8-K
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 16(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 11, 2000
NTELOS Inc.
(Exact Name of Registrant, as Specified in Charter)
Virginia 0-16751 54-1443350
(State of Incorporation) (Commission File Number) (IRS Employer)
Identification No.)
P. O. Box 1990
Waynesboro, Virginia 22980
(Address of principal executive offices)
(540) 946-3600
(Registrant's telephone number, including area code)
Item 9. Regulation FD Disclosure
Pursuant to Regulation FD, information is being furnished below with
respect to presentations to be made by Mr. James S. Quarforth,
Chairman and Chief Executive Officer, and Mr. Michael B. Moneymaker,
Chief Financial Officer, at various investor meetings.
This presentation provides an overview of NTELOS' strategy,
transactions and performance through the third quarter of 2000.
Included are statistical reviews of our core services (digital PCS,
Internet, and local telephone service).
The presentation is also available on the company's website at
www.ntelos.com.
NTELOS
Photo of products and customers.
NTELOS Overview
- --------------------------------------------------------------------------------
o Regionally-focused ICP concentrating on high-growth sectors
- PCS: 11.0MM pops
- Internet: 58 markets
- Wireline: CLEC (9 markets)
Long Haul
ILEC (3 markets)
o Long operating history, founded in 1897
- Public for over 30 years
- Wireless services since 1991
o Strong local presence and brand
o Facilities-based
o Established "mid-stage" telco
- Over 288,000 customers
- Over $500MM CAPEX from 1996-2000
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing regions with:
PCS, CLEC AND Internet
PCS & ISP
PCS
Richmond-Norfolk PCS
CLEC and ISP
ILEC
AT&T Swap
2
The Transactions
- --------------------------------------------------------------------------------
- -------------------------------- ----------------------------------- --------------------------------
| | | | | Divestiture of |
| Preferred Stock | | Debt Financing | | Non-Core Assets |
| o $225MM from Welsh Carson | | o $325MM Senior Credit Facility | | o Directory assistance |
| o $25MM from MSDW | | o $375MM Senior and | | o Communications towers |
| | | Subordinated Notes | | o Additional non-core assets |
- -------------------------------- ----------------------------------- --------------------------------
| | $700MM |
| | |
| $250MM ---------------- $60MM + |
| | | |
-----------------------------| NTELOS |------------------------
| | | Up to |
| $408.6MM + ---------------- $250MM |
| Asset Swaps + | 3.7MM |
| Assumed Leases | shares |
- ------------------------------------ ---------------------------------- ---------------------------------------
| Richmond-Norfolk | | | | |
| PCS Acquisition | | R&B Communications | | VA and WVA PCS |
| o $408.6MM cash | | Merger | | Alliance Recap |
| o Swap cellular assets of RSA 5 | | o Stock-for-stock | | o Inter-company loan |
| and RSA 6 | | o Long-time partner in all key | | o Refinance credit facilities |
| o Assume $20MM in capital leases| | businesses | | o Pro forma ownership |
| o Contiguous PCS footprint | | o Consolidate ownership of PCS | | o 91.1% of Virginia Alliance |
| | | Alliances | | o 78.9% of West Virginia Alliance |
- ------------------------------------ ---------------------------------- ---------------------------------------
3
Esatblished Regional ICP
- --------------------------------------------------------------------------------
Invested Capital
- ----------------
($MM)
[Graph]
PCS Other Total
--- ----- -----
1996 98.1 21.0 119.1
1997 68.1 22.2 90.3
1998 63.6 20.8 84.4
1999 61.5 43.6 105.1
2000E 55.0 45.0 100.0
Customer Base
- -------------
(000s)
[Graph]
PCS ILEC/CLEC Internet Total
--- --------- -------- -----
1995 41.7 41.7
1996 43.4 0.3 43.7
1997 23.8 45.5 4.8 74.1
1998 69.8 48.9 8.7 127.4
1999 122.1 59.3 47.3 228.7
3Q00 157.7 70.8 60.1 288.6
4
Richmond-Norfolk PCS Acquisition and AT&T Swap
- --------------------------------------------------------------------------------
Expanding PCS footprint
o Richmond-Norfolk PCS
- Rationale:
o Expansion of ICP footprint to adjacent market
o Increase on-net traffic with end-to-end connectivity
o 42 company-owned distribution outlets
- Key operating metrics:
o 3.0MM pops (20 MHz)
o 83% covered
o 88,300 subscribers
- Seamless integration
o AT&T Swap - definitive agreement with AT&T to swap licenses in PA
- 2.5MM new pops (10-15 MHz)
- No build-out requirement
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing regions with:
Alliances and NTELOS (5.5MM pops)
Richmond-Norfolk PCS (3.0MM pops)
AT&T Swap (2.5MM pops)
5
R&B Communcations Merger
- --------------------------------------------------------------------------------
Unifying companies with similar footprint and products
o R&B Communications Overview
- Member of the VA and WV PCS Alliances (26% and 34%)
- 12,509 ILEC access lines
- 5,690 CLEC access lines
- 2,552 Internet customers
o PCS Alliances
- First CDMA provider in central and western VA and WV
- 91.1% pro forma interest in VA Alliance
- 78.9% pro forma interest in WV Alliance
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing regions with:
NTELOS CLEC Service Area
R&B CLEC Service Area
NTELOS ILEC
R&B ILEC
6
Pro Forma Service Footprint
- --------------------------------------------------------------------------------
PCS
- -----------------------------
o 11,032,828 PCS pops
o 157,717 PCS subscribers
o 616 cell sites
Wireline
- -----------------------------
o 51,894 ILEC access lines
o 18,858 CLEC access lines
o 727 route miles
o 60,109 Internet subscribers
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing regions with:
PCS, CLEC and Internet
PCS & ISP
PCS
Richmond-Norfolk PCS
CLEC and ISP
ILEC
AT&T Swap
7
Transition and Integration - Virginia East (Formerly PrimeCo)
- ----------------------------------------------------------
. Transition Management
- Transition Teams Created
- Detailed Schedule of Activities Developed
- Strong Project Management
. Project Status - On Schedule
- Organizational Integration Completed
- Functional Transition Completed For:
. Human Resources
. Inside Sales
. Purchasing
. Branding Campaign
. New Service Plans
8 [LOGO]
Transition and Integration - Virginia East (Formerly PrimeCo)
- -----------------------------------------------------------
. December 31, 2000 Milestone
- Customer Care Transition
- Fraud Management Transition
. September 1, 2001 Milestone
- Point of Sale/RMS Inventory
- Pre-Pay Platform
- Billing Conversion
- Over-the-Air Activation
[LOGO]
9
New Customer Care Center - Portsmouth VA
- --------------------------------------------------------------------------------
. Shell Renovations began Oct. 4 [picture appears here]
. Phased Construction
-- Training Rooms
-- Rep Work Areas
. Team Recruited - 117 Employees
. Training
-- Basic Customer Care
-- Company Philosophy
-- Products/Pricing/Billing
[picture appears here] . Operational Status Dec. 4
-- Now taking 30% of calls
-- 100% of VA East calls by 1/1/01
. Future Training to focus on ICMS
Billing Conversion
[LOGO]
10
Transition and Integration - R & B Communications
- -------------------------------------------------
. Transition Management
- Similar Management Approach as Utilized with Virginia East
- Strong Cultural Match
. Project Status
- Organizational Integration to be Completed 1/1/01
- Transition Schedule Developed
. Future Milestones
- Branding Campaign - 3/31/01
- Product/Pricing Standardization 3/31/01
- HR Payroll Integration - 5/1/01
- Begin System Integration Planning - 7/1/01
- Complete System Integration 4/1/02
- Complete Operational Integration 4/1/02
[LOGO]
Fiber Network Expansion
- --------------------------------------------------------------------------------
o 727 route miles
o Fiber construction and swap activities
- 500 new route miles to be completed in early 2001
- 1,500 route miles to be in service in early 2001
- 32,000 fiber route miles in early 2001
- Charlottesville to Richmond to Norfolk planned in 2001
o Connectivity to major cities
o Best-in-class equipment
(Lucent, Nortel, Siemens/Corning)
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing Fiber Network expansion plans
at:
End of year 1999
End of year 2000
Planned
12
Pro Forma PCS Statistics
Subscribers
- -----------
(000s)
[Graph]
Alliance PrimeCo Total
-------- ------- -----
1Q 99 19.1 68.6 87.7
2Q 99 24.2 73.7 97.9
3Q 99 30.5 74.9 105.4
4Q 99 43.3 78.9 122.2
1Q 00 55.2 86.4 141.6
2Q 00 63.5 88.0 151.5
3Q 00 69.4 88.3 157.7
Revenues and EBITDA
- -------------------
($ MMs)
[Graph]
EBITDA Revenues
------ --------
1Q 99 (9.6) 15.1
2Q 99 (8.0) 16.6
3Q 99 (5.7) 17.2
4Q 99 (8.9) 19.6
1Q 00 (8.9) 21.2
2Q 00 (4.7) 23.8
3Q 00 (5.7) 23.9
13
Pro Forma PCS Statistics
- --------------------------------------------------------------------------------
Cost of Acquisition
Cost of Acquisition (per gross add)/1/
1Q00 2Q00 3Q00
- --------------------------------------------------------
Virginia East $279.15 $308.30 $325.05
Virginia West 431.18 320.24 424.22
West Virginia 317.24 413.65 399.85
- --------------------------------------------------------
Total: $326.68 $337.62 $368.54
EBITDA
1Q00 2Q00 3Q00
- --------------------------------------------------------
Virginia East $(2,143) $ 712 $ (682)
Virginia West (3,469) (2,739) (2,886)
West Virginia (3,255) (2,651) (2,142)
- --------------------------------------------------------
Total: $(8,867) $(4,678) $(5,710)
Pre-Marketing EBITDA/2/
1Q00 2Q00 3Q00
- --------------------------------------------------------
Virginia East $ 3,306 $ 5,012 $ 4,325
Virginia West (385) 380 713
West Virginia (870) (303) 90
- --------------------------------------------------------
Total: $ 2,051 $ 5,089 $ 5,128
Pre-Marketing EBITDA
($MMs)
1Q00 (8.9) 2.3
2Q00 (4.7) 5.3
3Q00 (5.7) 5.4
/1/ Cost of acquisition includes handset subsidy, marketing costs, advertising
costs, sales commissions and sales management costs.
/2/ Pre-Marketing EBITDA is EBITDA before costs of acquisition.
14 [LOGO]
PCS Operating Strategy
- --------------------------------------------------------------------------------
o Own and control licenses, network, distribution channels and brand
o Focus on in-region market niche with localized marketing
- Highly competitive intra-regional "one-rate" plans (88-94% of
subscribers)
- National "one-rate" (6-12% of subscribers)
o Expand robust digital CDMA PCS network
o Emphasize customer service via consolidated selling effort and single bill
o Target attractive markets
- Individual - convenience users in the 25-45 age group
- Business - regional small to medium sized businesses
15
PCS Spectrum and Market Coverage
- --------------------------------------------------------------------------------
Digital
Company Service Launch Date Spectrum Market
------- ------- ----------- -------- ------
NTELOS CDMA Digital 1996 10 -40 Mhz 8
PCS
Sprint PCS CDMA Digital 1Q 1999 10 - 30 Mhz 8(1)
PCS
Triton/AT&T TDMA Digital 1Q 1999 10 - 30 Mhz 5
PCS
ALLTEL Digital/Analog Incumbent 25 Mhz 6
Cellular WL Cellular
Verizon Digital/Analog Incumbent 25 Mhz 3
Cellular WL Cellular
US Cellular Digital/Analog 2Q 1998 25 Mhz 4
Cellular
Note: (1) Includes wholesale agreements in six NTELOS markets
16
Wireline Overview
- ------------------
100% digital platform with best-in-class equipment
CLEC
----
o 18,858 business access lines
o 9 markets; 11 COs
o Interconnection agreements in
VA, WV and TN with Sprint and
Bell Atlantic/GTE
Internet ILEC
-------- ----
o 60,109 customers o 51,894 residential/business
o 58 markets access lines
o Dial-up access o Leading ILEC service provider in VA
o DSL in 16 markets
17
Focused Wireline Service Area
- --------------------------------------------------------------------------------
Map of Virginia, West Virginia, Maryland, Portions of Pennsylvania, Portions of
North Carolina, and Portions of Kentucky showing regions with:
CLEC
ILEC
18
Integrated CLEC Operating Strategy
- --------------------------------------------------------------------------------
o Hybrid facilities-based/ "smart-build" strategy
- Leverage our fiber optic network and ILEC switching platform
- Remote switching in COs
o Target businesses through a direct sales strategy
o Bundle local service with long distance, DSL and digital PCS
- PCS service emphasized
o Leverage local brand name recognition and strong customer service
o Focus on long-term, sustainable revenues
19
Pro Forma CLEC Statistics
- --------------------------------------------------------------------------------
Business Access Lines
- ---------------------
($000s)
[Graph]
NTELOS R&B Total
------ --- -----
1Q 99 0.9 1.6 2.5
2Q 99 2.3 2.6 4.9
3Q 99 4.0 3.1 7.1
4Q 99 5.8 4.0 9.8
1Q 00 8.9 4.4 13.3
2Q 00 12.4 5.0 17.4
3Q 00 13.2 5.7 18.9
Revenues and EBITDA
- -------------------
($000s)
[Graph]
EBITDA Revenues
------ --------
1Q 99 (295) 647
2Q 99 (404) 884
3Q 99 (334) 1,132
4Q 99 (501) 1,453
1Q 00 (486) 2,013
2Q 00 (820) 2,180
3Q 00 (764) 2,245
20
Favorable ILEC Regulatory Environment
- --------------------------------------------------------------------------------
o No competition in ILEC markets to date, despite deregulation
o ILEC operates under small company status, which is lightly regulated
o Virginia State Corporation Commission has taken a progressive stance
on supporting the value of rural telephone companies and the role
they play in economic development in these regions
o Process for rate increases is less cumbersome than for large telcos
21
Pro Forma ILEC Statistics
- --------------------------------------------------------------------------------
Access Lines
- ------------
(000s)
[Graph]
NTELOS R&B Total
------ --- -----
1Q 99 37.1 10.8 47.9
2Q 99 37.3 10.9 48.2
3Q 99 37.5 11.3 48.8
4Q 99 37.9 12.2 50.1
1Q 00 38.3 12.3 50.6
2Q 00 39.1 12.3 51.4
3Q 00 39.4 12.5 51.9
Revenues and EBITDA
- -------------------
(000s)
[Graph]
EBITDA Revenues
------ --------
1Q 99 6,642 9,880
2Q 99 7,024 10,251
3Q 99 6,503 10,054
4Q 99 6,293 10,018
1Q 00 6,407 10,171
2Q 00 6,037 10,072
3Q 00 6,265 10,178
22
Internet Operating Strategy
- --------------------------------------------------------------------------------
o Broad product offering of fast and reliable services
- Offers local dial-up, dedicated and discounted bundled services
- All digital network
- Web hosting available
- Low modem-to-customer ratio (9:1)
o 24/7 customer care
o High speed data services
- Aggressive rollout strategy
- DSL: offered in a growing number of markets in four states
- Wireless spectrum: LMDS (1.3MM POPs), MMDS (850,000) households
23
Pro Forma Internet Statistics
- -----------------------------
Subscribers
- -----------
(000s)
[Graph]
NTELOS R&B Total
------ --- -----
1Q 99 9.1 1.4 10.5
2Q 99 16.7 1.4 18.1
3Q 99 31.6 1.8 33.4
4Q 99 45.7 2.1 47.8
1Q 00 54.4 2.2 56.6
2Q 00 57.0 2.3 59.3
3Q 00 57.6 2.5 60.1
Revenues and EBITDA
- -------------------
(000s)
[Graph]
EBITDA Revenues
------ --------
1Q 99 (249) 630
2Q 99 (325) 921
3Q 99 (249) 1,704
4Q 99 86 2,949
1Q 00 84 3,652
2Q 00 197 4,142
3Q 00 431 4,347
24
Extensive Retail Distribution Focused on Customer Care
- --------------------------------------------------------------------------------
o Sales force representatives
- 106 retail
- 30 business
- 14 CLEC
o 43 company-owned retail outlets
o Consolidated customer care centers
and operations support systems for
all products
- One-call access for all products and services
- Consolidated, itemized bill
Photo of retail center.
25
When Quality Matters
- --------------------------------------------------------------------------------
Hospitals
. Augusta Health Care
- PRI CLEC Service
. Rockingham Memorial Hospital
- PRI CLEC Service
- Private Fiber Network
- 100 meg Circuit
- PCS
. Genesis/1/
- PRI CLEC Service
- Private Fiber Network
Colleges & Universities
. James Madison University
- PRI Service
- 100 meg Circuits
- PCS
. Eastern Mennonite University
- PRI Service
- PCS
. Mary Baldwin College
- PRI Service
. Bridgewater College
- T-l Internet Service
- PRI Service
. Liberty University
- PRI Service
- PCS
Monthly Revenues over $46,000
26 /1/Services contracted to begin in early 2001 [LOGO]
Pro Forma Historical Operating Statistics
- --------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Subscribers
PCS - - 23,758 69,797 122,150
% Growth - - - 193.8% 75.0%
Internet - 363 4,800 8,659 47,290
% Growth - - 1,222.3% 80.4% 446.1%
Access Lines
CLEC - - - 1,688 9,176
% Growth - - - - 443.6%
ILEC 41,689 43,371 45,495 47,258 50,157
% Growth NA 4.0% 4.9% 3.9% 6.1%
27
Pro Forma Historical Financial Statistics
- -----------------------------------------
Revenues
- --------
($MM)
[Graph]
Wireline/
PCS Other
--- -----
1995 - 54.6
1996 0.7 62.1
1997 11.3 72.3
1998 36.0 85.0
1999 66.9 98.7
EBITDA
- ------
($MM)
[Graph]
Wireline/
PCS Other
--- -----
1995 - 26.3
1996 (14.9) 29.5
1997 (28.0) 34.9
1998 (30.5) 39.8
1999 (28.5) 37.6
Capital Expenditures
- --------------------
($MM)
[Graph]
Wireline/
PCS Other
--- -----
1995 7.3 15.2
1996 98.1 21.0
1997 68.1 22.2
1998 63.6 20.8
1999 61.5 43.6
28
Investment Highlights
o Transactions solidify position as regional PCS / ICP powerhouse
o Region's first and largest PCS provider utilizing CDMA technology
o Established, local CLEC and ILEC presence provides stable revenues
o Explosive Internet growth increases bundled service offerings
o Significant liquidity and financial flexibility
- Positive EBITDA
- $250MM of new preferred stock
- $175MM available at closing under senior credit facility
- $100MM+ in non-core assets available for sale
o Experienced management team
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NTELOS Inc.
(Registrant)
By: /s/ Michael B. Moneymaker
--------------------------
Michael B. Moneymaker
Chief Financial Officer and Senior
Vice President, Treasurer and
Secretary
Date: December 11, 2000