Las Vegas wireless firm sold for $160 million

David Strow

Tuesday, Aug. 22, 2000 | 11:10 a.m.

Las Vegas-based Chadmoore Wireless Group Inc. became part of the telecommunications merger frenzy today, announcing a $160 million buyout by Nextel Communications Inc.

Though not large by Nextel's standards, Chadmoore holds valuable assets -- mobile radio licenses in 180 American markets. By acquiring the company, Nextel will be able to greatly expand the area covered by its mobile radio wireless service.

"Chadmoore (management) felt it was a fair offer," said Chadmoore spokesman Bob Schechter. "The amount of capital needed to expand their business was quite substantial, and they saw this as a fair opportunity for their shareholders."

The amount of stock Chadmoore shareholders will receive in the deal is subject to change, based on the price of Nextel shares prior to closing and other unspecified "adjustments." Currently, the company anticipates Chadmoore's shareholders will receive a total of $113.5 million in Nextel stock. The addition of debt and expenses assumed by Nextel raises the value of the deal to $160 million.

Also unclear this morning was the impact the merger would have on Chadmoore's employees.

Chadmoore employs about 75 people, most deployed in the field around the country. The largest base of employment for the company is in Memphis, Tenn., Schechter said, while a handful of employees work in the Las Vegas corporate office.

Schechter said he didn't know if Chadmoore's employees would be retained by Nextel. A Nextel spokesman couldn't be reached for comment.

The deal was announced after markets closed Monday evening. This morning, Chadmoore traded at $1.12, up 39 cents.

In 1999, Chadmoore reported net revenues of $6.1 million, compared to Nextel's $3.33 billion. Chadmoore posted a 1999 net loss of $11.8 million.

Chadmoore is the nation's second-largest holder of "specialized mobile radio" (SMR) licenses, trailing only Nextel. Its 4,800 licenses cover 180 towns and cities, or about one-fifth of the country's population. Cities of operation include Memphis and Little Rock, Ark.

SMR is a service used by Nextel to differentiate itself from its large national competitors. Used in concert with Nextel cellular phones, the service allows users to use their cellular phones like "walkie-talkies." It allows businesses to communicate with more than one employee at once over a cellular phone, and users pay a flat fee for the service, rather than paying on a per-minute basis.

Though Nextel holds SMR licenses in most major U.S. cities, the Chadmoore purchase will allow the company to expand this service into smaller areas, said Edward Jones telecommunications analyst Tim Burke.

"Once they (Nextel) have major cities built out ... they start looking at second- and third-tier markets, and looking at companies that can fill holes with them," Burke said. "It's all about real estate."

Though Nextel could offer SMR service in cities where it didn't hold SMR licenses, it has to do so by renting licenses or networks held by other companies.

"That's the easiest way to go, but it's not the most cost-effective," Burke said. "This is about the (Chadmoore) properties, the licenses and the fact Nextel won't have to pay another company to rent their network."

Because the merger involves the merger of the No. 1 and No. 2 players in a market, the deal must pass antitrust scrutiny, as well as approval by the Federal Communications Commission. However, Burke does not expect the federal government to step in to squelch the deal.

"Nextel is using Chadmoore to roam. They're not competing in most markets," Burke said. "If they do compete (in a market), they would be forced to sell their position or Chadmoore's position (in that city)."