VERIZON WILL PAD COFFERS WITH $800 MILLION TSI SALE

Deal part of Bell company's cash-generation plan

TSI Telecommunication Services will shed the shackles of incumbent ownership early this year when Verizon Communications is expected to sell the subsidiary to Chicago-based private equity firm GTCR Golder Rauner for $800 million.

TSI, a provider of transaction-based call processing and interoperability services to wireless carriers, began in 1987 as part of GTE and grew into a wholly owned subsidiary. The company now will get a chance to prove itself as an independent entity under GTCR as part of a deal announced last month.

Contrary to speculation by some experts that the arrangement is temporary, TSI's new owners say they are looking for a long-term relationship.

“We tend to be long-term investors,” said Collin Roche, vice president of GTCR. “You don't make an investment of this size if you don't really like the company, like the industry and like the opportunity.”

And TSI likes it as well. “We view this as a very positive step in our evolution,” said a spokeswoman for TSI. “There have been times when being a Verizon company has been very helpful, but it can also be a hindrance.”

Indeed, the association with Verizon has hindered TSI's growth, said Patrick Comack, senior telecom analyst for Guzman & Co. “Competitors are not going to use TSI because the profit goes to Verizon Wireless,” Comack said. “TSI is probably better off on its own.”

Verizon agrees.

“For that company to flourish, they really needed to be separate from [us],” a Verizon spokesman said.

In addition to potential conflicts selling to competitors, TSI is now free to raise and spend its own capital.

“As part of a large corporation like Verizon, you are always competing for resources with other business units,” the TSI spokeswoman said. “We feel we are on the cusp of tremendous growth, and we will be able to do more as an independent company.”

Raising capital also was a primary driver for Verizon, which is in the process of raising cash to invest in its growth units.

“We have to raise cash for a number of issues, including our growth investment markets like wireless but also for DSL and long distance,” said Verizon's spokesman.

The $800 million Verizon gets for TSI won't come close to paying the $8.4 billion bill due around June for the block of spectrum the carrier won through auction in January 2001 but that remains in custody of Congress pending the outcome of the NextWave Telecom settlement (Telephony, Dec. 17, page 15).

Verizon hopes its twice-delayed IPO for Verizon Wireless next quarter — a move that analysts believe will generate $4 billion — will raise enough money to cover much of that check.

And the carrier continues to accumulate cash via other methods. It announced plans last month to sell $2.5 billion in debt, and it has sold more than 1.2 million former GTE access lines to Alltel and CenturyTel for an estimated $4.1 billion. “They are likely to sell more,” Comack said.

Among the many services provided by TSI is the ability to help small carriers and wireless operators run their businesses like the big guys without the huge financial investment in network infrastructure. The company provides SS7 Intelligent Network services, including…
SS7 signaling transport
ISUP signaling transport
Calling name services
Local number portability
Credit card validation
Wireless 911
Commercial location services
Prepaid wireless services
Carrier access billing
LIDB line information database access
Toll-free database services