Weeks after the private equity firm buyout of Alltel Wireless [1], The Wall Street Journal reports that rural wireless carrier Dobson Communications is considering a similar move. Dobson, which has a market cap of $1.73 billion and debt totaling $2.67 billion, has hired Morgan Stanley to explore its options, according to the report.
Dobson sells wireless services under its Cellular One brand, which boasts about 1.7 million customers. About 22 percent of the carrier's revenue comes from roaming agreements with AT&T and T-Mobile USA [2]. A private equity buyout makes sense for Dobson for two key reasons: rural areas have a lower penetration rate for mobile users, which leaves plenty of room for growth, and chances are that at some point a larger carrier will scoop up the rural carrier making for a nice payout.
This is not the first time Dobson has hired consultants to "explore its strategic options." In 2001 the rural carrier hired Lehman Brothers and Bank of America to do just that, but come November of that year the company decided not to opt for a change in control.
Dobson offers services in many Midwestern states, parts of the Southwest, Alaska and upstate New York. Dobson's top competitors include Alltel, Rural Cellular and US Cellular.
For more on Dobson's strategic options:
- see this article [3] from the WSJ (sub. req.)
Links:
[1] http://www.fiercewireless.com/story/private-equity-firms-snag-alltel-for-27.5b/2007-05-21
[2] http://www.fiercewireless.com/story/t-mobile-usa-subs-sent-16-billion-messages-in-q1/2007-05-11
[3] http://online.wsj.com/article/SB118274542869346811.html?mod=dist_smartbrief