Alaskan telcos General Communication (GCI) and Alaska Communications have merged their networks in a new entity. The Alaska Wireless Network (AWN), a holding company based in Delaware, will operate both companies’ wireless facilities.
Under the terms…
Alaskan telcos General Communication (GCI) and Alaska Communications have merged their networks in a new entity. The Alaska Wireless Network (AWN), a holding company based in Delaware, will operate both companies’ wireless facilities.
Under the terms of the agreement GCI and Alaska Communications will contribute their respective wireless assets, including spectrum licenses, to AWN, the companies said. GCI will also purchase US$100m of wireless assets from Alaska Communications and contribute them to AWN.
AWN will be one-third owned by Alaska Communications and two-thirds owned by GCI. Alaska Communications will be eligible to receive preferential cash distributions totalling US$190m for four years, and GCI will receive all remaining available cash distributions over the same period. After the four year period the partners will receive distributions proportional to their ownership interests in AWN.
GCI and Alaska Communications will continue to market and sell their plans independently to their respective retail customers.
The creation of AWN is subject to clearance by the relevant antitrust authority, requires FCC approval for the transfer of spectrum licenses to AWN and is subject to other customary conditions. The transaction is expected to close by the second quarter of 2013.
“The wireless business is capital intensive, requires scale to compete successfully against national carriers, and demands more spectrum than either company individually owns,” Alaska Communications president and CEO Anand Vadapalli and GCI president and CEO Ron Duncan were quoted saying in the press release.
AWN will cover more than 95% of Alaska’s population. In its first year of operations, AWN is expected to have EBITDA of approximately US$120m and capital expenditures of approximately US$40m. Synergies from the transaction are expected to total US$30m a year, starting in the second year of operations. The synergies are expected to be split equally between capital and operating expenses.
GCI plans to finance the US$100m asset purchase from Alaska Communications by refinancing its senior credit facility. Alaska Communications will use the proceeds of the sale to strengthen its balance sheet by paying down debt and increasing cash reserves. Alaska Communications were advised by Evercore Partners.
