Filed by AirGate PCS, Inc.
Pursuant to Rule 425 under the Securities Act of 1933, as amended
and deemed filed pursuant to Rule 14a-12(b) of the Securities Act of 1934
Subject Company: iPCS, Inc.
Commission File No. 333-47682; 333-47688
AIRGATE PCS/iPCS
Analysts Teleconference Call Script
Moderator: Thomas Dougherty
August 29, 2001
7:30 a.m. MT
Operator: Good morning, everyone. Welcome to the AirGate iPCS analysts
and investor's teleconference call. With us today, we have
Thomas M. Dougherty, President and Chief Executive Officer
of AirGate PCS and Timothy M. Yager, President and Chief
Executive Officer of iPCS. After the opening remarks, you
will be taking questions. At that time, you will need to
press the one, followed by the four on your telephone. This
call is intended for financial analysts and investors only.
All other participants will be placed in a listen-only mode.
This call is being recorded. Your participation implies
consent to our recording this call. If you do not agree to
these terms, simply drop off the line.
Now I'd like to turn the conference over to Alan Catherall.
Please go ahead, sir.
Alan Catherall: Thank you, operator. Good morning, ladies and gentlemen.
This is Alan Catherall, Chief Financial Officer of AirGate.
As we've already mentioned, joining me this morning is Tom
Dougherty, President and Chief Executive Officer of AirGate,
as well as Tim Yager, President and Chief Executive Officer
of iPCS.
Before we begin, I'd like to make the following disclosure.
Certain forward-looking statements that will be made by
management during this call are being provided in reliance
upon the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Since these forward-looking
statements are based on factors that involve risks and
uncertainties, actual results may differ materially from
those contained in this presentation. These factors are
disclosed with our filings with the SEC. We do not assume
any obligation to update these forward-looking statements.
I'd now like to turn the call over to Tom Dougherty, who
will make some opening remarks. Tom?
Tom Dougherty: Thank you, Alan. Good morning, everyone, and thank you for
joining us. We've very excited about our combination with
iPCS, which will create what we believe will be the premiere
Sprint PCS network partner. Before moving into this
presentation, I'd like to give Tim Yager the opportunity to
share with you his thoughts about this morning's
announcements. Tim?
Tim Yager: Thank you, Tom. I'm pleased to be here and am excited about
the future of a combined AirGate and iPCS. Both our
companies share a common culture and strategic approach to
our markets and focus on shareholder value. We both have
successfully executed our strategies and enjoy superior
subscriber growth. The wireless communications industry
continues to evolve and grow at an unprecedented rate. We
look forward to quickly
closing this transaction so we can begin working together
with AirGate to combine best practices and create a true
leader within our industry, bringing additional value to our
shareholders, opportunities for employees and strengthening
relationships with our customers.
I'll now turn the call back over to Tom Dougherty. Tom?
T. Dougherty: Thank you, Tim. Many of you on this call are, of course,
very familiar with AirGate and you know that we have some of
the best operating metrics among the Sprint affiliates. To
ensure that we continue to bring value to shareholders and
customers alike, we have been very disciplined in our
expansion. With iPCS, we are confident that we found the
right partner to build value while creating a true leader
within the wireless communications industry.
Like AirGate, iPCS has strong relationships with its
customers, densely populated territories, attractive market
demographics and a fully funded business plan. Undoubtedly,
this is the right transaction at the right time.
As announced in our press release earlier today, the boards
of directors of both AirGate and iPCS have unanimously
approved an agreement under which AirGate and iPCS will
combine in a tax-free, stock for stock transaction. The
transaction has an enterprise value of approximately $900
million based on our closing stock price yesterday. The
terms of the transaction are straightforward. Specifically,
AirGate will issue approximately 12.4 million shares of
AirGate common stock. AirGate will hold in reserve an
additional 1.1 million shares for issuance upon the exercise
of the outstanding iPCS options and warrants. Assuming full
conversion of each company's options and warrants, AirGate
shareholders will own approximately 52.5 percent of the
combined company and iPCS shareholders will own
approximately 47.5 percent. AirGate will also assume
approximately $95 million of iPCS net debt.
Upon completion of the transaction, iPCS will become a
wholly owned subsidiary of AirGate. Barry Shiftman [sp] will
remain as Chairman of AirGate and I will remain President
and CEO. Alan Catherall will remain CFO of AirGate. Tim
Yager, iPCS's President and CEO will continue in that
position until the transaction closes. Tim will then join
the AirGate Board of Directors as one of iPCS's three
designated director. A representative of the Blackstone
Group, which through its affiliated fund, is a significant
shareholder of iPCS, and another independent director will
be agreed upon by both AirGate and iPCS and will also be
added to the combined company's board.
When all is said and done, AirGate's board will expand to
include nine members. We will meet customary regulatory
approval and review--I'm sorry regular--regulatory review
and approvals by the shareholders of AirGate, both company's
senior secured lenders and Sprint PCS. A majority of the
shareholders of iPCS have agreed to vote their shares in
favor of the merger. We believe that all of our
constituencies will recognize the merits of this combination
and that approvals can be obtained quickly. We expect the
transaction to close by the end of the February 2002.
I'd now like to turn the call over to Alan again. Who will
provide you with some more detail on iPCS and its markets.
Where we believe significant opportunities exists for
additional revenue growth and market penetration. Alan?
A. Catherall: Thanks, Tom. We believe that this is a unique opportunity to
expand our existing network and customer base and allow us
to leverage our operating expertise across iPCS's strong and
attractive markets. For those of you unfamiliar with iPCS,
is the fifth largest Sprint PCS affiliate. As the exclusive
rights to provide mobile, wireless personal
communication network services under the Sprint PCS brand to
over 7.4 million POPS, and, as of June 30, at over 107,000
subscribers.
IPCS's service territory is adjacent to several major
metropolitan areas but are operated by Sprint PCS, including
Chicago, Detroit, DeMoine, Indianapolis and St. Louis.
Thereby, offering us additional sources of roaming revenue.
Additionally, in many of iPCS's markets competition is more
fragment--fragmented than is generally the case for wireless
service providers operating in larger metropolitan markets.
iPCS is the first or second PCS entrance in most of its
markets. iPCS's territory is rich in population density and
has strong demographics. For instance the territory includes
the headquarters of a number of large companies, such as
State Farm Insurance, Archer Daniels Midland, Dow Chemical,
John Deere, and Caterpillar, as well as over 90 colleges and
universities. By leveraging our joint operating expertise,
and the Sprint brand, we believe there is significant
potential for additional subscriber growth and market
penetration in our combined territory.
iPCS's territory, also includes Grand Rapids, the largest
market affiliated by Sprint PCS with over 1 million POPS.
Other key markets include Cedar Rapids, Champaign-Urbana,
Peoria, the Quad Cities, Seganal Bay City [sp], and
Springfield. Combined with iPCS, we will have approximately
11 million covered POPS, making AirGate the largest Sprint
PCS network partner based on coverage.
We are proud to say that the combined company will also
boast a subscriber growth rate among the highest in the
industry. With that, let me turn the call back over to Tom.
T. Dougherty: Thanks, Alan. As you can see this transaction brings
together two companies to create a formidable competitor and
an outstanding service provider, while creating significant
value for shareholders. Together with iPCS we will be well
positioned to capture the growing opportunities in the
wireless communications industry. Both AirGate's and iPCS's
operating regions enjoy strong demographics that support the
continued demand for wireless service.
AirGate's territory has one of the highest population
densities among Sprint PCS affiliates and a significant
number of highway miles and major interstate corridors
leading to tourists' destination. As Alan discussed, iPCS's
shares these demographic strengths.
As you know, infrastructure and funding is a competitive
differentiator within our industry. AirGate has already
completed its network build out. In fact, we successfully
completed AirGate's build out plan in less than 10 months,
an industry record. iPCS expects to--its build out to be
completed by the end of this year. Importantly, both
companies are fully funded with a significant cash cushion
to finance further growth.
By the end of this year, our combined network infrastructure
will cover 12 million people in key markets throughout the
Southeastern and Midwestern United States. With iPCS,
AirGate will cover more than 80 percent of the POPS in our
combined territory. We believe that, with our attractive
markets, larger scale and strong support of Sprint PCS,
we'll have the formula for success, creating enhanced growth
and profit opportunities.
AirGate continues to expect to reach EBITDA positive in the
second calendar quarter of 2002. As a result of this
transaction, on a combined basis, the company expects to
reach EBITDA positive one quarter later.
We are excited to be the largest Sprint PCS affiliate based
on covered POPS and look forward to working with iPCS's
talented management team. And now, if you have any
questions, Alan and I and Tim would be happy to address
them.
Operator: Thank you, gentlemen. Ladies and gentlemen, if you wish to
register for a question, please press the one followed by
the four on your telephone. You will hear a three-tone
prompt acknowledging your request. If your question has been
answered and you wish to withdraw your polling request, you
may do so by pressing the one, followed by the three. If you
are on a speakerphone, please pick up your handset before
entering your request.
One moment, please, for the first question. John Bensche
with Lehman Brothers. Please go ahead with your question.
John Bensche: Hi. Congratulations, Tom and Tim, on a good deal here. The
question I have is for you, Tom, as you look at acquisition
versus organic growth, what are your thoughts on the balance
of the two, in terms of growing AirGate going forward, this
is a bit of a change from where you had been. And secondly,
what do you think about contiguous versus non-contiguous,
clearly this is non-contiguous, does that at all make it
difficult to realize scale or synergies in the merger
between the two?
T. Dougherty: John, the first part of your question about growth, as you
undoubtedly know, and we've certainly told other analysts
and investors, we are very focused on operating metrics.
AirGate has been very successful in achieving good metrics
by keeping its nose close to the grindstone. We focus on the
important operating elements, sales, marketing, high network
quality and absolutely deliver on the numbers. There'll be
no change in that. We will continue to focus on our core
business and as we have brought this transition into play,
we will be just as focused on the operating metrics of the
new territory currently branded as iPCS.
The second part of your question about continuity. I have
been in this business for a long time and in the cellular
business, years ago, it was very important contiguous
territory because you had to reestablish a brand name and no
one had a national footprint. This particular situation with
Sprint allows a very wide degree of geography that could be
operated just as well as those close by, because you got one
common brand name throughout the country and Sprint and its
affiliates together provide a national footprint. There's
absolutely--as long as we have a big, well-run operation at
what is now iPCS, we're very confident that it can be run
very smoothly just as we have AirGate up to this point. Does
that answer your question, John?
J. Bensche: Yes, it did. If I could ask one follow up to Alan. Do you
have revised financial guidance for say the `02 period when
the iPCS transaction, I guess, should impact pretty much the
first three quarters? Last three fiscal quarters of your
numbers?
A. Catherall: We all get confused at times, John, on the fiscal quarter
versus calendar quarter.
J. Bensche: It's a good time to calendarize that, Alan.
T. Dougherty: I think it may be a good time to fiscalize it actually.
A. Catherall: I--actually, John, with regard to guidance we're working
through the numbers right now. We have provided, as Tom
indicated, guidance on the EBITDA break-even date. And,
quite honestly, that is the only guidance we'll provide
regarding 2002 at the moment.
J. Bensche: Thank you.
Operator: Bill Benton with William Blair. Please go ahead with your
question.
Bill Benton: Good morning, guys, congratulations.
T. Dougherty: Thank you, Bill.
B. Benton: You have even more reason to come visit me in Chicago now.
T. Dougherty: With pleasure, Bill. With pleasure.
B. Benton: Yeah. Just with a--as an FYI, they have great coverage from
Chicago to St. Louis, and I think Tim already knows that.
T. Dougherty: Thank you, Bill.
T Yager: Good.
T. Dougherty: I'll drive it and test it.
B. Benton: Just a couple questions, and maybe these are really
questions for Tim. I wonder if you could comment--I know you
said the competitive environment in those iPCS markets is
lower, or is less I should say. And I was wondering if you
could just talk about how that maybe situation is changing.
And then maybe another question for Tim, which is, I
presume, given this property that you had sufficient
interest among several affiliates and I'm just curious on
your thoughts, you know, I have my own reasons why you'd
choose AirGate, but I'm just curious on, you know, why you
chose AirGate?
T. Yager: Sure. First question Bill, in terms of the competitive
landscape, it is starting to change. We see SunCom brands in
our Iowa market starting to compete with us. We know AT&T's
coming into Illinois, they're not in all our markets yet in
Illinois. They're not in our Michigan markets yet, but
they're coming. But, as we've said on our own calls in the
past, Verizon's our strongest competitor across both of our
footprints. But, it's still very fragmented in terms of our
overall footprint.
B. Benton: OK.
T. Yager: With regards to the second question in terms of who we
talked to in this process. I think, as you and most of the
people on the call realize, everyone--it's a very small
space with the affiliates and we all talk to everyone. And I
think it was clear as we went down the road that AirGate was
the right alternative for our shareholders of iPCS and
provided a tremendous amount of value to our shareholders.
B. Benton: OK. Well, great. Well, congratulations, again, guys.
T. Yager: Thanks, Bill.
A. Catherall: Thanks, Bill.
Operator: Aryeh Bourkoff with UBS Warburg. Please go ahead.
Aryeh Bourkoff: Yes. Thank you and congratulations. Just a question on the
organization rollout structure if possible. Can you talk
about how the iPCS entity is being rolled in. Is that gonna
be an [inaudible] that remains on its own. And, also if you
could talk about the change of control. Thank you.
A. Catherall: Thank you for the question, this is Alan Catherall. This--
the structure is gonna be organized as an unrestricted
subsidiary, iPCS will become an unrestricted subsidiary of
AirGate and essentially the two credits will remain
independent. The silo approach that
I'm sure you're very familiar with and that--to use
that description. And I believe change of control, with the
structure, the change of control does not come to play.
A. Bourkoff: OK, thank you.
Operator: Michael Attar with Morgan Stanley. Please go ahead with your
question.
Michael Attar: Hi. Congratulations on it, guys. Couple questions, first,
just in terms of financials for the rest of the year, up
through the acquisition there'll be no--until the
acquisition closes, obviously no impact on the numbers for
AirGate. Will you breakout going forward the iPCS results on
the quarterly calls, just informationally?
T. Dougherty: We would expect to breakout some of the operating metrics of
iPCS separately . I think we wanted to make sure that
everybody understands how well we're performing in both sets
of markets.
M. Attar: OK. And then I understand the--you indicated a substantial
cash cushion after the acquisition is closed. Can--I know,
it's early, any visibility or granularity you can give us on
that in terms of where you expect to stay in terms of cash
cushion or credit availability at the point when the
companies, on a combined basis, turn EBITDA positive?
A. Catherall: Yes, Mike. Early indications are by the time we turn EBITDA
positive on a combined basis, the cash cushion will be 100
to 100--130 to $140 million.
M. Attar: OK. OK. Thanks a lot.
Operator: Sherryn Kinsey with CS First Boston. Please go ahead with
your question.
Cindy Motes: Hi, Tom.
T. Dougherty: Yes?
C. Motes: It's actually Cindy Motes, sorry about that.
T. Dougherty: Hi, Cindy. How are you?
C. Motes: I'm good, thanks. Congratulations to you and Tim and Alan,
it's a really smart deal. Anyway, I just--you might of
talked about this but I got disconnected off the call at one
point. But, would you consider possibly, I guess, more
acquisitions down the road? Especially, I guess, you know,
if you're gonna have that kind of sizable cash cushion I
guess, you know, out next year, is that something you would
also look to do? And then, obviously Sprint PCS has got to
approve this, but I--is it--I guess it would be safe to say
that they're pretty pleased with this sort of consolidation
that's going on, especially, you know, coming from
yourselves given the value you've created?
T. Dougherty: I--well, let me answer the second one first. The--we--Sprint
PCS has been notified and Tim will be writing requesting the
formal approval in the coming days. We would expect that to
go forward in a pro forma fashion.
C. Motes: Sure.
T. Dougherty: And, you know, I think that Sprint will, you know, has a
real--they have a very strong program of affiliation and
this will strengthen that program significantly, so, I can't
think as they do. But, I would imagine that they would find
this to be pretty positive.
In terms of additional acquisitions, we are very focused, as
I said earlier, on making sure that the operating metrics of
our combined company are at a very strong level so that we
can get to cash flow positive at the earliest possible date.
That is where we're gonna focus our attention. I will also
say to you that if we are as disciplined as we were in
dealing with our current expansion and working with this
transaction, there may be some other transactions that will
surface. It will be also very attractive to our
shareholders. But we would be obliged to take a look at
them. Right now, I don't see anything happening in the near
future and I would encourage all of the management of
AirGate to focus on operating the businesses that we have at
hand.
C. Motes: And, also, Tom, just following up, I--you don't see any like
potential, like, integration issues? I would think this one
would be pretty easy to integrate. Is that probably
accurate?
T. Dougherty: That is very accurate. This is--we're using the same billing
system--.
C. Motes: Right.
T. Dougherty: --And customer care and we have common infrastructure. They
have a mixture of Lucent and Nortel equipment, both of them
have become very similar in a way that they function. The
handset mix is the same. The--you know, we have similar
sales commission structures. There is so much similarity you
have to really hunt for differences.
C. Motes: Right.
T. Dougherty: And we would expect it to have a very smooth transition and
the management is going to ensure that that takes place.
C. Motes: Great. Well, congratulations.
T. Dougherty: Thank you very much, Cindy.
Operator: Will Power with Robert W. Baird. Please go ahead.
Will Power: Good morning.
T. Dougherty: Hello, Bill.
W. Power: Congratulations on putting the transaction together. I--a
couple of questions. First, I wonder if you can walk us
through potential areas of cost synergies. I know there's
already a lot shared back office. But if you can provide any
preliminary ranges for, you know, what some of the
anticipated savings might look like.
And, second, on the revenue side, I think in the second
quarter, Illinois PCS is ARPU was about 10 percent or so
below your all's ARPU. I wonder if you can give us an
indication as to what the differences are there and what you
all think you can do to increase Illinois PCS's ARPU up to
your current level? Thanks.
T. Dougherty: Go ahead.
A. Catherall: Specifically, Will, with regard to the ARPU, there is one
major accounting difference between AirGate and iPCS. We
recognize the activation fees ourselves over 15 months iPCS
uses a recognition period of 30 months. And that difference
accounts for about a dollar difference in ARPU between
AirGate and iPCS.
I think the other factor is--probably relates more to
distribution than anything. iPCS has probably, as you know,
a great number of local fill-in, local distributors, we
operate on--largely on retail stores. Our retail stores are
incented to up-sell customers. iPCS's local distributors are
now incented to up-sell customers. That wasn't the case for
most of this year. They've made a recent change on the
commission structure. I think you'll see that benefit in
higher ARPU's prospectively for iPCS.
With regard to synergies, we didn't do this transaction for
synergy savings. I think, as everybody knows, in the Sprint
affiliate world, there are some synergy savings at the
senior management level, but below that there are very few
synergy savings to be gained. I should say, though, that
both companies will use this as an opportunity, if you will,
to install best practices, both sales, marketing,
engineering, finance, throughout the organization and, you
know, improve our operating metrics accordingly.
W. Power: OK. Great. Thanks a lot.
Operator: Ric Prentiss with Raymond James. Please go ahead.
Ric Prentiss: Yeah, I'll echo my sentiments, nice deal, guys.
T. Dougherty: Thanks, Rick.
R. Prentiss: And also congratulate you on the echo--or on the quality of
the network up there. I was in the Midwest all last week and
my Sprint phone worked great. A couple questions for you,
Tom, you mentioned earlier about how all these markets are
adjacent to a lot of the bigger markets in the Midwest. What
do you think the impact will be on kind of your in/out
roaming issues up there?
T. Dougherty: Well, maybe we should let Tim talk about that to begin with.
But, the interesting piece about roaming is that the history
that we're gaining now will help us in our forward
projections. I don't think anyone would bet their entire
career on having a wonderful projection about what the in
and out roaming would be from say the areas surrounding St.
Louis. But, we do believe that there is a very attractive
roaming territory in iPCS's territory, perhaps, it's more
evenly distributed throughout the year rather than our
seasonal, but we would expect them to be net positive for
some time to come.
R. Prentiss: OK. And also, what's kind of the--amount of the ASL
customers up there? Is there a lot of prepaid versus post-
paid or what's the mix?
A. Catherall: Rick, this is Alan, it's about the same as AirGate, both
companies have approximately 25, 26 percent of net
subscribers--sorry, subscribers, rather, at the end of June.
And both companies run a similar distribution path, if you
will.
R. Prentiss: OK, sounds good. And you talked also about the sprint local
being up in the area. How much a benefit or how do you
expect to be able to use that?
T. Dougherty: Sprint local is just in our territory in--at AirGate in the
Carolina's. There is no Sprint local, to my knowledge,
anyway, [inaudible] due diligence in iPCS's territory.
R. Prentiss: All right, my bad. I read it too fast. Congratulations,
guys.
T. Dougherty: Thank you very much.
Operator: Jennifer Murtaugh with First Union. Please go ahead.
Jennifer Murtaugh: Hi, congratulations. Also, you can come visit me in Chicago.
Question on two things, can you go through the--if there's
any lockup terms regarding Blackstone and the other
shareholders, what the duration of that is? And, I think,
self-admittedly Sprint kind of admits that Chicago is one of
their weaker markets from seeing them in a recent road show,
they said that they were changing the infrastructure here. I
guess, it's more a question to Tim. Do you think that will
improve if it, you know, already good roaming revenue coming
from Chicago through your market?
T. Yager: Sure, Jennifer, I'll take the second one and then let Tom
handle the first about Blackstone. But, with regards to
Chicago's market, they've made substantial improvements in
that market throughout the summer. I know they've had an
active capital plan in Chicago. We still see very positive
roaming revenues or travel revenues coming out of Chicago as
well as Detroit and St. Louis into our markets. So, we think
that it only improves from here.
J. Murtaugh: Great, thanks.
T. Dougherty: And in terms--I believe your question--your first question
was about lockups and so forth.
J. Murtaugh: [Unintelligible].
T. Dougherty: We're--we believe that the correct way to deal with a merger
of this type is to proactively manage shareholder liquidity.
We believe the right way to do this is to get this going as
quickly as practical. So we are going to put in place a
shelf registration. After close, there'll be a lockup on the
shareholders that we will commit to have a planned secondary
offering in that 120 days. We will then, after than
secondary offering, have lockup provisions that are
standard, which I would imagine would be about 90 days.
Following that 90-day period, there's still a phase-out for
some of the larger shareholders that are some of the
founders. It will--they'll have 20 percent of their
remaining stock available after that 90-day lockup. There's
another 30 percent 90 days later after that. And the
remaining 50 percent, 90 days after that. I know that's a
rather lengthy answer to your question, but I tried to--.
J. Murtaugh: No, it's good. It was very thorough. Thank you. That helps a
lot. Congratulations.
T. Dougherty: Sure.
A. Catherall: And by the way, Jennifer, congratulations to you as well on
your upcoming marriage.
J. Murtaugh: Thank you, Alan. Talk to you soon.
Operator: Ned Zachar with Thomas Weisel Partners. Please go ahead.
Ned Zachar: Thanks very much. This is one of the rare occasions where
you can say that both sides got a good deal. So,
congratulations, again.
T. Dougherty: Thanks, Ned.
N. Zachar: A couple of questions, Alan, did you say that the cash
cushion would be, I think, 100 to 130 to 140 at the time you
turned EBITDA positive or free cash flow positive?
A. Catherall: At the time, we turned EBITDA positive, Ned.
N. Zachar: And I'm assuming, since you really need separate credits,
you'll have to file two separate 10Q's?
T. Dougherty: That's correct.
N. Zachar: So we'll get plenty of information there about Illinois PCS.
T. Yager: Yes, you will.
N. Zachar: And then a question for Tim, if you could talk a little
bit--remind us a little bit about the density and
demographics in the Illinois PCS territories, that would be
very helpful.
T. Yager: All right. Our densities are typically above the national
average, they're around a hundred. So they're just a mark--
just a hair below what AirGate's densities are. And our
demographics are very strong. For instance, our medium
income is north of $30,000. And so we have a--we have very
good demographics that hold up both on the density to
traffic counts as well as the medium household incomes.
N. Zachar: Terrific. Thanks, again, guys.
T. Yager: Thank you.
Operator: Steve Yanis with Bank of America Securities. Please go
ahead.
Steve Yanis: Hi, Steven Yanis, again, congratulations.
T. Dougherty: Steven, thanks.
S. Yanis: Pretty much been exhausted, thanks. Pretty much been
exhausted on the fundamental questions. You might of said
this, I apologize if you have to repeat yourself. The 1X
plan for iPCS in terms of timing?
T. Dougherty: The timing on 1XRTT is very similar to ours. We would expect
to finish collectively and then sort of first or second
calendar quarter of next year.
S. Yanis: And if I could just have a follow-up on that, I guess a non-
merger related question. Have you guys been to Kansas, have
you played with these handsets? I mean, does the system
work, are you impressed? Is it fast? Do you like what you
can do?
T. Dougherty: I really was, Steve. I was out in--we had an affiliate
meeting out in San Diego week before last, and at that
meeting, a great deal of the time was spent on 1XRTT and
what the plans are of implementation. Sprint is obviously
going to distribute information about their plans if--later
all on their own, but the availability of handsets, the
advanced operating systems that they're putting in place, I
think are going to be very pleasing to the public. I'll tell
you what pleasantly surprised me was that we're gonna have a
generous quantity of 1XRTT handsets for the Christmas
selling season.
S. Yanis: Great.
T. Dougherty: And I think that's going to be--have quite an impact on
the--our competitors in the market place.
S. Yanis: It might be a whole another layer of growth. Hey,
congratulations, again. Thanks.
T. Dougherty: Thank you.
Operator: Jeffrey Thiam with Deutsche Bank. Please go ahead.
Chris Avery: Hi, it's Chris Avery sitting in for Jeff. Congratulations. I
think, Tim, I was hoping you could share some related
numbers from the last quarter for iPCS in the metrics such
as CPGA, churn and what ARPU actually was.
T Yager: Sure. Our ARPU for the second quarter was about--our base
ARPU was about $56 with travel and roaming it was about $84.
Our CPGA was about $320.
C. Avery: OK, and then churn?
T. Yager: Our churn, net of 30 days for the second quarter was a
little over 2 percent, about 2.1 percent.
C. Avery: OK. Great. Thank you very much.
T. Yager: You're welcome.
Operator: Jason Bell with SunTrust Robinson Humphrey. Please go ahead.
Jason Bell: Thank you. Good transaction. Most of my questions have been
answered but just a couple of quick ones. I apologized if
this has been asked, but I was disconnected from the call
for a little bit. But, do you have like penetration rates,
you know, industry penetration averages for Illinois PCS's
markets? And, then secondly, I saw that, you know, Illinois
PCS had 500 minutes of used excluding roaming. But do you
have that figure including roaming? In other words, the
outbound travel minutes in the second quarter for iPCS?
Thanks.
T. Dougherty: The first question about penetration in the markets, the
iPCS markets are much like ours, they're very close to the
national average. And, I'm sorry I missed the second part of
the question.
J. Bell: The second part of the question, I saw in--that your minutes
of use for the second quarter were about 500 per average sub
and it sounds like that excludes roaming. I was wondering
what that MOU number was excluding the travel--I mean,
including the travel time?
T. Dougherty: Total with the outbound travel would be about 590, we have
about 90 minutes.
A. Catherall: And, Jason, this is Alan, that's very--you know, 90 minutes
is very similar to AirGate as well.
J. Bell: Right. Right. OK. Thanks a lot.
T. Dougherty: Thank you.
Operator: Steven Wells with Lehman Brothers. Please go ahead.
Steven Wells: Thank you. Two questions. Can you review in addition to the
high yield offering at iPCS what bank facilities are
outstanding, or other vendor debt? And the second question
is in iPCS's market are any--are there any next wave
licenses that are being held in limbo? And, if so, who were
the original bidders back in January? Thanks.
A. Catherall: With regard to senior secured financing, we have a senior
secured facility in place. Lehman Brothers, is the
administrative agent. This was prior--formally known as the
Lucent vendor financing. Lehman Brothers also took over the
small piece that Lucent had
not syndicated $8.5 million. So, Lucent is completely out of
the paper from B. both providing financing, and B. being the
administrative agent.
With regard to iPCS, they have a senior secured facility in
place led by Toronto Dominion.
S. Wells: And how much is that for?
A. Catherall: That's for $140 million.
S. Wells: With zero balance?
A. Catherall: They've drawn down $50 million right now.
S. Wells: OK. Thanks.
A. Catherall: And, Tim, can you talk to next wave?
T. Yager: Sure I can talk generic about next wave. I'll tell you we
didn't participate in any of the next wave re-auction. Next
wave had a few smaller markets available in our territory.
We did not participate so I don't have the details with me
today.
S. Wells: OK. Thanks.
T. Dougherty: Operator, could we take one more question?
Operator: Absolutely. Paul Wuh with Goldman Sachs. Please go ahead.
Paul Wuh: Hi. Just a couple quick questions for you. You had mentioned
that you had a cash cushion of 130 to 140 million by the
time you turn EBITDA positive. Could you tell us are you
fully funded through free cash flow positive? And then if
you could, you had mentioned that you would have 1XRTT
handsets available for the Christmas selling season. Did you
say that you'd have the infrastructure in place by then to
support that?
A. Catherall: Paul, I'll address the cash cushion. I think Tom will talk
more about 1XRTT. You know, sorry--the cash cushion through
EBITDA positive, as I've said earlier, is approximately 130
to $140 million, both companies are fully funded through
free cash flow positive, that's a significant advantage that
iPCS brings to AirGate. You know, we don't have to worry
about raising capital. Both companies are fully funded, in
fact, over funded at both at EBITDA positive and free cash
flow positive.
T. Dougherty: In terms of the infrastructure for 1XRTT, the implementation
of 1XRTT is fairly simple and straightforward. The
availability of the equipment is scheduled to be available
whenever we want it. It's literally a call by the current
management of iPCS as to when they would put it in place,
and AirGate when we would put it in place. The handsets
themselves can be available and be used on the old network
as well as the new. So, you--they're backward compatible.
So, what we'll do is sell the 1XRTT handsets into the
marketplace and we'll let the customer know that they have
great future in terms of the services that can be delivered
over here. We fully expect that there'll be an overlap of a
couple of months where they'll use basically second
generation technology but have the handset capable of third
generation services soon in the 2002 time frame.
P. Wuh: And we understand that the Korean handset manufacturers will
be first with 1XRTT handsets, Samsung and LG. Is that what
you're seeing as well?
T. Dougherty: We have--I don't want to start telling you about Sprint's
overall plans, but there will be multiple handset
manufacturers in Asia that will have their branded handsets
in the marketplace for the Christmas selling season.
P. Wuh: Thank you very much.
T. Dougherty: You're welcome.
Operator: Ladies and gentlemen, that does conclude our conference call
for today. You may all disconnect and thank you for
participating.
Additional Information
In connection with the proposed merger, AirGate PCS, Inc. will file a proxy
statement/prospectus with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO
CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION
WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The
proxy statement/prospectus will be filed with the SEC by AirGate PCS, Inc.
Investors and security holders may obtain a free copy of the proxy
statement/prospectus (when it is available) and other documents containing
information about AirGate PCS, Inc. and iPCS, Inc., without charge, at the SEC's
web site at www.sec.gov. Copies of the proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the proxy statement/prospectus
may also be obtained for free by directing a request to: Investor Relations,
AirGate PCS, Inc., 233 Peachtree St. NE, Harris Tower Suite 1700, Atlanta,
Georgia 30303, Phone: 404 525-7272, Fax: 404 525-7922.
In addition, the identity of the persons who, under SEC rules, may be considered
"participants in the solicitation" of AirGate PCS shareholders in connection
with the proposed transaction, and any description of their direct or indirect
interests, by security holdings or otherwise, is available in an SEC filing
under Schedule 14A made by AirGate PCS on December 20, 2000.
This communication is not an offer to purchase shares of iPCS, Inc., nor is it
an offer to sell shares of AirGate PCS, Inc. common stock which may be issued in
any proposed merger with iPCS, Inc. Any issuance of AirGate PCS, Inc. common
stock in any proposed merger with iPCS, Inc. would have to be registered under
the Securities Act of 1933, as amended and such AirGate, PCS, Inc. common stock
would be offered only by means of a prospectus complying with the Act.