Centennial Communications Corporation

3349 Route 138
Wall Township, New Jersey 07719
U.S.A.
Telephone: (732) 556-2200
Fax: (732) 556-2242
Web site: http://www.centennialcom.com

Public Company
Incorporated: 1988 as Centennial Cellular Corporation
Employees: 2,200
Sales: $501.3 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: CYCL
NAIC: 513310 Wired Telecommunications Carriers; 513322 Cellular and Other Wireless Telecommunications

In the United States, Centennial Communications Corporation owns and operates cellular systems in two regional clusters that cover six states, three in the Midwest (Michigan, Indiana, Ohio), and three in the South (Texas, Louisiana, Mississippi). It provides mobile wireless communications primarily to small city and rural markets that are next to major metropolitan markets. By focusing on those types of markets, Centennial has become an attractive roaming partner to the larger regional and nationwide wireless operators. Centennial’s Caribbean operations are centered in Puerto Rico, where the company provides wireless personal communications services (PCS), as well as wired services over its own fiber-optic and microwave network. As of June 2000, Centennial was the largest all-digital wireless carrier in Puerto Rico, with 181,500 wireless subscribers. In addition, Centennial is the only significant fiber-based competitive local exchange carrier (CLEC) in Puerto Rico and owns its own communications network there with more than 16,000 switched access lines and some 32,000 equivalent lines of dedicated circuits. Its Puerto Rican wireline business offers a broad range of telephone services to commercial, Internet service provider (ISP), carrier, and government customers over its fiber-optic network. Centennial expanded its Caribbean presence in 2000 with the introduction of wireless services in the Dominican Republic. The company also planned to build a wireless network in Jamaica in 2001. Centennial’s controlling stockholders are the investment firm of Welsh, Carson, Anderson & Stowe and an affiliate of The Blackstone Group.

Regional Wireless Services Provider, 1988–97

The company was founded in 1988 as Centennial Cellular Corp. and was originally based in New Canaan, Connecticut. The company grew rapidly and offered wireless personal communications services (PCS) in Indiana, Michigan, Ohio, Louisiana, Texas, Mississippi, Arizona, and California. Its strategy was to obtain cellular licenses in small cities and rural areas that bordered on major metropolitan areas. These less densely populated areas would not attract the investment necessary to build extensive new PCS networks—thus reducing potential competition—while at the same time making Centennial an attractive roaming partner for PCS providers in the nearby major cities.

In the Midwest, the company’s cluster in Indiana, Michigan, and Ohio covered portions of three major interstate highways that connected Chicago, Detroit, and Indianapolis. In the South, the company’s East Texas and Louisiana cluster covers portions of interstate highway I-10, as well as areas adjacent to Houston, New Orleans, Shreveport, and Baton Rouge. Centennial’s Southwest cluster covered Yuma, Arizona, and El Centro, California, and was bordered by Los Angeles to the northwest, San Diego to the west, Phoenix to the east, and Mexicali, Mexico, to the south.

In 1996 Centennial established its Midwest operations headquarters in Fort Wayne, Indiana. At the time, Centennial was the parent company of Cellular One of Fort Wayne. Centennial had annual revenue of nearly $150 million and about 800 employees. Since its 1988 founding, the company had enjoyed a 50 percent annual growth rate. Its rapid growth was due in part to acquisitions and in part to the growing demand for wireless services.

Expanding into Caribbean: 1997–2000

In 1997 Centennial entered the Puerto Rico market as a personal communications services (PCS) provider. The company chose CDMA (code division multiple access) technology for its system there, in part because the system and all its network interfaces would be defined by industry standards. That would enable Centennial to develop a multivendor network and distinguish it from its competition.

In July 1998 Centennial agreed to be bought by the private investment firm of Welsh, Carson, Anderson & Stowe for approximately $2 billion. The company would continue to operate as an independent cellular phone service company under its current name.

In January 1999 Centennial underwent a recapitalization. As the result of a merger with a new entity formed by Welsh, Carson, Anderson & Stowe, a new group of equity investors acquired a 92.9 percent ownership interest in Centennial. Public stockholders owned the remaining 7.1 percent of the company, with shares trading on the NASDAQ. As part of the recapitalization, the company entered into a $1.05 billion senior term loan and revolving credit facility and issued some $550 million in notes. Also in January, Michael J. Small was named president and CEO of Centennial. He was formerly executive vice-president and CFO of 360 Communications Company, which became a subsidiary of Alltel Corp.

For fiscal year 1999, ending May 31, Centennial reported revenue of $369.2 million, operating income of $16 million, and a net loss of $80.2 million. The loss included recapitalization costs of $52.8 million and an extraordinary loss of $35.1 million, net of taxes. The company’s wireless subscriber base increased 41 percent, from 322,200 on May 31, 1998, to 454,100 on May 31, 1999, with about half of the increase attributed to new wireless subscribers in Puerto Rico.

During 1999 Centennial upgraded most of its domestic systems to offer digital services. While its Caribbean systems utilized CDMA digital technology, Centennial’s domestic digital services used TDMA (time division multiple access) technology. During fiscal 2000 ending May 31, the company added 133 cell sites domestically for a total of 577 cell sites, and it added 17 cell sites in Puerto Rico for a total of 149 cell sites there.

For 1999 and 2000 Centennial continued to expand in the Caribbean region and to acquire new licenses to complement its domestic areas of service. In August 1999 Centennial acquired Integrated Systems Inc. and Spiderlink Puerto Rico Internet Services for $5.9 million in cash and stock. Located in Puerto Rico, these companies specialized in network design and integration, systems consulting, software design development, and Internet solutions, including Web page design, Web hosting, e-commerce, and related services. In November 1999 Centennial acquired the wireless telephone system in Allegan, Michigan, for $34.7 million in cash and stock.

In January 2000 Centennial acquired a 70 percent controlling interest in All America Cables and Radio, Inc., an international long-distance provider in the Dominican Republic. The acquisition also included a PCS wireless license covering 8.9 million Pops (points of presence). At the end of February 2000 the company changed its name from Centennial Cellular to Centennial Communications to better reflect the integrated communications services that it offered.

In March 2000 Centennial acquired an international gateway switch in Miami, Florida, that was expected to deliver the company’s growing outbound traffic from its Caribbean service areas closer to its destination. The company also hoped to attract more southbound calling destined for Puerto Rico, the Dominican Republic, Jamaica, and other areas in the region. In April 2000 the company acquired the wireless telephone system serving Kokomo, Indiana, for $25.6 million in cash.

In May 2000 Centennial agreed to acquire the cable television assets of Pegasus Communications Corp. for $170 million in cash. Pegasus’s cable TV systems covered the western part of Puerto Rico and had more than 55,000 subscribers. The acquisition closed in September 2000.

A second Caribbean acquisition in May 2000 involved obtaining a 51 percent controlling interest in Paradise Wireless (Jamaica) Ltd., which had a CDMA wireless license covering 2.6 million Pops. Following the acquisition Paradise Wireless became Centennial Digital Jamaica Ltd. Later in the year Centennial acquired a 60 percent interest in Infochannel Ltd., a leading ISP on Jamaica with more than 6,000 subscribers.

For fiscal year 2000 ending May 31, Centennial reported revenue of $501.3 million, operating income of $155.2 million, and net income of $16.7 million. During the year, the company’s wireless subscriber base increased 38 percent, from 454,100 on May 31, 1999, to 626,800 on May 31, 2000.

In July 2000 Centennial entered into an agreement to sell its Southwest cluster, representing 311,000 Net Pops, to Western Wireless Corp. for $202.5 million in cash. It was Centennial’s smallest cluster, with service areas in and around Yuma, Arizona, and El Centro, California; its Midwest cluster contained about 3.7 million Net Pops, and its cluster in the South contained about 2.3 million Net Pops.

Company Perspectives:

Centennial Wireless is one of the nation’s largest independent wireless providers. We provide the latest in digital phones, accessories, features, and services designed to meet your business or personal communication needs. As one of the first cellular companies, Centennial covers nearly 82,000 square miles of service area in six states, and has one of the most comprehensive networks in the country. Our “big area” home calling area is a seamless calling area. Centennial has over 100 stores, retail outlets, and authorized agents to serve you. Since we are a local, regional company, every market has a manager that has the authority to take care of you—our customer. Centennial Wireless offers true value by simply offering a large calling area for a low price. Centennial Wireless, “the big area, small price wireless phone company.”

Also in July Centennial acquired the remaining 74.9 percent of the Lake Charles, Louisiana, wireless license that it didn’t own for about $42 million. This market connected the company’s existing Louisiana and Texas service areas.

In November 2000 Centennial completed the sale of its limited partnership interest in Sacramento-Valley Limited Partnership to Verizon Wireless for $236 million. The partnership provided wireless telephone service in Northern California and Nevada and was controlled and managed by Verizon Wireless. The sale of Centennial’s interest was part of its strategy to monetize investments in companies that it did not control. Under the same strategy, earlier in the year, Centennial realized $48 million from the sale of its 2.9 percent investment interest in a San Francisco Bay-area cluster.

For the quarter ending November 30, 2000, Centennial reported a 25 percent gain in revenue over the same quarter in 1999. Its wireless subscriber base increased by 27 percent, from 525,100 in 1999 to 664,400 in 2000. Domestic cellular subscribers decreased by 12,100, including a loss of 22,600 subscribers from the sale of Centennial’s Southwest cluster in Arizona and California. Caribbean wireless subscribers increased 12,500 during the quarter.

Caribbean Initiative

In the Caribbean, Centennial launched its wireless service in the Dominican Republic in October 2000 and obtained a $75 million vendor financing commitment to construct a wireless network in Jamaica. In December 2000 Centennial announced it would acquire the Puerto Rican cable TV company Teleponce for $108 million in cash. Teleponce had more than 37,000 subscribers and passed over 124,500 homes in southwestern Puerto Rico. The Caribbean was becoming an increasingly significant source of revenue for Centennial. For the quarter ending November 30, 2000, total Caribbean revenue was $68.6 million—an increase of 39 percent over the same quarter of the previous year—while domestic wireless revenue for the quarter was $85.8 million. Other significant developments included the acquisition in December 2000 of Com Tech International Corp., which increased Centennial’s undersea fiber-optic cable capacity.

Centennial was well positioned to grow in the Caribbean region in 2001. The company planned to build a wireless network in Jamaica and introduce wireless services there, as well as in the U.S. Virgin Islands. In Puerto Rico Centennial was the only fully integrated competitive communications provider, offering PCS, wireless local exchange, fiber-based local exchange and private line, long distance, and Internet access services. The company planned to leverage its dominant position in Puerto Rico to become the leading integrated carrier in the Caribbean region. In the United States Centennial planned to rely on growth from its roaming revenue in the two geographic clusters where it offered wireless services. Having upgraded its domestic network, Centennial was able to offer a full range of digital services.

Principal Divisions

Centennial de Puerto Rico; Centennial Digital Jamaica Ltd.; Centennial Dominicana.

Principal Competitors

Cellular Communications of Puerto Rico, Inc.; Puerto Rico Telephone Co.; Nextel Communications Inc.; AT&T Wireless; GTE Wireless; Verizon Wireless; Sprint PCS Group.

Key Dates:

1988:

Company is founded as Centennial Cellular Corp.

1997:

Centennial expands into Puerto Rico.

1998:

Centennial is bought by the private investment firm of Welsh, Carson, Anderson, & Stowe for approximately $2 billion.

2000:

Centennial changes its name to Centennial Communications Corp.

Further Reading

“Centennial Sold,” Telephony, July 13, 1998.

“Centennial Comm to Buy Puerto Rico Cable TV Firm,” Futures World News, December 19, 2000.

Graf, Rudy, “Centennial Communications Gives Its Business Case for Deploying CDMA in Puerto Rico,” America’s Network, December 1, 1997, p. 24.

LeDuc, Doug, “Centennial Cellular to Establish Midwest Operations in Kentucky,” Knight-Ridder/Tribune Business News, August 21, 1996.

——, “Fort Wayne Ind.-Based Telecom Firm to Add Voice-Recognition to Cell Phones,” Fort Wayne News-Sentinel, October 24, 2000.

—David P. Bianco