Thursday, April 23, 1998 | 10:25 a.m.
MGC Communications Inc., a locally based telecommunications company challenging Sprint for small business and residential telephone customers in the Las Vegas Valley, has filed documents with the Securities and Exchange Commission to take the company public.
MGC filed documents showing its intent to sell 3.5 million shares with an expected price of between $16 and $18 per share in the initial public offering. Documents were filed with the SEC this week.
The company hopes to raise $69 million in the offering, but the price per share would have to be $19.71 to hit that amount.
According to the SEC filing, the company expects to raise $54.7 million and with the proceeds would purchase and install telecommunications switches and associated equipment as well as have working capital to pay general business expenses.
SEC rules prohibit company officers from making statements about the offering, which is being underwritten by Bear Stearns & Co. Inc., and Furman Selz, two New York-based investment bankers. Bear Stearns is the lead manager in the offering.
Officials familiar with the offering said executives will be making presentations to investment bankers in the next two weeks and that the company would be trading publicly by the end of May.
The company would be listed on the Nasdaq exchange with the symbol MGCX.
The SEC filing calls MGC "a rapidly growing integrated communications services provider offering switched local and long-distance voice and data services."
During the company's 1998 first quarter, in which revenue was up 52 percent over the year-ago quarter, MGC installed 5,334 net new lines for a total of 20,924. Average monthly revenue per line was $53.13, with 38 percent of the lines sold to businesses, 35 percent to residences and 27 percent to pay phones.
The Las Vegas office of MGC produced cash flow of $145,800 in February 15 months after the company was formed.
MGC set up its national headquarters at 3301 N. Buffalo Drive. Managed by Chief Executive Nield Montgomery, MGC -- formerly known as NevTEL -- uses lines from the Sprint network and makes money by buying access to Sprint lines at a bulk rate and reselling them to consumers at a profit, undercutting Sprint's basic residential and business rates in the process.
MGC, which began operations in November 1996, has more than 150 local employees. Montgomery, a former Centel executive, founded the company with the financial backing of Maurice Gallagher, who also developed ValuJet Airlines.
Gallagher, 48, holds 24 percent of the company's stock, while Montgomery, 53, Timothy Flynn and Robert and Carol Priddy own 20 percent of the shares between them. Flynn was chairman and chief executive officer of WestAir, a Fresno, Calif.-based regional airline he founded with Gallagher.
The company recently began offering local phone service in Los Angeles and Atlanta and its prospectus says it plans to expand by the end of 1998 in California, Illinois and Florida. The push into San Diego, Chicago and Fort Lauderdale will give the company access to a total of 11 million lines.
The company intends to target small businesses with less than 50 lines and residential customers. It also plans to develop high-speed Internet access.
MGC expects to have 200 central offices open by the end of the year.
Investment risks cited in the SEC filing include the company's short time in business, net losses in earnings reports over the history of the company and the fact the company is highly leveraged -- equipment acquisitions have put the company $156.6 million in debt.
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