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Date: Sunday 11 February, 2007
Reprinted with permission by Alaska Daily News
February 11, 2007 - DigiTel's new game: with GCI investment, wireless company must expand in significant way
Jeff Roe took over as Alaska DigiTel Wireless Communications' chief operating officer six months ago. Today, he is plotting the upstart cell phone company's next phase of growth.
DigiTel set up shop in Anchorage in late 1998, using money from a group of private investors to establish a foothold in what they saw as a burgeoning wireless phone market. Eight years later, the upstart cell phone company has a network that covers most of the Anchorage and Eagle River area as well as swaths of Mat-Su, the Kenai Peninsula, Fairbanks and Juneau.
In the process, the company has also built up a roster of subscribers, claiming to have roughly 33,000 at last count. That makes it a distant third behind Alaska Communications Systems, which last reported some 130,000 wireless subscribers, and Cellular One, which is thought to be the state's largest wireless phone company but does not disclose the specific number of subscribers it has.
This year, Anchorage-based General Communication Inc., an Alaska telecom powerhouse, bought a 78 percent stake in DigiTel for $29.5 million. As part of that deal, GCI also allowed DigiTel to draw on a $15 million revolving credit loan as needed. Executives of GCI said they see their stake in DigiTel purely as an investment, and they won't have much of a hand in running it. Though he declines to say how much, Roe notes that only part of what GCI paid for DigiTel went to the original investors. The rest is available to reinvest in the company, Roe says.
Roe recently discussed the changes at DigiTel and how they will affect his company and the broader cell phone market in Alaska. Following are excerpts from that conversation.
Q. How does GCI stepping in as a majority owner change the game for Alaska DigiTel?
A. The most significant thing is that we have a lot more money available to invest and grow our business. With that, we have a mandate to grow our business in a very significant way. The money they invested in the company wasn't just paying off shareholders. Some was additional paid-in capital. They're also providing us a revolving line of credit that is funding our rapid expansion.
Q. How does the credit line work?
A. They become a banker, just like any other banker, with a loan agreement and covenants and restrictions. With the additional paid-in capital that GCI has put into our enterprise, we could have gone outside and sought financing. But heck, GCI stepped in as our banker. That's an additional advantage we have.
Q. What are you going to do with some of that money this year?
A. We're going to be increasing the number of cell sites. I'm not disclosing specific numbers, but we will have 50 percent more cell sites at the end of this year than we had coming into the year. We'll be extending in Fairbanks. We are going to be filling in and adding to our coverage on the Kenai Peninsula, and we are going to be improving our coverage in the Mat-Su area. We'll do a few sites in Anchorage, but by and large, Anchorage is working real well for us now.
Q. How competitive is the cell phone market in Alaska?
A. With ... Dobson Cellular One on one side and ACS wireless coming up as a competitor, they go head-to-head pretty well. Alaska DigiTel is a later entrant, but with the injection of capital giving us the capability to grow our business, we anticipate a very vibrant competitor to the other two carriers. We anticipate we will be taking market share. The other good thing about our business right now is it's growing in terms of general penetration and population growth. It's pretty amazing. A little over 60 percent of the population has cell phones. And that's still growing.
Q. How much more can it grow?
A. It's still growing, and of course the population is growing. Wireless applications are growing, and generally the wireless industry is growing enough to support a third player.
Q. GCI has a very strong brand throughout the state. Will Alaska DigiTel be able to benefit from that now that GCI is its majority owner?
A. I can't speculate as to their plans, but as things stand now, GCI has an arrangement to resell Dobson Cellular One service. They've said they intend to honor that arrangement. They have us as an investment, which will be arm's length in terms of operating on a day-to-day basis. They have a presence on our board and have influence as an owner, obviously. But beyond that, we're growing our business without the benefit of their brand or their participation.
Q. Being a smaller player with fewer resources, how are you going to get your message out as effectively as ACS and Cellular One, who are fairly aggressive with their advertising and other marketing?
A. We have pretty aggressive marketing plans, too. We're spending a lot of money this year to build out our network. That's a major priority. We're spending money on improving and adding stores. We're investing in people and our call center and our Web site. And we're investing in our advertising in a much bigger way. You'll see double the advertising coming out of our company than what we've spent in the past.
Media Source: http://www.adn.com/money/story/8632916p-8525248c.html
Alaska DigiTel began providing CDMA wireless communication service in the state of Alaska in November of 1998. Alaska DigiTel provides 100% digital service in Greater Anchorage, the Mat-Su Valley, Fairbanks, Juneau and the Kenai Peninsula. Our fundamental goal is to provide customers with the best in wireless communications and personalized customer service. We live, work, and play in the communities we serve. We are constantly increasing our coverage area in the state of Alaska and adding new services for our customers. We carry a wide range of phones and accessories in each of our stores and offer the best in customer service. |
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