NEW YORK (CNNfn) - Verizon Wireless Inc., the nation's largest wireless provider, filed Thursday to raise up to $5 billion in an initial public offering that will rank among the largest new issues of all time.|
The Bedminster, N.J.-based company did not disclose how many shares it hopes to sell or at what price, but said the proceeds would be used to build out its national network, acquire additional wireless licenses and for general corporate purposes.
At $5 billion, the offering would fall well short of the $10.6 billion rival AT&T Wireless (AWE: Research, Estimates), the nation's No. 2 wireless concern, raised last April. But it still would rank as the ninth-largest IPO in history, right behind the $5.23 billion semiconductor maker Infineon Technologies (IFX: Research, Estimates) raised in March, according to data from CommScan, a New York investment banking research firm.
Verizon Wireless was formed through the merger of paging and PCS assets of Bell Atlantic Corp., GTE Corp., and Vodafone AirTouch wireless earlier this year. It currently can service roughly 90 percent of the U.S. population and reaches 96 of the nation's top 100 markets.
The company earned a pro-forma $659 million last year on revenue of $13.5 billion. Verizon currently estimates it will require capital expenditures of approximately $4.3 billion next year.
The offering, being co-underwritten by Goldman Sachs & Co. and Merrill Lynch & Co., is expected to be made sometime during September. Verizon's parent company, Verizon Communications (VZ: Research, Estimates), announced its intention to take the wireless unit public in April, hoping to capitalize on the market's recent attraction to new wireless issues.
The wireless market
However, since that time the wireless market has hit some bumps.
The huge deal from AT&T Wireless (AWE: Research, Estimates) flooded the market for service providers, analysts said, leaving investors with little interest in other new issues.
Since launching the IPO in April, AT&T Wireless has consistently traded below its $29.50 offer price. Competitor Sprint Corp. (PCS: Research, Estimates) is also trading well below its year high of 66-15/16 and shares for Deutsche Telekom currently acquiring Voicestream Wireless Corp. (VSTR: Research, Estimates), are also falling.
"When you add it all up the environment is not so good," said analyst Charles Disanza of Gerard Klauer Mattison & Co.
Analysts credit an oversupply of wireless stock for causing the tumble. BellSouth (BLS: Research, Estimates) and SBC Communications (SBC: Research, Estimates) are merging their U.S. wireless operations and many expect the deal to result in a tracking stock. AT&T Wireless is also expected to spin out the rest of its shares.
The widely anticipated deal from Verizon Wireless has added to concerns the market for new wireless issues may be saturated, said analyst Bill Benton, of William Blair & Co.
"Verizon is contributing to its own fate," Benton said. "Maybe its not the best time to go public but it will help with the company's overall valuation."
The Verizon deal was expected to be larger but the company chose to pare down the deal because of falling valuations, Benton said.
"They thought they'd go with a smaller deal initially and get a better valuation with a secondary offering," he said.
However, some believe that the lack of potential pairings in the wireless market is causing stocks to tumble. Companies have traded up in the past year because of consolidation speculation, said analyst Peter Friedland, of W.R. Hambrecht.
The failed $117 billion merger between WorldCom (WCOM: Research, Estimates) and Sprint Corp. (FON: Research, Estimates) changed all that. Many viewed Deutsche Telekom (DT: Research, Estimates) as a likely acquirer of Sprint but the German telecom's deal for Voicestream took it out of the picture, Friedland said.
"There are only a limited number of companies big enough to buy Sprint," he said. "This has take some of the buzz out of the wireless sector so it may be the reason why the stocks have traded off."
In afternoon trading Thursday, AT&T Wireless rose 1/8 to 24-5/8, Sprint gained 1/8 to 48, Deutsche Telekom rose 13/16 to 39-1/16, WorldCom climbed 1 to 35-9/16 and Voicestream increased 3-5/8 to 115-1/2.