The Free Press, Mankato, MN

Local News

September 27, 2005

Midwest Wireless dials up bids

Local wireless company could sell for $1 billion

By Tim Krohn

MANKATO — Midwest Wireless is on the auction block, with major telecommunications giants expected to pay up to $1 billion for the 15-year-old Mankato company.

The Wall Street Journal reported Monday that Verizon Wireless and Alltel Corp. are among the expected bidders. Midwest Wireless employs 643 people.

Ved Sharma, chairman of the MSU economics department, said a sale of the company is bad news for the local economy.

“Jobs will be leaving town. That’s how they economize,” Sharma said.

“But that’s how the market works.”

Midwest Wireless, with new offices off Highway 14 on the northeast edge of Mankato, has been the poster child of success in the local high-tech industry. The company focuses on the mostly rural areas of southern Minnesota, northern Iowa and western Wisconsin.

The company has 425,000 subscribers.

Chief Executive Dennis Miller was unavailable Monday but said in a written statement that the company’s investors “felt the timing was right,” to hire Bear Stearns to explore a sale.

Midwest Wireless is owned by a group of 71 investors, including 60 local telephone companies.

The company has added employees steadily in recent years. It recently built an addition to its 5-year-old headquarters, bringing it to 130,000 square feet.

The nation’s major wireless players have been buying up regional carriers, lured by the customer base and the low debt carried by the fast-growing regional companies.

The Journal, citing people close to the deal, said Midwest Wireless is expected to have earnings of $100 million this year, before interest, taxes, depreciation and amortization. With regional wireless companies selling for about 10 times their earnings, Midwest Wireless is expected to fetch about $1 billion.

Verizon Wireless, with 47 million customers, is the second-largest wireless carrier in the nation and already has a network-sharing agreement with Midwest Wireless.

Alltel is the fifth-largest wireless company in the nation and has been spending billions of dollars buying up regional carriers.

The Journal said private-equity firms also may bid on Midwest Wireless because it has so little debt, allowing the buyers to leverage the company.

Sharma said consumers should be unaffected by any sale, as customers will continue to get the services they are used to.

“The other downside I see is that they are a home-grown company, they took pride in the community. They paid for the naming rights to the Civic Center, and many other things. You will lose that,” Sharma said.

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