Teligent Lays Off 900 as Debt Looms
Facing a Tuesday deadline to find $350 million in debt payments, Teligent Inc. laid off 900 workers in a bid to keep afloat its pioneering wireless phone business.
The Vienna, Va.-based firm, which operates a wireless network that transmits phone calls and computer data to customers whose homes are equipped with a small outdoor antenna, said it also will shut down parts of its network to conserve cash. The moves will leave Teligent with about 1,400 employees, down from a high of 3,400 a year ago, said company spokeswoman Tita Thompson.
Trading in Teligent shares, which were facing delisting from the Nasdaq Stock Market, was halted Friday, apparently in response to the layoff news. The company’s shares last traded May 2, closing at 56 cents, down from a peak of nearly $100 early last year.
Teligent is the latest victim of a telecom industry shakeout.
The company began offering service in 1998 in the rosy aftermath of the landmark Telecommunications Act of 1996. Its founders hired former AT&T; executive Alex Mandel as president and hoped to provide consumers and businesses with a new wireless electronic link that would compete with the old copper lines of the entrenched Baby Bells.
But building a new network that leapfrogged the local phone giants proved costly. The effort has pushed about half a dozen upstart telecommunications companies into bankruptcy and left much of the rest of the industry more than half a trillion dollars in debt.
“Fixed wireless were supposed to be the pick of the litter--and Teligent and [rival Winstar Communications Inc.] were the highest-quality names,” said Scott C. Cleland, an analyst for Precursor Group in Washington.
“But nobody has made the business model work,” he said. The industry’s financial troubles “continue to signal that the local competition envisioned by the telecom act was way over-optimistic.”
Teligent now operates in 43 markets, including Los Angeles, and--without naming any locations--Thompson said it will curtail service in several of them. She declined to confirm reports that it will drop out of 11 markets, but sources close to the company said Teligent could file for Chapter 11 bankruptcy protection as early as Monday.
Some analysts speculated that tax considerations could figure prominently in any financial reorganization of Teligent. That’s because Newark, N.J.-based IDT Corp., which acquired a controlling stake in Teligent earlier this year, is said to be looking to shelter the windfall it gained when it sold part of its stake in Internet start-up Net2Phone Inc. to AT&T; Corp. last year for about $1.1 billion.
Thompson declined to comment, saying Teligent’s strategy was changing “minute to minute” as executives considered options.
Friday’s work force cut was the third in 12 months. The company has been selling assets to raise money. Teligent, which has never made a profit, has until Tuesday to secure $350 million in financing to make payments on its debt.
