect of the
formation of certain joint ventures on the comparability of the Company's
consolidated financial results, the Company believes that proportionate
financial and operating data facilitates the understanding and assessment of its
consolidated financial statements.
Under GAAP, the Company consolidates the entities in which it has a
controlling interest and uses the equity method to account for entities over
which the Company has significant influence but does not have a controlling
interest. In contrast, proportionate accounting reflects the Company's relative
ownership interests in operating revenues and expenses for both its consolidated
and equity method entities. For example, domestic cellular proportionate results
present the Company's share--its percentage ownership--for all significant
domestic cellular operations, including those joint ventures and partnerships
where the Company does not own more than 50%. Similarly, total proportionate
results show the Company's share of all its significant worldwide operations.
Proportionate operating cash flow represents the Company's ownership interests
in the respective entities' operating cash flows. As such, proportionate
operating cash flow does not represent cash available to the Company.
References to "AirTouch" or the "Company" are to AirTouch Communications,
Inc. and its subsidiaries unless the context otherwise requires.
S-2
<PAGE> 3
THE COMPANY
AirTouch Communications, Inc. ("AirTouch" or the "Company") is one of the
world's leading wireless telecommunications companies, with significant cellular
telecommunications interests in the United States, Europe and Asia. At March 31,
1996, the Company's proportionate worldwide cellular and broadband personal
communications services ("PCS") interests represented 165 million POPs and more
than 3.3 million customers. In the United States, the Company has approximately
52 million proportionate cellular and broadband PCS POPs. The Company controls
or shares control over cellular systems in ten of the 30 largest domestic
cellular markets, including Los Angeles, San Francisco, San Diego, Detroit and
Atlanta, and through PrimeCo Personal Communications, L.P. ("PrimeCo") shares
control over 11 major PCS markets. Internationally, the Company had more than
112 million cellular POPs as of March 31, 1996, and held significant ownership
interests, with board representation and substantial operating influence, in
national cellular systems operating in Germany, Japan, Portugal, Sweden,
Belgium, Italy, Spain and South Korea, in a regional system in Madras, India,
and in systems under construction in Poland and in Madhya Pradesh, India. Based
on industry surveys, the Company is also among the largest providers of paging
services in the United States, with approximately 2.5 million units in service
at March 31, 1996. In total, at March 31, 1996, the Company provided wireless
telecommunications services to almost six million proportionate customers
worldwide.
FINANCIAL OVERVIEW
The strength of the Company's recent financial and operating performance
has been driven by increased global demand for wireless communications services,
continued strong growth in the Company's domestic wireless operations, the
Company's disciplined pursuit of cellular licenses overseas and significant
growth in the Company's international operations.
ON A GAAP BASIS
The Company's total operating revenues grew 29.8% in 1995 to $1.6 billion.
Net income for the year was $131.9 million, up 34.5% over 1994. The Company's
growth continued in the first quarter of 1996 as total operating revenues
increased 20.1% to $448.9 million as compared to the first quarter of 1995, and
net income rose 47.9% to $52.2 million from $35.3 million in the first quarter
of 1995.
ON A PROPORTIONATE BASIS
The Company's proportionate net operating revenues were $2.6 billion in
1995, a 45.4% increase over 1994. Proportionate operating cash flow (defined as
operating income plus depreciation and amortization) was $702.3 million in 1995,
a 38.8% increase over 1994. In 1995, the Company's worldwide proportionate
cellular subscribers grew by over one million, or 57.0%, to over three million
subscribers.
During the first quarter of 1996, as compared to the first quarter of 1995,
proportionate net operating revenues grew 42.4% to $801.4 million and
proportionate operating cash flow grew 34.5% to $244.8 million. Worldwide, the
Company's proportionate cellular subscribers grew by over 1.2 million from the
end of the first quarter of 1995 to the end of the first quarter of 1996,
representing a 58.7% increase.
BUSINESS OF THE COMPANY
The Company's objective is to be the premier provider of wireless
telecommunications services worldwide. To achieve its objective, the Company
seeks to achieve scale and scope in its wireless operations in order to reduce
costs and gain greater efficiencies; pursues wireless licenses in new countries;
opportunistically increases ownership interests in existing wireless markets;
and pursues value-creating wireless opportunities around the world.
In response to the continuing evolution of telecommunications technology
and customer requirements, the Company is evaluating the possibility of
expanding its operations into lines of business beyond its historical base of
high mobility wireless services where such expansion would enhance existing
wireless services. Areas of possible expansion could include: wireless local
loop (the construction and operation of dedicated wireless
S-3
<PAGE> 4
networks designed to compete directly with or substitute for wireline networks);
international long distance service for the Company's cellular subscribers; and
international wireline long distance services which complement the Company's
wireless properties. Any decision by the Company to enter any of these lines of
business will depend on the Company's evaluation of its ability to create value
by employing the assets or expertise of its wireless operations, including
networks and customer bases, as well as the stand-alone attractiveness of the
opportunity.
DOMESTIC CELLULAR AND BROADBAND PCS
The Company is one of the largest providers of cellular service in the
United States, with interests in some of the country's most attractive cellular
markets. The Company's cellular interests in the United States represented more
than 37 million POPs and nearly 2.4 million proportionate subscribers as of
March 31, 1996. In addition, through PrimeCo, the Company shares control of
approximately 57 million PCS POPs.
The Company's domestic cellular subscriber base is rapidly expanding, with
almost 728,000 new proportionate cellular subscribers added between the end of
the first quarter of 1995 and the end of the first quarter of 1996, a 43.8%
increase. Proportionate net operating revenues were $1.5 billion and
proportionate operating cash flow was $605.2 million for the year ended December
31, 1995, up 28.1% and 26.3%, respectively, from the previous year. For the
quarter ended March 31, 1996, proportionate net operating revenues were $413.5
million and proportionate operating cash flow was $186.7 million, an increase of
23.4% and 25.1%, respectively, from the first quarter of 1995. Operating cash
flow margins were 41.0% for the year ended December 31, 1995 and 45.2% for the
quarter ended March 31, 1996. Domestic cellular generated approximately 51.6% of
the Company's proportionate net operating revenues in the first quarter of 1996.
The following table sets forth certain information regarding the Company's
domestic cellular and broadband PCS licenses as of the dates indicated and on a
pro forma basis as if the Company's acquisition of Cellular Communications, Inc.
("CCI"), described below, had been effective as of such date:
<TABLE>
<CAPTION>
PROPORTIONATE
POPS(1) SUBSCRIBERS(2)
------------- --------------
<S> <C> <C>
(in millions) (in thousands)
Domestic Cellular
Southern California........................................... 15.8 *
San Francisco Bay Area........................................ 3.1 *
Sacramento Valley............................................. 1.8 *
Michigan/Ohio(3).............................................. 11.2 *
Georgia and Kansas/Missouri................................... 5.1 *
Other domestic interests...................................... 0.7 *
----- ------
Domestic Cellular Subtotal................................. 37.7 2,392
Domestic Broadband PCS.......................................... 14.3 --
----- ------
Domestic Total.................................................. 52.0 2,392
----- ------
Domestic Total Pro Forma for CCI Merger......................... 57.0 2,738
----- ------
</TABLE>
- ---------------
* Not disclosed.
(1) As of December 31, 1995. The Company is a party to agreements with U S WEST,
Inc. ("U S WEST") and CCI, each of which will materially affect the
Company's domestic cellular interests. As described below, under the
Company's agreement with U S WEST, the Company and U S WEST will contribute
their respective domestic cellular properties into a joint venture, subject
to obtaining required consents and authorizations. See footnote 3 for
information with respect to the effect of the Company's agreement with CCI.
(2) As of March 31, 1996.
(3) POPs for the Michigan/Ohio region reflect both the Company's 50% interest in
New Par and its ownership of approximately 38% of the outstanding CCI stock
at March 31, 1996. In April 1996, AirTouch entered into an agreement to
acquire the remainder of CCI. See "-- CCI Merger" below.
S-4
<PAGE> 5
CCI Merger
In April 1996, the Company entered into a merger agreement (the "1996
Merger Agreement") with CCI to acquire all of CCI's capital stock that it does
not already own (approximately 62%) as an alternative transaction (the "CCI
Merger") to the transaction set forth in the Company's original 1990 merger
agreement (the "1990 Merger Agreement") with CCI. The CCI Merger, which is
subject to CCI stockholder approval and certain other conditions, is expected to
close in August 1996. Unless the CCI Merger is approved and completed, an
appraisal process will commence in accordance with the 1990 Merger Agreement.
For a discussion of the appraisal process and the potential obligation of the
Company with respect to a related "make-whole" payment, see Note E to "Notes to
Consolidated Financial Statements" in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, as amended. Approximately 72% of the
merger consideration will consist of AirTouch preferred securities and
approximately 28% will consist of cash, subject to possible adjustment in order
to maintain the tax-free nature of the transaction. As of the date of the 1996
Merger Agreement, the acquisition cost to the Company was anticipated to be
approximately $1.65 billion, including the assumption of approximately $200
million in net debt. Upon consummation of the CCI Merger, AirTouch will own 100%
of CCI and New Par, the equally owned joint venture between the Company and CCI
that operates cellular properties in Michigan and Ohio. Accordingly, subsequent
to the CCI Merger, the Company will consolidate the operating results of CCI and
New Par, which are currently reported using the equity method of accounting. If
the acquisition had been consummated at the beginning of 1995, CCI would have
contributed approximately $80 million of incremental proportionate operating
cash flow to the Company's 1995 results. The transaction will be recorded using
the purchase method of accounting for business combinations, and is expected to
materially dilute earnings. See "Pro Forma Condensed Combined Financial
Statements." For further discussion of matters related to the CCI Merger, see
the Company's Registration Statement on Form S-4 (File No. 333-03107).
U S WEST Joint Venture
In July 1994, the Company and U S WEST entered into an agreement to combine
their domestic cellular properties into a joint venture (the "AirTouch/U S WEST
joint venture") in a multi-phased transaction. During the initial phase the
companies formed a jointly owned management company to serve as a single
management resource and provide support services to both companies' domestic
cellular operations, which remain separately owned. In May 1996, U S WEST began
providing cellular services under the AirTouch name in the 12 states in which it
operates.
The Company and U S WEST are currently seeking to obtain the regulatory and
other approvals and consents necessary to enter into the second phase of the
transaction, in which the companies will contribute their respective domestic
cellular properties to the joint venture. When all such properties are
contributed, the joint venture will operate in 16 of the country's top 30
markets and cover nearly 55 million POPs.
Concurrently with the formation of the AirTouch/U S WEST joint venture, the
companies also formed an equally owned partnership to pursue new PCS (personal
communications services) opportunities (the "PCS Partnership"). The PCS
Partnership is a 50% partner in PrimeCo (see below). The Company and U S WEST
plan to contribute their respective interests in the PCS Partnership to the
AirTouch/U S WEST joint venture. The Company anticipates that the PCS
Partnership will be required to make significant capital contributions for the
build-out of PCS markets and that it will continue to experience substantial
operating losses associated with the start-up phase of the PCS business, which
is expected to last several years. Upon contribution of the PCS Partnership to
the joint venture, the Company's relative share of PCS capital investments and
operating losses related to the PCS Partnership will increase from 50% to its
percentage ownership of the joint venture.
The Company presently owns 70% of the management company formed in the
initial phase of the transaction, and would expect to own approximately 74% of
the AirTouch/U S WEST joint venture upon the commencement of the second phase in
the event that all of its and U S WEST's domestic cellular properties (but not
their interests in the PCS Partnership) were contributed at that time. However,
the actual ownership interests of the Company and U S WEST in their joint
venture at the commencement of the second phase of the transaction or at any
given point in time thereafter will depend, among other things, on the ability
of the
S-5
<PAGE> 6
companies to contribute their respective domestic cellular properties, the
timing of the contributions of the domestic cellular properties, the timing and
value of the PCS Partnership contribution, and the status of the Company's
acquisition of CCI. The Company could experience near-term earnings dilution in
connection with the contribution of its and U S WEST's domestic cellular
properties to the AirTouch/U S WEST joint venture. The extent of such dilution,
which could be material, will depend on the relative profitability of the
Company's and U S WEST's respective operations subsequent to the contributions
of such operations. Also, subsequent to the closing of the second phase, the
Company and U S WEST will each deconsolidate for financial reporting purposes
the operations they each contributed to the joint venture, using instead the
equity method of accounting to report their respective percentage interests in
subsequent operating results of the joint venture. The Company cannot precisely
assess the future impact of its joint venture with U S WEST on the Company's
results of operations due to the uncertain timing of the second phase of the
transaction and the uncertain timing of the contribution of the PCS Partnership
to the joint venture. See "Pro Forma Condensed Combined Consolidated Financial
Statements" herein. The Company anticipates that the second phase of the
transaction will occur in the fourth quarter of 1996 or the first quarter of
1997. See "Business -- Domestic Cellular -- Joint Ventures -- WMC Partners," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended; and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Form 10-Q for
the quarter ended March 31, 1996 for further discussion of the transaction with
U S WEST, including the third phase of such transaction.
Relationship with Bell Atlantic and NYNEX
PrimeCo, a partnership owned equally by AirTouch's and U S WEST's PCS
Partnership and by a joint venture between Bell Atlantic Corporation ("Bell
Atlantic") and NYNEX Corporation ("NYNEX"), owns broadband PCS licenses covering
57 million POPs in eleven major markets, including Chicago, Dallas, Tampa,
Houston and Miami. PrimeCo is currently constructing PCS systems in each of its
markets and intends to commence operations in most if not all of its markets by
the end of calendar 1996. AirTouch's proportionate share of PrimeCo's POPs is
more than 14 million POPs. The partners' combined cellular and PCS "footprint"
will cover 26 of the nation's top markets, representing nearly 170 million POPs.
In addition to the formation of PrimeCo to jointly acquire and operate PCS
licenses in markets complementary to the Company's and U S WEST's respective
cellular properties, the Company and U S WEST formed another partnership with
Bell Atlantic and NYNEX called TOMCOM, L.P. ("TOMCOM"). TOMCOM was formed to
develop technical and service standards for the partners' wireless properties,
pursue national marketing strategies, develop information technology, create a
national distribution strategy and implement joint purchasing arrangements.
INTERNATIONAL CELLULAR
AirTouch's international cellular operations represent an increasing
percentage of total Company results. The Company had more than 112 million
international POPs as of March 31, 1996. The Company's international cellular
subscribers more than doubled to 797,000 proportionate subscribers during the
year ended December 31, 1995, an increase of 105.4% over 1994. The Company added
158,000 new international proportionate subscribers, excluding acquisitions, in
the first quarter of 1996, which increased its proportionate international
subscribers by 114.6% over the end of the first quarter of 1995. On April 23,
1996, AirTouch International announced that it had reached one million
proportionate international subscribers. International cellular existing
operations (defined as operations that have completed 12 months of commercial
service) generated 37.9% of the Company's proportionate net operating revenues
for the quarter ended March 31, 1996.
S-6
<PAGE> 7
The following table sets forth certain information regarding AirTouch's
international cellular properties as of March 31, 1996, except for market
population information, which is as of December 31, 1995.
<TABLE>
<CAPTION>
TOTAL
MARKET SERVICE VENTURE TOTAL
POPULATION INITIATION SUBSCRIBERS AIRTOUCH LICENSEES
COUNTRY/VENTURE (IN MILLIONS) DATE (IN THOUSANDS) INTEREST(1) IN MARKET
<S> <C> <C> <C> <C> <C>
Germany/Mannesmann Mobilfunk............ 81.6 6/92 >1,600 34.8% 3
Portugal/Telecel........................ 9.9 10/92 >195 23.0%(2) 2
Sweden/NordicTel(3)..................... 8.8 9/92(4) 185 51.1% 3
Belgium/Belgacom Mobile................. 10.1 1/94(4) 267 25.0% 2
Spain/Airtel............................ 39.2 10/95 74 16.0% 2
Italy/Omnitel-Pronto Italia............. 58.2 10/95 123 11.7%(5) 2
Japan/
Tokyo Digital Phone................... 42.2 4/94 * 15.0% 7(6)
Kansai Digital Phone.................. 20.6 5/94 * 13.0% 7(6)
Central Digital Phone................. 14.4 7/94 * 13.0% 7(6)
----- -------
Sub Total Digital Phone Group...... 77.2 1,081
Japan/Digital TU-KA(7).................. 46.3 -- 100(7) 4.5% 7(6)
South Korea/Shinsegi.................... 44.9 4/96 -- 10.7% 2
India-Madras/RPG Cellular Services
Limited............................... 6.7 9/95 3 20.0% 2
India-Madhya Pradesh/CCIL............... 72.7 -- -- 49.0% 2
Poland/Polkomtel........................ 38.8 -- -- 19.3% 3
</TABLE>
- ---------------
* Not disclosed.
(1) Exclusive of any options, warrants or other rights to increase ownership.
(2) Under an agreement with other shareholders, the Company funds Telecel as if
it held a 38.89% interest. Amounts funded in excess of the Company's actual
interest are in the form of interest-free convertible loans.
(3) Through a wholly-owned subsidiary named NordicTel Dk ("Dk"), NordicTel
formerly owned 20% of Danish GSM operator Dansk Mobiltelefon ("DMT"). When
the Company became the principal owner of NordicTel, certain DMT
shareholders claimed the move violated the DMT joint venture agreement and
could trigger a transfer to them of Dk's interest in DMT. The issue is in
arbitration.
(4) The Company acquired its interest after commercial launch. In Belgium,
reflects launch of digital system only; analog system was launched in
January 1987.
(5) Indirect ownership interest through Pronto-Italia S.p.A.
(6) Includes up to three licensees operating limited mobility Personal
Handyphone Services.
(7) Includes Kyushu, Chugoku, Tohoku, Hokkaido, Hokuriku and Shikoku regions.
Subscribers are not included in proportionate subscribers because the
Company accounts for these investments on a cost basis.
Proportionate net operating revenues for existing international operations
in Germany, Portugal, Belgium, Sweden and Japan grew to $841.0 million for the
year ended December 31, 1995, up 138.4% over the previous year, and grew 89.5%
during the first quarter 1996, as compared with the first quarter 1995. For
existing international cellular operations, proportionate operating cash flow
rose 133.1% to $203.7 million in 1995 compared to 1994. In the first quarter of
1996, proportionate operating cash flow for existing international cellular
operations rose 73.8% over the comparable period in 1995. During the first
quarter of 1996, the Company's existing international cellular operations
generated net income of $4.7 million.
S-7
<PAGE> 8
Losses from the continued construction and build-out of international
cellular start-up operations in Italy, South Korea, Spain and India, totaled
$51.6 million for 1995, and were $19.7 million during the first quarter of 1996
(which also included Poland, where the Company's consortium was awarded a
license in February 1996). Losses from international start-up operations are
expected to total $100 million in 1996.
The Company believes that its proven technical, operating and marketing
expertise makes it a highly desired participant in consortia formed to pursue
new international opportunities and has been a significant factor in the success
of the subsequent license applications by its consortia. The Company constantly
evaluates opportunities to increase its ownership in its existing international
ventures, especially where contractual rights of first refusal provide the
Company with favorable opportunities. The Company also plans to continue
pursuing opportunities to acquire new interests in wireless systems throughout
the world.
The Company measures each international opportunity against such criteria
as demographic factors, the degree of economic, political and regulatory
stability, the quality of local partners and the degree to which the Company
would control or meaningfully participate in management. Until recently, the
Company's primary focus in pursuing licenses had been Western Europe and Asia
because the Company believes that these regions provide the highest potential
for value creation; however, the Company has increasingly been considering
opportunities in other parts of the world. The Company is currently considering
pursuing cellular licenses in Taiwan and Brazil, and expects to pursue other
opportunities in the future. The pursuit of new international wireless
telecommunications opportunities is expected to remain highly competitive,
especially in light of the trend toward the "auctioning" of new wireless
licenses in international markets, as opposed to merit-based selection criteria.
PAGING
AirTouch Paging is one of the largest paging companies in the United States
with almost 2.5 million units in service at March 31, 1996. Domestically, the
Company offers paging services in over 167 markets in 29 states, including many
of the largest metropolitan areas in the country, such as Atlanta, Boston,
Chicago, Dallas, Detroit, Houston, Los Angeles, New York, Philadelphia, San
Francisco and Washington. The Company offers numeric display, alphanumeric,
tone-only and tone and voice paging services. For 1995, units in service
(excluding acquisitions) grew by 30.4% or 463,000, and units in service
increased by 28.6% (excluding acquisitions) for the first quarter of 1996 over
the first quarter of 1995. Net operating revenues were $225.4 million and
operating cash flow was $74.6 million for the year ended December 31, 1995, up
19.3% and 12.4%, respectively, from the previous year. Net operating revenues
were $70.5 million and operating cash flow was $21.5 million for the quarter
ended March 31, 1996, an increase of 34.3% and 27.2%, respectively, over the
first quarter of 1995. Operating cash flow margins were 33.1% for the year ended
December 31, 1995 and 30.5% for the quarter ended March 31, 1996. Domestic
paging generated approximately 8.8% of the Company's proportionate net operating
revenues for the quarter ended March 31, 1996.
Internationally, AirTouch has ownership interests in paging companies in
Portugal and Spain.
GLOBALSTAR AND OTHER INVESTMENTS
The Company holds a 6.4% interest in Globalstar L.P. ("Globalstar"), a
joint venture led by Loral Space & Communications Ltd. and QUALCOMM Incorporated
("QUALCOMM"), that will design, construct and operate a worldwide,
satellite-based digital telecommunications system. Globalstar, which is expected
to begin initial service in late 1998, will provide an array of communications
services to global travelers and to customers in locations where it is not
economically feasible to build out wireline or fixed wireless systems. As a
condition of its investment, the Company has exclusive service provider rights
to provide Globalstar service in the United States and Austria, Belgium, the
Caribbean, Indonesia, Japan, Malaysia, the Netherlands, Portugal and
Switzerland. The Company is party to a joint venture holding the exclusive
service provider rights for Mexico, and is in negotiation to obtain co-exclusive
service provider status in Canada.
Other AirTouch investments include a 10% interest in International Digital
Communications, which provides long distance telephone service between Japan and
over 90 international destinations, including the United States, and 400,000
shares of common stock of QUALCOMM, a publicly traded developer of digital
S-8
<PAGE> 9
mobile communications technology. The Company also holds warrants to purchase
approximately 780,000 additional shares of QUALCOMM common stock.
FINANCIAL OUTLOOK
The Company believes that 1996 proportionate operating cash flow is likely
to approach $1 billion, as the Company benefits from scale and scope and the
improving performance of existing international operations. In addition, as the
Company continues to expand its operations domestically and internationally,
capital requirements are expected to reach approximately $1 billion in 1996
(excluding the pending acquisition of CCI). For a discussion of anticipated
near-term dilution to the Company's earnings, see "The Company -- Business of
the Company" above.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes (after deducting
underwriting discounts and estimated expenses payable by the Company) are
estimated to be $642.9 million. The purpose of the Notes offering is (i) to
satisfy the cash component of the CCI Merger, which will be a maximum of
approximately $470.0 million, and (ii) for general corporate purposes. Pending
such uses, the net proceeds will be applied to retire commercial paper, which
bore interest rates averaging 5.58% at March 31, 1996. The commercial paper was
issued to repay borrowings under the Company's revolving credit facility, which
borrowings were incurred in connection with the Company's purchases of CCI stock
and options in October 1995 and January 1996, respectively. The Company intends
to reborrow under its commercial paper program to meet its cash obligations
under the CCI Merger. See "The Company--Business of the Company--Domestic
Cellular and Broadband PCS--CCI Merger."
S-9
<PAGE> 10
CAPITALIZATION
The following table sets forth the capitalization and cash of the Company
(i) at March 31, 1996, (ii) as adjusted to give effect to the sale of the Notes
and the application of the estimated net proceeds therefrom as set forth under
"Use of Proceeds," and (iii) pro forma, as so adjusted, as if the CCI Merger had
been effective as of March 31, 1996 (see footnote 1 below). This table should be
read in conjunction with the Consolidated Financial Statements of the Company
and related notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, as amended, and the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996, incorporated by
reference herein, and the Pro Forma Condensed Combined Financial Statements
included herein.
<TABLE>
<CAPTION>
PRO FORMA
AS
AS ADJUSTED CCI
ACTUAL ADJUSTED MERGER(1)(2)
-------- -------- ------------
<S> <C> <C> <C>
(in millions)
Cash and cash equivalents............................................ $ 38.4 $ 38.4 $ 68.4
======= ======= ==========
Short-term obligations............................................... $ 84.3 $ 84.3 $ 84.3
-------- -------- ----------
Long-term obligations:
Bank debt and commercial paper..................................... 992.0 349.1 1,034.4(3)
7 1/8% Notes due 2001.............................................. -- 250.0 250.0
7 1/2% Notes due 2006.............................................. -- 400.0 400.0
Capital lease obligations.......................................... 8.2 8.2 8.2
-------- -------- ----------
Total long-term obligations..................................... 1,000.2 1,007.3 1,692.6
-------- -------- ----------
Minority interests in consolidated wireless systems.................. 157.0 157.0 158.7
-------- -------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value:
50,000,000 shares authorized; no shares issued and outstanding(4):
6.00% Class B Mandatorily Convertible Preferred Stock,
Series 1996 (24,000,000 shares authorized, pro forma)......... -- -- 500.0
4.25% Class C Convertible Preferred Stock, Series 1996
(19,000,000 shares authorized, pro forma)...................... -- -- 580.0
Common Stock, $0.01 par value:
1,100,000,000 shares authorized; 499,097,030 shares issued and
498,974,070 shares outstanding................................. 5.0 5.0 5.0
Additional paid-in capital......................................... 3,887.1 3,887.1 3,887.1
Accumulated deficit................................................ (105.9) (105.9) (105.9)
Cumulative translation adjustment.................................. 15.9 15.9 15.9
Other.............................................................. 10.2 10.2 10.2
-------- -------- ----------
Total stockholders' equity...................................... 3,812.3 3,812.3 4,892.3
-------- -------- ----------
Total capitalization................................................. $5,053.8 $5,060.9 $6,827.9
======= ======= ==========
</TABLE>
- ---------------
(1) Assumes the net proceeds from the sale of the Notes are used to pay the cash
portion of the CCI Merger consideration of $420.0 million (see "Explanatory
Notes to Pro Forma Condensed Combined Financial Statements -- CCI Merger
Pro Forma -- Basis of Presentation") and to repay bank debt and commercial
paper of $222.9 million.
(2) The contribution of U S WEST's and the Company's cellular properties to the
AirTouch/U S WEST joint venture will have minimal effect on the Company's
capitalization. Accordingly, no separate capitalization reflecting such
contribution is provided.
(3) Includes assumption of CCI's Zero Coupon Convertible Notes.
(4) The charter instruments for the Class B Mandatorily Convertible Preferred
Stock and Class C Convertible Preferred Stock had not been filed and, as a
result, no shares were authorized or outstanding as of March 31, 1996 or as
of the date hereof. This information is included for pro forma purposes
only. The number of shares of Class B Mandatorily Convertible Preferred
Stock and Class C Convertible Preferred Stock issuable in the CCI Merger
depends on a pricing period that has not yet ended and, accordingly, is not
presented.
S-10
<PAGE> 11
RATIOS OF EARNINGS TO FIXED CHARGES
For the purpose of calculating the following ratios of earnings to fixed
charges, earnings consist of income before cumulative effect of accounting
change and income taxes and fixed charges included in pre-tax income, adjusted
for minority interests in the income of certain consolidated wireless systems
and equity in net losses and distributed net income of certain
less-than-fifty-percent owned unconsolidated wireless systems. Fixed charges
include interest on indebtedness and the portion of rental expense
representative of the interest factor.
HISTORICAL(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
5.3 7.2 10.4 6.0 2.4 3.4
</TABLE>
ADJUSTED AND PRO FORMA
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996 YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------- ---------------------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS IF NOTES CCI CCI MERGER AS IF NOTES CCI CCI MERGER
SOLD(2) MERGER(3) AND PHASE II(4) SOLD(2) MERGER(3) AND PHASE II(4)
- ----------- --------- --------------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C>
4.7 1.8 1.5 3.9 1.3 N/A (5)
</TABLE>
- ---------------
(1) Ratio of earnings to fixed charges from continuing operations of AirTouch
for the periods indicated on a historical basis.
(2) Ratio of earnings to fixed charges from continuing operations of AirTouch
for the periods indicated after adjustment for sale of the Notes.
(3) Ratio of earnings to combined fixed charges and preferred stock dividends
from continuing operations of AirTouch for the periods indicated on a pro
forma basis giving effect to the CCI Merger. Interest component included in
fixed charges assumes borrowings totaling $420 million, which amount is
sufficient to satisfy the assumed cash component of the CCI Merger
consideration. See "Pro Forma Condensed Combined Financial Statements."
(4) Ratio of earnings to combined fixed charges and preferred stock dividends
from continuing operations of AirTouch for the periods indicated on a pro
forma basis giving effect to the CCI Merger and Phase II of the AirTouch/U S
WEST joint venture. Interest component included in fixed charges assumes
borrowings totaling $420 million, which amount is sufficient to satisfy the
assumed cash component of the CCI Merger consideration. See "Pro Forma
Condensed Combined Financial Statements."
(5) Pro forma earnings do not cover combined fixed charges and preferred stock
dividends by $22.4 million.
S-11
<PAGE> 12
SELECTED HISTORICAL CONSOLIDATED AND PROPORTIONATE
FINANCIAL INFORMATION
The following tables set forth selected historical consolidated and
proportionate financial information for the periods and as of the dates
indicated for the Company. This information should be read in conjunction with
and is qualified in its entirety by the Consolidated Financial Statements and
accompanying notes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, as amended, and Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, which are incorporated by reference herein.
The historical consolidated financial information for the three months ended
March 31, 1996 and 1995 is derived from the unaudited financial statements of
the Company and, in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of such information. Results of operations for interim periods
are not necessarily indicative of the results to be expected for the full year.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(2) 1992 1991(3)
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Operating revenues(4)................ $ 448.9 $ 373.9 $1,618.6 $1,246.9 $1,057.7 $ 880.2 $ 781.1
Operating income..................... $ 49.3 $ 54.0 $ 112.8 $ 72.6 $ 128.2 $ 95.9 $ 136.6
Equity in net income (loss) of
unconsolidated wireless systems:
Domestic........................... $ 56.1 $ 35.4 $ 188.2 $ 125.4 $ 70.4 $ 41.1 $ 15.5
International...................... $ (7.1) $ (6.4) $ (35.9) $ (14.7) $ (37.5) $ (38.5) $ (21.4)
Interest:
Income............................. $ 4.5 $ 12.1 $ 34.9 $ 54.7 $ 12.0 $ 13.3 $ 13.8
Expense............................ $ (8.4) $ (3.9) $ (13.0) $ (10.3) $ (22.1) $ (52.9) $ (37.6)
Income (loss) before cumulative
effect of accounting change........ $ 52.2 $ 35.3 $ 131.9 $ 98.1 $ 40.1 $ (10.1) $ 43.1
Per share data:
Income (loss) before cumulative
effect of accounting change...... $ 0.10 $ 0.07 $ 0.27 $ 0.20 $ 0.09 $ (0.02) $ 0.10
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994(1) 1993(2) 1992 1991(3)
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investments in unconsolidated
wireless systems................... $3,201.7 $2,002.1 $3,076.3 $1,697.9 $1,154.5 $ 935.4 $ 676.6
Total assets......................... $5,786.4 $4,465.4 $5,647.9 $4,488.0 $4,076.7 $2,371.1 $1,900.1
Long-term obligations(5)............. $1,076.6 $ 140.0 $ 906.4 $ 130.1 $ 78.9 $ 257.3 $ 276.0
Total stockholders' equity........... $3,812.3 $3,526.6 $3,750.7 $3,459.6 $3,337.3 $ 752.1 $ 635.2
Working capital (deficit)............ $ (51.6) $ 539.2 $ 18.5 $ 736.5 $1,346.8 $ (698.4) $ (426.3)
Capital expenditures, excluding
acquisitions and capital
calls(6)........................... $ 80.5 $ 95.5 $ 530.3 $ 408.7 $ 225.9 $ 231.0 $ 230.2
</TABLE>
- ---------------
(1) Prior to April 1, 1994, the Company was an 86.1% owned subsidiary of Pacific
Telesis Group ("Telesis"). On April 1, 1994, the Company was spun off from
Telesis.
S-12
<PAGE> 13
(2) In December 1993, the Company completed a public offering of 68,500,000
shares of newly issued Common Stock for proceeds of $1,489.2 million. Prior
to such offering, the Company was a wholly owned subsidiary of Telesis. In
September 1993, the Company consummated a joint venture ("CMT Partners")
with AT&T Wireless, formerly McCaw Cellular Communications, Inc., and
contributed cellular assets with a net book value totaling $206.0 million.
The formation of CMT Partners resulted in a reduction in the individual
asset, liability, and income statement accounts of the Company's
Consolidated Financial Statements, and the reporting instead of income and
expense attributable to CMT Partners in the line item entitled "Equity in
net income (loss) of unconsolidated wireless systems: Domestic." See Note E,
"Investments in Unconsolidated Wireless Systems," to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, as amended, incorporated herein by
reference, for further information.
(3) In 1991, the Company and CCI formed New Par. The formation of New Par
resulted in a reduction in the individual asset, liability, and income
statement accounts of the Company's Consolidated Financial Statements, and
the reporting instead of income and expense attributable to New Par in the
line item entitled "Equity in net income (loss) of unconsolidated wireless
systems: Domestic." See Note E, "Investments in Unconsolidated Wireless
Systems," to the Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, as amended,
incorporated herein by reference, for further information.
(4) Presentation for 1994 has been restated to conform to the presentation for
the subsequent period. See Note A, "Summary of Significant Accounting
Policies -- Basis of Presentation," to the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended, incorporated herein by reference.
(5) Includes the current portion of long-term debt.
(6) For the quarters ended March 31 and years ended December 31, as applicable.
S-13
<PAGE> 14
SELECTED HISTORICAL PROPORTIONATE
FINANCIAL AND OPERATING INFORMATION
The following table is not required by generally accepted accounting
principles ("GAAP") and is not intended to replace the Company's Consolidated
Financial Statements prepared in accordance with GAAP. It is presented to
provide supplemental data. Because significant assets of the Company are not
consolidated and because of the substantial effect of the formation of certain
joint ventures on the year-to-year comparability of the Company's consolidated
financial results, the Company believes that proportionate financial and
operating data facilitates the understanding and assessment of its Consolidated
Financial Statements.
Under GAAP, the Company consolidates the entities in which it has a
controlling interest and uses the equity method to account for entities over
which the Company has significant influence but does not have a controlling
interest. In contrast, proportionate accounting reflects the Company's relative
ownership interests in operating revenues and expenses for both its consolidated
and equity method entities. For example, domestic cellular proportionate results
present the Company's share -- its percentage ownership -- for all significant
domestic cellular operations, including those joint ventures and partnerships
where the Company does not own more than 50%. Similarly, total proportionate
results show the Company's share of all its significant worldwide operations.
TOTAL COMPANY(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
PROPORTIONATE OPERATING
RESULTS
Total net operating
revenues.............. $ 801.4 $ 562.8 $2,605.2 $1,791.8 $1,226.1 $ 873.2 $ 687.0
Total operating
income................ $ 113.0 $ 86.4 $ 296.7 $ 171.5 $ 97.6 $ 11.3 $ 98.8
Total operating cash
flow(2)............... $ 244.8 $ 182.0 $ 702.3 $ 506.1 $ 351.5 $ 191.5 $ 223.9
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PROPORTIONATE OPERATING
DATA
Total cellular
POPs(3)............... 165,002 113,365 164,908 99,508 75,290 69,468 57,551
Total cellular
subscribers........... 3,347 2,109 3,059 1,948 1,206 779 558
Cellular subscriber net
adds in period,
excluding
acquisitions.......... 288 160 974 713 409 221 140
Total paging units in
service............... 2,614 1,760 2,474 1,647 1,269 899 669
Paging units in service
net adds in period,
excluding
acquisitions.......... 147 113 477 378 348 230 136
</TABLE>
See accompanying footnotes.
S-14
<PAGE> 15
PROPORTIONATE DOMESTIC
CELLULAR OPERATIONS(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC CELLULAR OPERATING RESULTS
Service and other revenues......... $ 434.1 $ 343.5 $1,523.3 $1,160.1 $ 892.0 $ 699.4 $ 564.6
Equipment sales.................... 18.7 22.8 78.9 74.6 40.2 24.8 19.3
Cost of equipment sales............ (39.3) (31.3) (125.6) (82.0) (42.2) (23.9) (18.4)
-------- -------- -------- -------- -------- -------- --------
Net operating revenues............. 413.5 335.0 1,476.6 1,152.7 890.0 700.3 565.5
-------- -------- -------- -------- -------- -------- --------
Cost of revenues................... 49.4 43.1 188.4 136.5 116.3 98.7 80.0
Selling and customer
operations(4).................... 143.6 113.7 544.0 415.2 297.2 -- --
General, administrative, and other
expenses(4)...................... 33.8 28.9 139.0 122.0 96.9 322.5 238.6
Depreciation and amortization
expenses......................... 58.9 45.3 189.2 185.7 164.7 124.1 93.7
-------- -------- -------- -------- -------- -------- --------
Total operating expenses........... 285.7 231.0 1,060.6 859.4 675.1 545.3 412.3
-------- -------- -------- -------- -------- -------- --------
Operating income................... $ 127.8 $ 104.0 $ 416.0 $ 293.3 $ 214.9 $ 155.0 $ 153.2
======== ======== ======== ======== ======== ======== ========
Operating cash flow(2)............. $ 186.7 $ 149.3 $ 605.2 $ 479.0 $ 379.6 $ 279.1 $ 246.9
Operating cash flow margin(5)...... 45.2% 44.6% 41.0% 41.6% 42.7% 39.9% 43.7%
Capital expenditures, excluding
acquisitions..................... $ 55.8 $ 63.0 $ 475.0 $ 296.7 $ 198.4 $ 199.8 $ 159.6
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC CELLULAR OPERATING DATA
Total POPs(3)....................... 37,798 35,390 37,739 35,390 34,889 34,121 32,560
Subscribers......................... 2,392 1,664 2,262 1,560 1,046 744 558
Subscriber net adds in period,
excluding acquisitions............ 130 104 591 514 286 186 140
</TABLE>
See accompanying footnotes.
S-15
<PAGE> 16
PROPORTIONATE INTERNATIONAL
CELLULAR OPERATIONS(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL CELLULAR OPERATING RESULTS
Existing operations(6):
Net operating revenues.............. $ 303.8 $ 160.3 $ 841.0 $ 352.8 $ 88.3 -- --
Operating income (loss)............. $ 25.6 $ 10.4 $ 62.7 $ 10.0 $ (17.3) -- --
Operating cash flow(2).............. $ 76.3 $ 43.9 $ 203.7 $ 87.4 $ 6.5 -- --
Income (loss)....................... $ 4.7 $ (1.4) $ (0.5) $ (13.2) $ (18.9) -- --
Start-up systems(7):
Income (loss)....................... $ (19.7) $ (10.2) $ (51.6) $ (26.1) $ (20.9) -- --
Total income (loss)................... $ (15.0) $ (11.6) $ (52.1) $ (39.3) $ (39.8) -- --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL CELLULAR OPERATING DATA
Total POPs(3).......................... 112,904 64,675 112,869 64,118 40,401 35,347 24,991
Subscribers............................ 955 445 797 388 160 35 --
Subscriber net adds in period,
excluding acquisitions............... 158 56 383 199 123 35 --
</TABLE>
DOMESTIC PAGING OPERATIONS(8)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
PAGING OPERATING RESULTS
Service and other revenues............ $ 69.0 $ 50.9 $ 219.4 $ 183.5 $ 145.7 $ 113.5 $ 92.6
Equipment sales....................... 12.9 11.3 45.5 43.4 35.2 22.2 9.7
Cost of equipment sales............... (11.4) (9.7) (39.5) (38.0) (31.9) (19.2) (7.4)
-------- -------- -------- -------- -------- -------- --------
Net operating revenues................ 70.5 52.5 225.4 188.9 149.0 116.5 94.9
-------- -------- -------- -------- -------- -------- --------
Total operating expenses before
depreciation and amortization....... 49.0 35.6 150.8 122.5 98.7 74.0 56.2
Depreciation and amortization
expenses............................ 14.7 9.7 42.8 36.8 30.6 26.3 23.4
-------- -------- -------- -------- -------- -------- --------
Operating income...................... $ 6.8 $ 7.2 $ 31.8 $ 29.6 $ 19.7 $ 16.2 $ 15.3
======== ======== ======== ======== ======== ======== ========
Operating cash flow(2)................ $ 21.5 $ 16.9 $ 74.6 $ 66.4 $ 50.3 $ 42.5 $ 38.7
Operating cash flow margin............ 30.5% 32.2% 33.1% 35.2% 33.8% 36.5% 40.8%
Capital expenditures, excluding
acquisitions........................ $ 27.2 $ 13.3 $ 72.0 $ 61.3 $ 53.4 $ 42.9 $ 34.8
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PAGING OPERATING DATA
Units in service....................... 2,468 1,634 2,338 1,525 1,167 821 601
Units in service net adds in period,
excluding acquisitions............... 131 109 463 358 324 220 127
</TABLE>
See accompanying footnotes.
S-16
<PAGE> 17
- ---------------
(1) Reflects results, total subscribers of all cellular systems, and total units
in service of all paging systems in which the Company owns an interest,
multiplied by the Company's ownership interest, exclusive of cost-based
investments and certain equity-based investments that are not material to
the Company's Consolidated Financial Statements taken as a whole.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization and is not the same as cash flow from operating activities in
the Company's Consolidated Statements of Cash Flows. Proportionate operating
cash flow represents the Company's ownership interests in the respective
entities' operating cash flows. As such, proportionate operating cash flow
does not represent cash available to the Company.
(3) POPs are the estimated market population multiplied by the Company's
ownership interest in a licensee operating in that market and includes
markets in which the networks are under construction and the markets of
certain cost-based investments not included in proportionate operating
results. Total AirTouch cellular POPs included personal communications
services ("PCS") POPs of 14,300 at December 31, 1995 and March 31, 1996 and
13,300 PCS POPs at March 31, 1995; international cellular POPs (and
therefore total AirTouch cellular POPs) included 36,943 POPs at December 31,
1995 for recently formed ventures in India and 7,469 and 7,491 POPs at
December 31, 1995 and March 31, 1996, respectively, for Poland where the
Company's consortium was awarded a national cellular license in February
1996.
(4) For periods prior to 1993, selling and customer operations expenses were
reported on a combined basis with general, administrative, and other
expenses.
(5) If net losses on equipment sales were reclassified as operating expenses,
operating cash flow margins would be 43.0% and 43.5% for the three months
ended March 31, 1996 and 1995, respectively, and 39.7%, 41.3%, 42.6%, 39.9%
and 43.7% for the years 1995, 1994, 1993, 1992 and 1991, respectively.
(6) Represents the Company's share of income or loss (after foreign taxes where
applicable) for international cellular systems which have completed 12
months of commercial service, as follows:
<TABLE>
<S> <C>
1st Quarter 1996 and 1995: Germany, Portugal, Sweden, Belgium, and Japan
1995: Germany, Portugal, Sweden, Belgium, and Japan
1994: Germany, Portugal, Sweden, and Belgium (6 months)
1993: Germany (6 months), Portugal (3 months), and Sweden (3 months)
</TABLE>
(7) Effective January 1, 1996, start-up systems represent the Company's share of
income or loss (after foreign taxes where applicable) for international
cellular systems which did not provide commercial service for the full 12
months of any preceding calendar year, as follows:
1st Quarter 1996: Italy, South Korea, Spain, India, and Poland
Prior to January 1, 1996, start-up systems represent the Company's share of
income or loss (after foreign taxes where applicable) for international
cellular systems which have not yet completed 12 months of commercial
service, as follows:
<TABLE>
<S> <C>
1st Quarter 1995: Italy, South Korea, and Spain
1995: Italy, South Korea, Spain, and India (4 months)
1994: Japan, Italy (3 months), and South Korea (3 months)
1993: Japan, Germany (6 months), and Portugal (9 months)
</TABLE>
(8) Domestic paging is wholly owned by the Company; therefore, proportionate
information reflects 100% of the subsidiary's GAAP-basis operating results.
S-17
<PAGE> 18
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1996 combines (1) the historical consolidated balance sheets of
AirTouch and subsidiaries and CCI and subsidiaries as if the CCI Merger had been
effective on that date and after giving effect to the purchase method of
accounting and other merger-related adjustments described in the accompanying
explanatory notes, and (2) the second phase of the AirTouch/U S WEST joint
venture described in the accompanying explanatory notes ("Phase II"), assuming
Phase II occurred on that date, and (A) all of the domestic cellular interests
owned by each of AirTouch and U S WEST, including those subject to regulatory
and other approvals, were contributed at such time to the joint venture, and (B)
U S WEST did not cause the contribution of the PCS Partnership to the joint
venture at such time. The unaudited Pro Forma Condensed Combined Statements of
Income present the combined results of operations of (1) AirTouch and CCI as if
the CCI Merger had been effective at the beginning of each period after giving
effect to the purchase method of accounting and other merger-related adjustments
described in the accompanying explanatory notes, and (2) Phase II of the
AirTouch/U S WEST joint venture as if Phase II had been effective at the
beginning of each period as described in the accompanying explanatory notes.
The Pro Forma Condensed Combined Financial Statements and accompanying
explanatory notes reflect the application of the purchase method of accounting
for the CCI Merger. Under the purchase method of accounting, the purchase price
will be allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the effective time of the CCI Merger (the "Effective
Time"). As described in the accompanying notes, estimates of the fair values of
CCI and subsidiaries' assets and liabilities have been combined with recorded
values of the assets and liabilities of AirTouch. However, changes to
adjustments included in the Pro Forma Condensed Combined Financial Statements
are expected as valuations/appraisals of assets and liabilities are completed,
and additional information becomes available. Although the Company cannot
ascertain what these changes would be, such changes could be material. In
addition, the results of operations of CCI subsequent to March 31, 1996 will
affect allocation of the purchase price. Accordingly, actual amounts will differ
from those set forth in the Pro Forma Condensed Combined Financial Statements.
Contingent payments, if any, associated with AirTouch's 6.00% Class B
Mandatorily Convertible Preferred Stock, Series 1996 will not affect the
aggregate purchase price, since the contingency is based on changes in the
volume-weighted average trading price of such preferred stock.
The equity method of accounting was applied for Phase II of the joint
venture. Despite having majority ownership, the equity method of accounting will
be required for the joint venture under generally accepted accounting principles
and it will not be consolidated because AirTouch will not control the joint
venture. Under the joint venture agreement, AirTouch is required to obtain
concurrence from U S WEST, or the Independent Member as defined in the
agreement, with respect to approval of the joint venture's budgets and business
plans, capital contributions in excess of certain levels, acquisition or
disposition of assets with fair market value in excess of certain levels, and
any distributions not contemplated in an approved budget. The equity method of
accounting requires recognition of AirTouch's share of the financial condition
and operating results of the AirTouch/U S WEST joint venture on one line in the
Pro Forma Condensed Combined Balance Sheet and in the Pro Forma Condensed
Combined Statement of Income, respectively. The contribution of net assets to
the AirTouch/U S WEST joint venture will be recorded on a historical basis. The
actual interests at the time of the Phase II closing or at a given point in time
thereafter of AirTouch and U S WEST in the capital, income (loss) and cash flows
of the joint venture will depend on a number of factors, the outcomes of which
are subject to significant uncertainties and contingencies. These factors
include, among other things, the timing of the actual closing of Phase II, the
ability of the parties to contribute certain of their domestic cellular
interests to the joint venture (and the timing of such contributions), the
ability of the parties to restructure the allocation of profits and losses and
the distribution of cash and property of the joint venture in the event that
they are unable to contribute all of their domestic cellular interests to the
joint venture at the closing of Phase II (and the manner in which any such
restructuring is implemented, see discussion below), the timing of the parties'
contribution of their PCS Partnership to the joint venture (and the value of the
PCS Partnership at the time of such contribution), and the timing of the closing
of the CCI Merger. The closing of Phase II is conditioned upon the satisfaction
of certain conditions, including the ability of AirTouch and
S-18
<PAGE> 19
U S WEST to contribute at least 60% of their respective domestic cellular
interests to the joint venture, measured on the basis of the adjusted POPs
represented by such interests and, in the case of AirTouch, excluding New Par.
AirTouch anticipates that Phase II will occur in the fourth quarter of 1996 or
the first quarter of 1997.
Some of the cellular interests of AirTouch and U S WEST, including their
general partner interests in Los Angeles and Seattle, respectively, are subject
to consent provisions in connection with certain transactions. In addition,
other partnership interests may, under certain circumstances, be subject to
rights of first refusal provisions in favor of third parties. The foregoing
provisions may or may not result in certain of the parties' properties not being
contributed to the AirTouch/U S WEST joint venture. In addition, a limited
partner in U S WEST's majority-owned Seattle system has initiated litigation
challenging the arrangements between AirTouch and U S WEST as they relate to the
Seattle property and the parties' joint venture. To the extent any such
properties have not been contributed to the joint venture at the time of the
Phase II closing, however, AirTouch and U S WEST are obligated throughout the
life of the joint venture to continue to use reasonable efforts to effect to the
maximum extent possible such contribution. In addition, AirTouch and U S WEST
have agreed that, in the event that either is unable to contribute all of its
domestic cellular interests to the joint venture, the parties, to the extent
feasible (including with respect to obligations to third parties), will (for a
five-year period following the Phase II closing) restructure, among other
things, the allocation of profits and losses and the distribution of cash and
property of the joint venture or, to the extent such a restructuring is not
feasible, to otherwise implement a compensation mechanism, in each case, to
provide each party with the same economic result (taking into account all tax
consequences) such party would have obtained if all of the parties' domestic
cellular interests had been contributed to the joint venture at the Phase II
closing. AirTouch and U S WEST have not yet determined whether any such
restructuring is feasible, or how any such restructuring or other compensation
mechanism would be implemented.
As a result of the uncertainties and contingencies surrounding Phase II,
AirTouch cannot predict the actual interest which it will have upon the closing
of Phase II in the capital, income (loss) or cash flow of the joint venture, or
the degree to which its domestic cellular operations will be deconsolidated, and
such interest and manner of accounting presentation could differ materially from
the pro forma information presented below. AirTouch nevertheless believes it is
reasonable to use the above-described assumption that all cellular properties
are contributed to the joint venture in the pro forma presentation because of
(i) the continuing obligations of AirTouch and U S WEST to attempt to effect
such contribution, and (ii) the fact that such an assumption reflects the most
conservative expected result (i.e., full deconsolidation) for the purposes of
AirTouch's financial statement reporting of all of AirTouch's domestic cellular
properties.
The Pro Forma Condensed Combined Financial Statements are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined company or
the financial position or the results of operations of the combined company that
would have actually occurred had the Merger and Phase II of the AirTouch/U S
WEST joint venture been in effect as of the date or for the periods presented.
The Pro Forma Condensed Combined Financial Statements and the accompanying
notes should be read in conjunction with and are qualified in their entirety by
the Consolidated Financial Statements, including accompanying notes, of AirTouch
and CCI and the Consolidated Financial Statements of U S WEST NewVector Group
included in the documents described under "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
S-19
<PAGE> 20
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA U S WEST CCI MERGER
---------------------------- CCI CCI JOINT VENTURE AND
AIRTOUCH CCI NEW PAR ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ -------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets.......................... $ 417.4 $203.3 $ 156.8 $ (7.0)(1) $ (207.0)(a)
(101.3)(2) $ 669.2 (156.8)(c) $ 305.4
Property, plant, and equipment, net..... 1,334.9 1.9 476.7 1,813.5 (866.5)(a)
(476.7)(c) 470.3
Investments in unconsolidated wireless
systems............................... 3,201.7 458.5 1,507.0(1) 941.5(a)
107.7(3) 4,016.2(c)
(3,418.4)(4) 1,856.5 6,814.2
Intangible assets, net.................. 582.5 410.0 2,149.3(4) (157.6)(a)
879.4(5) 4,021.2 (3,438.7)(c) 424.9
Deferred charges and other noncurrent
assets................................ 249.9 30.1 30.1 (107.7)(3) 202.4 (58.6)(a)
(30.1)(c) 113.7
-------- ------ -------- --------- -------- --------- --------
Total assets................... $5,786.4 $693.8 $1,073.6 $ 1,009.0 $8,562.8 $ (434.3) $8,128.5
======== ====== ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities..................... $ 469.0 $ 12.0 $ 80.5 $ 561.5 $ (177.9)(a)
(80.5)(c) $ 303.1
Long-term obligations................... 1,000.2 358.7 $ 420.0(1)
(93.4)(2) 1,685.5 (1.4)(a) 1,684.1
Deferred income taxes................... 254.8 33.6 879.4(5) 1,167.8 1,167.8
Deferred credits........................ 93.1 3.9 97.0 (11.9)(a)
(3.9)(c) 81.2
-------- ------ -------- --------- -------- --------- --------
Total liabilities.............. 1,817.1 404.3 84.4 1,206.0 3,511.8 (275.6) 3,236.2
-------- ------ -------- --------- -------- --------- --------
Minority interests in consolidated
wireless systems...................... 157.0 1.7 158.7 (157.0)(a)
(1.7)(c)
-------- ------ -------- --------- -------- --------- --------
Stockholders' equity:
6.00% Class B Mandatorily Convertible
Preferred Stock, Series 1996........ 500.0(1) 500.0 500.0
4.25% Class C Convertible Preferred
Stock, Series 1996.................. 580.0(1) 580.0 580.0
Common stock.......................... 5.0 5.0 5.0
Additional paid-in capital............ 3,887.1 3,887.1 3,887.1
Accumulated deficit................... (105.9) (105.9) (105.9)
Cumulative translation adjustment..... 15.9 15.9 15.9
Other................................. 10.2 10.2 10.2
Stockholders' equity -- CCI........... 289.5 (7.9)(2)
(281.6)(4)
Partners' capital -- New Par.......... 987.5 (987.5)(4)
-------- ------ -------- --------- -------- --------- --------
Total stockholders' equity..... 3,812.3 289.5 987.5 (197.0) 4,892.3 0.0 4,892.3
-------- ------ -------- --------- -------- --------- --------
Total liabilities and
stockholders'
equity....................... $5,786.4 $693.8 $1,073.6 $ 1,009.0 $8,562.8 $ (434.3) $8,128.5
======== ====== ======== ========= ======== ========= ========
</TABLE>
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
S-20
<PAGE> 21
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA U S WEST CCI MERGER
------------------------------ CCI CCI JOINT VENTURE AND
AIRTOUCH CCI(*) NEW PAR(*) ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ ---------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $ 448.9 $177.5 $ 626.4 $ (321.5)(b)
(177.5)(d) $ 127.4
-------- ------- -------- --------- --------
Operating expenses:
Cost of revenues............ 103.0 34.0 137.0 (65.0)(b)
(34.0)(d) 38.0
Selling and customer
operations expenses....... 138.3 52.6 190.9 (93.7)(b)
(52.6)(d) 44.6
General, administrative, and
other expenses............ 93.3 $ 63.4 9.2 $ (61.7)(11) 104.2 (43.2)(b)
(9.2)(d) 51.8
Depreciation and
amortization expenses..... 65.0 0.4 23.2 (2.6)(6) (38.8)(b)
27.3 (8) 113.3 (47.9)(d) 26.6
-------- ------ ------- ------- -------- --------- --------
Total operating expenses...... 399.6 63.8 119.0 (37.0) 545.4 (384.4) 161.0
-------- ------ ------- ------- -------- --------- --------
Operating income (loss)....... 49.3 (63.8) 58.5 37.0 81.0 (114.6) (33.6)
Equity in net income (loss) of
unconsolidated wireless
systems:
Domestic.................... 56.1 29.8 (64.1)(7) 21.8 68.0 (b)
34.3 (d)
(1.9)(e)
(3.5)(f) 118.7
International............... (7.1) (7.1) (7.1)
Minority interests in net
(income) loss of
consolidated wireless
systems..................... (8.5) (0.2) (8.7) 16.1 (b)
0.2 (d) 7.6
Interest:
Income...................... 4.5 1.9 2.4 8.8 (3.1)(b)
(2.4)(d) 3.3
Expense..................... (8.4) (6.3) (7.5)(9) (22.2) (0.2)(b) (22.4)
Miscellaneous income
(expense)................... 7.7 (3.1) (0.4) 4.2 0.4 (d) 4.6
-------- ------ ------- ------- -------- --------- --------
Income (loss) before
extraordinary item and
income taxes................ 93.6 (41.5) 60.3 (34.6) 77.8 (6.7) 71.1
Income taxes.................. 41.4 (14.3) 1.3 11.7(10) 40.1 (1.3)(d)
(0.6)(g) 38.2
-------- ------ ------- ------- -------- --------- --------
Income (loss) before
extraordinary item.......... $ 52.2 $(27.2) $ 59.0 $ (46.3) 37.7 (4.8) 32.9
======== ====== ======= =======
Preferred dividends........... 13.7 13.7
-------- --------- --------
Income attributable to common
stockholders................ $ 24.0 $ (4.8) $ 19.2
======== ========= ========
Income before extraordinary
item per share.............. $ 0.10 $ 0.05 $ 0.04
======== ======== ========
Weighted average shares
outstanding (in
thousands).................. 498,837 498,837 498,837
======== ======== ========
</TABLE>
- ---------------
(*) Conformed to AirTouch's Statement of Income presentation.
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
S-21
<PAGE> 22
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
AIRTOUCH/ PRO FORMA
AS REPORTED PRO FORMA U S WEST CCI MERGER
------------------------------ CCI CCI JOINT VENTURE AND
AIRTOUCH CCI(*) NEW PAR(*) ADJUSTMENTS MERGER ADJUSTMENTS PHASE II
-------- ------ ---------- ----------- --------- ------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $1,618.6 $660.3 $2,278.9 $(1,188.7)(b)
(660.3)(d) $ 429.9
-------- ------- -------- --------- --------
Operating expenses:
Cost of revenues............ 372.9 133.4 506.3 (231.0)(b)
(133.4)(d) 141.9
Selling and customer
operations expenses....... 524.7 204.4 729.1 (380.6)(b)
(204.4)(d) 144.1
General, administrative, and
other expenses............ 392.4 $ 13.6 38.4 444.4 (159.6)(b)
(38.4)(d) 246.4
Depreciation and
amortization expenses..... 215.8 2.2 86.4 $ (10.2)(6) (127.6)(b)
110.0 (8) 404.2 (186.2)(d) 90.4
-------- ------ ------- ------- -------- --------- --------
Total operating expenses...... 1,505.8 15.8 462.6 99.8 2,084.0 (1,461.2) 622.8
-------- ------ ------- ------- -------- --------- --------
Operating income (loss)....... 112.8 (15.8) 197.7 (99.8) 194.9 (387.8) (192.9)
Equity in net income (loss) of
unconsolidated wireless
systems:
Domestic.................... 188.2 101.3 (207.1)(7) 82.4 242.4 (b)
100.5 (d)
(17.5)(e)
(12.9)(f) 394.9
International............... (35.9) (35.9) (35.9)
Minority interests in net
(income) loss of
consolidated wireless
systems..................... (36.5) (0.9) (37.4) 56.4 (b)
0.9 (d) 19.9
Interest:
Income...................... 34.9 15.1 8.8 58.8 (12.3)(b)
(8.8)(d) 37.7
Expense..................... (13.0) (27.5) (0.1) (68.0)(9) (108.6) 5.1 (b)
0.1 (d) (103.4)
Miscellaneous income
(expense)................... (5.5) 16.1 (0.9) 9.7 (1.7)(b)
0.9 (d) 8.9
-------- ------ ------- ------- -------- --------- --------
Income before extraordinary
item and income taxes....... 245.0 89.2 204.6 (374.9) 163.9 (34.7) 129.2
Income taxes.................. 113.1 31.3 4.3 (54.4)(10) 94.3 (4.3)(d)
(6.7)(g) 83.3
-------- ------ ------- ------- -------- --------- --------
Income before extraordinary
item........................ $ 131.9 $ 57.9 $200.3 $(320.5) 69.6 (23.7) 45.9
======== ====== ======= =======
Preferred dividends........... 54.7 54.7
-------- --------- --------
Income (loss) attributable to
common stockholders......... $ 14.9 $ (23.7) $ (8.8)
======== ========= ========
Income (loss) before
extraordinary item per
share....................... $ 0.27 $ 0.03 $ (0.02)
======== ======== ========
Weighted average shares
outstanding (in
thousands).................. 494,925 494,925 494,925
======== ======== ========
</TABLE>
- ---------------
(*) Conformed to AirTouch's Statement of Income presentation.
See Explanatory Notes to the Pro Forma Condensed Combined Financial Statements.
S-22
<PAGE> 23
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
CCI MERGER PRO FORMA
Basis of Presentation. The 1996 Merger Agreement provides that at the
Effective Time, and subject to election and allocation procedures, each share of
CCI stock outstanding immediately prior to the Effective Time will be converted
into the right to receive either (i) $55.00 in cash, (ii) a fraction of a share
of the Company's 6.00% Class B Mandatorily Convertible Preferred Stock, Series
1996 (the "AirTouch Class B Preferred Stock"), and a fraction of a share of the
Company's 4.25% Class C Convertible Preferred Stock, Series 1996 (the "AirTouch
Class C Preferred Stock") (such fractional shares of securities being referred
to together as a "Unit") or (iii) a combination of cash and a fraction of a
Unit. Approximately 28% of the CCI stock not held by AirTouch will be converted
into the right to receive cash, and approximately 72% will be converted into the
right to receive Units. The total number of shares of CCI stock to be converted
into the right to receive Units and cash may be adjusted in order to maintain
the tax-free nature of the transaction.
Under the 1996 Merger Agreement, the aggregate amount of AirTouch Class B
Preferred Stock to be issued in the CCI Merger (without regard to the conversion
of CCI convertible debt (the "CCI Convertible Notes") or the exercise of options
to purchase CCI stock ("CCI Options"), in each case after the Effective Time)
may not exceed (i) $500 million divided by (ii) the volume-weighted average
trading price of AirTouch's common stock over the fifteen trading day period
ending on the second calendar day preceding the date on which the proxy
statement is mailed to CCI stockholders (the quotient of (i) and (ii), the
"Class B Maximum"). In the event that the number of shares of AirTouch Class B
Preferred Stock to be issued in the CCI Merger would exceed the Class B Maximum,
the composition of each Unit will be adjusted to increase the amount of AirTouch
Class C Preferred Stock contained in a Unit and decrease the amount of AirTouch
Class B Preferred Stock.
Under the 1996 Merger Agreement, CCI Convertible Notes will be assumed by a
subsidiary of AirTouch at the Effective Time. Each holder of CCI Options may
exercise such options before the Effective Time, subject to certain election
procedures, or after, subject to certain conversion procedures.
Pro forma income before extraordinary item per share is calculated based on
income before extraordinary item after deducting dividends of $54.7 million and
$13.7 million for the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively, for AirTouch Class B Preferred Stock and AirTouch
Class C Preferred Stock, and on weighted average shares of 494.9 million and
498.8 million as of December 31, 1995 and March 31, 1996, respectively. The
effect of convertible preferred stock, using the "if converted" method, is not
considered since the effect of such shares is anti-dilutive. The effect of CCI
Options and the CCI Convertible Notes has not been considered since the impact
is immaterial.
In the unaudited Pro Forma Condensed Combined Balance Sheet, (1)
outstanding CCI Options have not been considered in the pro forma presentation
since their impact is immaterial, (2) CCI Convertible Notes are assumed to not
convert into CCI stock prior to the Effective Time and (3) amounts presented
assume that 28% of the outstanding CCI stock would be exchanged for cash and
that the Class B Maximum will be issued. Although there could be other possible
combinations of cash and preferred stock as provided by the 1996 Merger
Agreement, any combination other than the one assumed would not have a
materially different impact from that shown by these Pro Forma Condensed
Combined Financial Statements. Because the AirTouch Class C Preferred Stock can
be redeemed for cash or converted into shares of common stock at the option of
AirTouch, it is not considered to be mandatorily redeemable for financial
reporting purposes.
The purchase price, exclusive of expenses related thereto and the
assumption of net CCI indebtedness, for the CCI Merger is summarized below (in
millions of dollars):
<TABLE>
<S> <C>
Cash................................................................ $ 420
Price for maximum AirTouch Class B Preferred Stock.................. 500
Price for AirTouch Class C Preferred Stock.......................... 580
------
Purchase price...................................................... $1,500
======
</TABLE>
S-23
<PAGE> 24
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
For purposes of the Pro Forma Condensed Combined Statement of Income for
the year ended December 31, 1995, the mandatory redemption offer pursuant to the
1990 Merger Agreement ("MRO") is assumed to have occurred concurrently with the
CCI Merger although it actually occurred in late October 1995. For purposes of
the Pro Forma Condensed Combined Statement of Income for the three months ended
March 31, 1996, the AirTouch Replacement Option payment (as defined in the 1990
Merger Agreement) is assumed to have occurred concurrently with the CCI Merger
although actually it occurred on January 4, 1996 (see Note 11).
The CCI Merger will be accounted for by AirTouch under the purchase method
of accounting in accordance with APB Opinion No. 16, and accordingly, this
method of accounting has been applied in the Pro Forma Condensed Combined
Financial Statements. The acquisition of CCI stock pursuant to the 1990 Merger
Agreement was accounted for using the equity method of accounting.
Under the purchase method of accounting, the purchase price will be
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time. Estimates of the fair values of CCI
and its subsidiaries' assets and liabilities have been combined with recorded
values of the assets and liabilities of AirTouch and subsidiaries in the
unaudited Pro Forma Condensed Financial Combined Statements. However, changes to
adjustments included in the Pro Forma Condensed Combined Financial Statements
are expected as valuations/appraisals of assets and liabilities are completed,
and additional information becomes available. Although AirTouch cannot ascertain
what the changes to pro forma adjustments will be, such changes could be
material. In addition, the results of operations of CCI subsequent to March 31,
1996 will affect the allocation of the purchase price. Accordingly, actual
amounts will differ from those in the Pro Forma Condensed Combined Financial
Statements. Contingent payments, if any, associated with AirTouch Class B
Preferred Stock will not affect the aggregate purchase price, since the
contingency is based on changes in the volume-weighted average trading price of
AirTouch Class B Preferred Stock.
CCI Merger Pro Forma Adjustments
1. Records the CCI Merger assuming the estimated professional fees of $7
million (primarily legal, investment bankers' and accountants' fees) related
to the CCI Merger were paid using available cash. For Pro Forma Condensed
Combined Financial Statement purposes, the as-reported values on CCI's
Balance Sheet other than its investment in New Par have been estimated to
approximate fair value.
2. Applies CCI's reported cash balances toward payment of its estimated merger
fees and the reduction of its long-term debt.
3. Reclassifies AirTouch Replacement Option payment made on January 4, 1996
from deferred charges.
4. Eliminates AirTouch's equity investment reflecting its equity interest in
CCI pursuant to the 1990 Merger Agreement and CCI's investment in New Par.
In addition, this entry allocates the full amount of the excess purchase
price over the as-reported amounts on CCI's and New Par's Consolidated
Balance Sheets to identifiable intangibles of New Par. Under the purchase
method of accounting, the purchase price is based on the total cost of all
equity acquired pursuant to the 1990 Merger Agreement and the 1996 Merger
Agreement.
<TABLE>
<CAPTION>
MARCH 31,
AGGREGATE PURCHASE PRICE 1996
------------------------ --------
<S> <C>
(1) Pursuant to 1996 Merger Agreement (after adjustments).............. $1,614.7
(2) Pursuant to 1990 Merger Agreement.................................. 810.7
--------
Total cost of acquisition................................................ 2,425.4
Less: Net assets acquired (net of adjustments)........................... 276.1
--------
Excess purchase price.................................................... $2,149.3
========
</TABLE>
5. Records the deferred tax liability related to identifiable intangible assets
other than goodwill and corresponding adjustment to goodwill (see Note 8).
AirTouch is required to recognize deferred tax liabilities for the temporary
differences between the initial assigned values to the identifiable
intangible assets and their tax bases. The deferred tax liability will be
amortized over the estimated useful lives of the
S-24
<PAGE> 25
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
relevant identifiable intangible assets. Goodwill is considered a residual
and no related deferred tax liability is recognized.
6. Adjusts New Par's as-reported depreciation expense to extend the lives of
certain domestic cellular telecommunications equipment from seven years to
ten years, to conform to AirTouch's useful lives.
7. Reverses AirTouch's equity in net income of CCI and New Par and CCI's equity
in net income of New Par for the year ended December 31, 1995 and the three
months ended March 31, 1996.
8. Records the amortization expense for identifiable intangible assets and
goodwill. For purposes of calculating the amortization of intangibles,
AirTouch has preliminarily estimated that approximately $191 million relates
to subscriber lists and $1,951.3 million relates to FCC licenses.
Amortization periods for subscriber lists and FCC licenses are five and
forty years, respectively.
9. Records interest expense incurred on $420 million of borrowings related to
the CCI Merger and $710.4 million of borrowings related to the MRO and
option payment, based on assumed average interest rates of 7.00% and 6.33%,
respectively. The weighted average effective interest rate on the Notes is
approximately 7.43%. The effect of the difference from the assumed interest
rate of 7.00% is immaterial. AirTouch anticipates indirectly using some of
the proceeds from the issuance of the Notes to fund the CCI Merger (see "Use
of Proceeds"). The rate of 6.33% represents average LIBOR for 1995 plus 30
basis points. Interest on the amount used to fund the MRO is based on the
terms of AirTouch's unsecured $2 billion, five-year revolving credit
facility. The effect of a 1/8% change in interest rates on interest expense
to pro forma net income of AirTouch is immaterial.
10. Records net income tax effects on the relevant pro forma items arising from
the CCI acquisition at the combined statutory rate of 41.05%. Pro forma
adjustments to the Condensed Combined Statements of Income include interest,
MRO compensation expense recorded by CCI (see Note 11), depreciation and
amortization expenses. Except for amortization of goodwill, these
adjustments were tax effected at the statutory rate to produce net tax
expense of $54.4 million and $11.7 million for the year ended December 31,
1995 and the three months ended March 31, 1996, respectively.
11. Reverses compensation expense recorded by CCI in connection with
cancellation of stock options, which options were acquired by AirTouch.
PHASE II OF AIRTOUCH/U S WEST JOINT VENTURE PRO FORMA
Basis of Presentation. In July 1994, AirTouch and U S WEST entered into an
agreement to combine their domestic cellular properties into a joint venture in
a multi-phased transaction. Phase I of the transaction commenced on November 1,
1995, and had no immediate financial accounting presentation impact. In Phase
II, the partners will combine their domestic properties into a joint venture,
subject to obtaining certain required consents and authorizations. AirTouch
believes that Phase II is a probable transaction. The most significant effect of
Phase II is the deconsolidation of AirTouch's domestic cellular interests and
the use of the equity method of accounting for its investment in the joint
venture.
The Pro Forma Condensed Combined Financial Statements assume that all of
AirTouch's domestic cellular properties (including the properties acquired in
the Merger) are contributed to the joint venture at the beginning of Phase II.
Similarly, all domestic cellular properties of U S WEST are assumed to be
contributed to the joint venture. The Pro Forma Condensed Combined Financial
Statements exclude the PCS Partnership since its inclusion is solely at the
option of U S WEST and could occur as late as mid-1998, and the effect of the
contribution to the relative ownership interest of the partners is not readily
determinable. The assumed ownership interests for AirTouch and U S WEST
approximate 74% and 26%, respectively, pursuant to a computation set forth in
the joint venture agreement.
S-25
<PAGE> 26
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
The following is selected pro forma financial information as of December
31, 1995 and March 31, 1996 and the periods then ended for the AirTouch/U S WEST
joint venture:
AIRTOUCH/U S WEST JOINT VENTURE
SUMMARY PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
OPERATING RESULTS
Operating revenues................................... $2,790.2 $ 762.9
Operating income..................................... $ 534.9 $ 164.6
Net income from operations........................... $ 562.1 $ 173.2
BALANCE SHEET
Total assets......................................... $6,893.3 $6,806.3
Total partners' capital.............................. $5,939.4 $6,084.0
</TABLE>
Pro forma net income per share is calculated based on income before
extraordinary items after deducting dividends of $54.7 million and $13.7 million
for AirTouch Class B Preferred Stock and AirTouch Class C Preferred Stock, and
assumes 494.9 million and 498.8 million weighted average shares outstanding as
of December 31, 1995 and March 31, 1996, respectively. The effect of convertible
preferred stock and convertible debt, using the "if converted" method, is not
considered since the effect of such shares is anti-dilutive. The CCI options
have not been considered in pro forma presentation since their impact is
immaterial.
Phase II Pro Forma Adjustments
a. Converts AirTouch's as reported investment in domestic cellular net
assets (before the CCI transaction) contributed to the joint venture to
the equity method of accounting.
b. Converts to the equity method of accounting AirTouch's as reported
domestic cellular consolidated 1995 and first quarter 1996 results of
operations.
c. Converts to the equity method of accounting AirTouch's interest in New
Par's as reported net assets (after the CCI Merger), including the
related intangibles.
d. Converts to the equity method of accounting AirTouch's interest in New
Par's 1995 and first quarter 1996 as reported results of operations,
including the amortization of intangibles arising from the CCI Merger.
e. Reduces AirTouch's as reported income in its domestic cellular
properties to reflect its ownership interest in the joint venture.
f. Adjusts AirTouch's share of the joint venture's net income for the
amortization of the implied goodwill (the difference between book value
of AirTouch's net assets (after the CCI Merger) contributed to the joint
venture and AirTouch's proportionate share of the pro forma combined net
assets of the joint venture at December 31, 1995 and March 31, 1996).
The amortization period for implied goodwill is 40 years.
S-26
<PAGE> 27
EXPLANATORY NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
----------- ---------
<S> <C> <C>
Book value of assets contributed by AirTouch................... $4,910.5 $5,065.4
Book value of assets contributed by U S WEST................... 1,028.9 1,018.6
-------- --------
Combined book values contributed............................... $5,939.4 $6,084.0
======== ========
AirTouch's share of combined book values at 74%................ 4,395.2 4,502.2
Book value of AirTouch's contribution.......................... 4,910.5 5,065.4
-------- --------
Implied goodwill............................................... $ 515.3 $ 563.2
======== ========
Annual amortization expense.................................... $ 12.9 $ 14.1
========
--------
Quarterly amortization expense................................. $ 3.5
========
</TABLE>
g. Records net income tax effects on the relevant pro forma items arising
from Phase II at the statutory rate of 41.05%.
S-27
<PAGE> 28
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered by
this Prospectus Supplement supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Debt
Securities under "Description of the Debt Securities" in the accompanying
Prospectus. Capitalized terms not defined herein have the meanings ascribed to
them in the accompanying Prospectus.
GENERAL
The Notes are being issued under an Indenture to be dated as of July 16,
1996, as amended by the First Supplemental Indenture to be dated as of July 16,
1996 and the Second Supplemental Indenture to be dated as of July 16, 1996 (such
indenture as so supplemented and amended in accordance with its terms is
referred to as the "Indenture") each being between the Company, as issuer, and
The First National Bank of Chicago, as trustee (the "Trustee"). The Indenture is
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Provisions of the Indenture are more fully described in
this Prospectus Supplement and under "Description of the Debt Securities"
commencing on page 11 of the accompanying Prospectus. The following summary of
the Notes is qualified in its entirety by reference to the Indenture, the Notes
and the Trust Indenture Act.
The Indenture does not contain any covenants specifically designed to
protect registered owners of the Notes against a reduction in the
creditworthiness of the Company in the event of a highly leveraged transaction.
The Notes will be originally issued in fully registered book-entry form and will
be represented by one or more Global Notes registered in the name of The
Depository Trust Company, as Depositary, or its nominee. See "--Book-Entry
System." Upon any exchange under the provisions of the Indenture of the Global
Notes for Notes in definitive form, such definitive Notes shall be issued in
authorized denominations of $1,000 or any integral multiples thereof.
The 7 1/8% Notes and the 7 1/2% Notes will be limited to $250.0 million and
$400.0 million aggregate principal amount, respectively. The 7 1/8% Notes will
mature on July 15, 2001, and the 7 1/2% Notes will mature on July 15, 2006. The
Notes will bear interest at the rate of 7 1/8% per annum in the case of the
7 1/8% Notes and 7 1/2% per annum in the case of the 7 1/2% Notes. Interest on
the Notes will accrue from July 15, 1996 and will be payable on each January 15
and July 15 commencing January 15, 1997. Interest on each Note will be computed
on the basis of a 360-day year of twelve 30-day months. Payments of interest and
principal on the Notes will be made in United States Dollars to the persons in
whose name the Notes are registered at the close of business on the date which
is fifteen days prior to the relevant payment date.
OPTIONAL REDEMPTION
The Notes will be redeemable in whole or in part, at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
their principal amount or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield plus 10 basis points in the case of the
7 1/8% Notes, and at the Treasury Yield plus 15 basis points, in the case of the
7 1/2% Notes; plus, for each of (i) and (ii) above, accrued interest on the
Notes to the date of redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means, in the case of the 7 1/8% Notes and the
7 1/2% Notes, the United States Treasury security selected by an Independent
Investment Banker as having a maturity comparable to the remaining terms of such
Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal
S-28
<PAGE> 29
amount) on the third business day preceding such redemption date, as set forth
in the daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations
for U.S. Government Securities" or (ii) if such release (or any successor
release) is not published or does not contain such prices on such business day,
the Reference Treasury Dealer Quotation for such redemption date.
"Independent Investment Banker" means Lehman Brothers or, if such firm is
unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Company and
acceptable to the Trustee.
"Reference Treasury Dealer Quotation" means, with respect to the Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
"Reference Treasury Dealer" means Lehman Brothers and its successor;
provided, however, that if it shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute therefor another Primary Treasury Dealer.
Holders of Notes to be redeemed will receive notice thereof by first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption.
If fewer than all the Notes are to be redeemed, selection of Notes for
redemption will be made by the Trustee in any manner the Trustee deems fair and
appropriate and that complies with applicable legal and securities exchange
requirements.
Unless the Company defaults in payment of the redemption price, from and
after the redemption date, the Notes or portions thereof called for redemption
will cease to bear interest, and the holders thereof will have no right in
respect of such Notes except the right to receive the redemption price thereof.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered Global
Debt Securities (each, a "Global Note") which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of a
nominee of DTC. Except as hereinafter set forth, the Notes will be available for
purchase in book-entry form only. The term "Depositary" as used in this
Prospectus Supplement refers to DTC or any successor depositary.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of New York Banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC was created to hold securities of persons who have accounts with DTC
("Participants") and to facilitate the clearance and settlement of securities
transactions among Participants in such securities through electronic book-entry
changes in accounts of such Participants. Participants include securities
brokers and dealers (including the Underwriters), banks and trust companies,
clearing corporations and certain other organizations, some of which (and/or
their representatives) own DTC. Access to DTC's book-entry system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants"). Persons who are not
Participants may beneficially own securities held by the Depositary only through
Participants or indirect participants.
DTC also advises that pursuant to procedures established by it, upon the
issuance by the Company of the Notes represented by the Global Notes, DTC or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Notes represented by such Global Notes to
the accounts of Participants. The accounts to be credited shall be designated by
the Underwriters. Ownership of
S-29
<PAGE> 30
beneficial interests in Notes represented by the Global Notes will be limited to
Participants or persons that hold interests through Participants. Ownership of
such beneficial interests in Notes will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
(with respect to interests of Participants in the Depositary), or by
Participants in the Depositary or persons that may hold interests through such
Participants (with respect to persons other than Participants in the
Depositary).
So long as the Depositary or its nominee is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented thereby for all
purposes under the Indenture and the Notes. Except as hereinafter provided,
owners of beneficial interests in the Global Notes will not be entitled to have
the Notes represented by a Global Note registered in their names, will not
receive or be entitled to receive physical delivery of such Notes in definitive
form and will not be considered the owners or holders thereof under the
Indenture. Unless and until a Global Note is exchanged in whole or in part for
individual certificates evidencing the Notes represented thereby, such Global
Note may not be transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any nominee of the Depositary
to a successor Depositary or any nominee of such successor Depositary.
Payments of principal of and interest on the Notes represented by a Global
Note will be made by the Company through the Trustee to the Depositary or its
nominee, as the case may be, as the registered owner of the Notes. The Company
has been advised that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Notes will credit immediately the
accounts of the related Participants with payment in amounts proportionate to
their respective beneficial interest in the Global Notes as shown on the records
of DTC. The Company expects that payments by a Participant to owners of
beneficial interests in the Global Notes will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
The Company will recognize DTC or its nominee as the sole registered owner
of the Notes for all purposes, including notices and consents. Conveyance of
notices and other communications by DTC to Participants, by Participants to the
indirect participants, and by Participants and the indirect participants to
beneficial owners will be governed by arrangements among them, subject to any
statutory and regulatory requirements as may be in effect from time to time.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Notes only at the direction of one or more
Participants to whose accounts interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of Notes as to
which such Participant or Participants has or have given such direction.
So long as the Notes are outstanding in the form of Global Notes,
registered in the name of DTC or its nominee Cede & Co., (a) all payments of
interest on and principal of the Notes shall be delivered only to DTC or Cede &
Co., (b) all notices delivered by the Company or the Trustee pursuant to the
Indenture shall be delivered only to DTC or Cede & Co. and (c) all rights of the
registered owners of Notes under the Indenture, including, without limitation,
voting rights, rights to approve, waive or consent, and rights to transfer and
exchange Notes, shall be rights of DTC or Cede & Co. THE BENEFICIAL OWNERS OF
THE NOTES MUST RELY ON THE PARTICIPANTS OR INDIRECT PARTICIPANTS FOR TIMELY
PAYMENTS AND NOTICES AND FOR OTHERWISE MAKING AVAILABLE TO THE BENEFICIAL OWNER
RIGHTS OF A REGISTERED OWNER. NO ASSURANCE CAN BE PROVIDED THAT IN THE EVENT OF
BANKRUPTCY OR INSOLVENCY OF DTC, A PARTICIPANT OR AN INDIRECT PARTICIPANT
THROUGH WHICH A BENEFICIAL OWNER HOLDS INTERESTS IN THE NOTES, PAYMENT WILL BE
MADE BY DTC, SUCH PARTICIPANT OR SUCH INDIRECT PARTICIPANT ON A TIMELY BASIS.
THE COMPANY AND THE TRUSTEE WILL NOT HAVE ANY RESPONSIBILITY, OBLIGATION OR
LIABILITY TO ANY PARTICIPANTS, TO ANY INDIRECT PARTICIPANT OR TO ANY BENEFICIAL
OWNER WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDE &
CO., ANY PARTICIPANT OR ANY INDIRECT PARTICIPANT,
S-30
<PAGE> 31
(2) THE PAYMENT BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT
WITH RESPECT TO THE PRINCIPAL OF OR INTEREST ON THE NOTES, (3) ANY NOTICE WHICH
IS PERMITTED OR REQUIRED TO BE GIVEN TO REGISTERED OWNERS OF NOTES UNDER THE
INDENTURE OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE
REGISTERED OWNER OF THE NOTES, OR BY PARTICIPANTS AS ASSIGNEES OF DTC AS THE
REGISTERED OWNER OF EACH ISSUE OF NOTES. THE RULES APPLICABLE TO DTC ARE ON FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE PROCEDURES OF DTC TO BE
FOLLOWED IN DEALING WITH PARTICIPANTS AND INDIRECT PARTICIPANTS ARE ON FILE WITH
DTC. NONE OF THE COMPANY, THE TRUSTEE OR ANY PAYING AGENT WILL HAVE ANY
RESPONSIBILITY FOR THE PERFORMANCE BY THE DEPOSITARY, PARTICIPANTS OR INDIRECT
PARTICIPANTS OF THEIR RESPECTIVE OBLIGATIONS UNDER THE RULES AND PROCEDURES
GOVERNING THEIR OPERATIONS.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, the Company will issue individual Notes in definitive form in exchange for
the Global Notes. In addition, if an Event of Default with respect to the Notes
shall have occurred and be continuing, the Company will, in accordance with the
procedures of the Depositary, issue individual Notes in definitive form in
exchange for the Global Notes. In any of the foregoing instances, the Company
will issue Notes in definitive form equal in aggregate principal amount to the
Global Notes, in such names and in such principal amounts as the Depositary
shall direct. Notes so issued in definitive form will be issued as fully
registered Notes in denominations of $1,000 or any amount in excess thereof
which is an integral multiple of $1,000.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on Global Notes will be
made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, while the
Notes are registered in the name of the Depositary or its nominee, the Notes
will trade in the Depositary's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
LEGAL OPINIONS
Certain matters relating to the legality of the Notes offered hereby will
be passed on for the Company by Pillsbury Madison & Sutro LLP and for the
Underwriters by Cleary, Gottlieb, Steen & Hamilton.
S-31
<PAGE> 32
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated July 11, 1996 (the "Underwriting Agreement"), between the Company and
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P.
Morgan Securities Inc. and Salomon Brothers Inc, as representatives of the
several Underwriters (the "Representatives"), the Company has agreed to sell to
each of the Underwriters named below, and each of such Underwriters has
severally agreed to purchase, the principal amount of Notes set forth opposite
its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 7 1/8% NOTES OF 7 1/2% NOTES
----------- ---------------- ----------------
<S> <C> <C>
Lehman Brothers Inc........................................ $ 62,500,000 $100,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. 62,500,000 100,000,000
J.P. Morgan Securities Inc................................. 62,500,000 100,000,000
Salomon Brothers Inc....................................... 62,500,000 100,000,000
------------ ------------
Total............................................ $250,000,000 $400,000,000
============ ============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations are such that the Underwriters are obligated to purchase all of the
Notes if any are purchased.
The Underwriters propose initially to offer the Notes directly to the
public at the public offering prices set forth on the cover page of this
Prospectus Supplement and, through the Representatives, to certain dealers at
such price less a concession not in excess of .375% of the principal amount for
the 7 1/8% Notes and .400% of the principal amount for the 7 1/2% Notes. The
Underwriters may allow and such dealers may reallow a discount not in excess of
.200% of the principal amount for the 7 1/8% Notes and .250% of the principal
amount for the 7 1/2% Notes to certain other dealers. After the initial
offering, the offering price and the other selling terms may be changed by the
Representatives.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Representatives that they intend to make a
market in the Notes, but that they are not obligated to so do and may
discontinue such market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, and
to contribute to payments the Underwriters may be required to make in respect
thereof.
Certain of the Underwriters and/or certain of their affiliates perform
investment banking and/or commercial banking services for, and/or engage in
general financing and banking transactions with, the Company and certain of its
affiliates from time to time in the ordinary course of their business and may
provide such services and engage in such transactions with the Company and its
affiliates in the future.
S-32
<PAGE> 33
======================================
NO DEALER, SALESMAN OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY AGENT OR UNDERWRITER.
THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO PURCHASE
ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................. S-3
Use of Proceeds............................. S-9
Capitalization.............................. S-10
Ratios of Earnings to Fixed Charges......... S-11
Selected Historical Consolidated and
Proportionate Financial Information....... S-12
Pro Forma Condensed Combined Financial
Statements................................ S-18
Description of the Notes.................... S-28
Legal Opinions.............................. S-31
Underwriting................................ S-32
PROSPECTUS
Index of Terms.............................. 3
Available Information....................... 3
Incorporation of Certain Documents by
Reference................................. 4
AirTouch Communications, Inc................ 5
The ATI Trusts.............................. 5
Use of Proceeds............................. 6
Ratio of Earnings to Fixed Charges.......... 6
General Description of Securities and
Risk Factors.............................. 6
Description of the Common Stock............. 6
Description of the Preferred Stock.......... 8
Description of the Depositary Shares........ 9
Description of the Debt Securities.......... 11
Description of the Warrants to Purchase
Common or Preferred Stock................. 20
Description of the Third Party Warrants..... 21
Description of the Warrants to Purchase Debt
Securities................................ 22
Description of the Stock Purchase Contracts
and Stock Purchase Units.................. 23
Description of the Preferred Securities..... 24
Description of the Guarantees............... 24
Plan of Distribution........................ 27
ERISA and Tax Considerations................ 28
Legal Matters............................... 28
Experts..................................... 28
</TABLE>
===================================================
======================================
$650,000,000
LOGO
$250,000,000
7 1/8% NOTES DUE 2001
$400,000,000
7 1/2% NOTES DUE 2006
-----------------
PROSPECTUS SUPPLEMENT
July 11, 1996
------------------
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
=====================================
