Omnipoint deal boosts shares 38%

Wireless phone firm in Bethesda to be sold for $4.5 billion

VoiceStream is buyer

New wireless company called 4th-largest with 1 million customers

June 25, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Shares of Omnipoint Corp. soared yesterday on news that the Bethesda wireless phone company agreed to be acquired by a Washington state telecommunications firm in a deal worth about $4.5 billion.

VoiceStream Wireless Corp., of Bellevue, Wash., will exchange 0.825 shares of its common stock plus $8 in cash for every share of Omnipoint common stock -- equivalent to $31.50 per share based on Voice- Stream's closing price yesterday and a 51.3 percent premium over Omnipoint's Wednesday close.

Omnipoint's stock price, which had averaged about $14.50 per share this year, increased $7.9375 -- more than 38 percent -- yesterday to close at $28.75.

VoiceStream also will assume $2.2 billion in Omnipoint debt.

The acquisition is expected to be completed in the fourth quarter.

"I love the deal; we've been proponents of Omnipoint since its stock was at $19 and we were saying it was worth $40 a share," said Frank Marsala, an analyst at Gerard Klauer Mattison in New York.

Last month, the company reported a first-quarter loss of $181.5 million, or $3.42 per share, on revenue of $69.7 million. For all of 1998, Omnipoint had revenue of $172.54 million and a net loss of $645.7 million.

Marsala said one reason the combination was so attractive was that Voice- Stream and Omnipoint employed "groupe speciale mobile" (GSM), a European standard that dominates most of the world's digital phone systems. Many U.S. companies -- such as Sprint PCS and Bell Atlantic Mobile -- use another type that is not compatible.

"GSM technology is used all around the world," he said. "If someone comes to the U.S. from overseas, they will roam on the GSM network."

Marsala said Omnipoint also had prime locations for its transmitting towers.

The Omnipoint phone network reaches from Maine to Florida to Indiana, while VoiceStream's territory is in Western states such as Colorado and Arizona.

"They fit together very nicely, that's the beauty of the deal," Marsala said. "VoiceStream is a terrifically run company, it's very, very well managed."

Another attractive aspect of the deal is that nearly a quarter of VoiceStream shares are owned by Hutchison Telecommunications Ltd. -- a Hong Kong company that has "a boat load of money," Marsala said. Hutchison has agreed to invest $957 million in cash in the combined company.

Omnipoint has 2,100 employees, 50 of whom are in Maryland. The companies expect few if any job losses, said Laura Knight, director of investor relations at Omnipoint. She said it "remains to be seen" what role the Bethesda office will play in the new company.

Omnipoint and the Justice Department reached a settlement of charges in November that the company had rigged its bids at auctions of mobile phone licenses. Omnipoint said it did not admit any wrongdoing and faced no penalties.

"This merger brings together two great companies, Omnipoint and VoiceStream," said Douglas G. Smith, chairman and chief executive officer of Omnipoint.

"The combined company provides service to over 1 million customers. As the second-largest PCS [personal communication system] license holder and the fourth-largest wireless company in the United States in terms of people in licensed areas, the combined company will reap the benefits of increased scale and scope."

Smith will become vice chairman of VoiceStream and continue as chairman of Omnipoint Technologies, the company's development arm in Colorado Springs.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.