Teligent Is Latest Telecom to Fail, File for Chapter 11
Teligent Inc., which lost more than $1 billion building an advanced wireless communications network, filed for Chapter 11 bankruptcy protection Monday, becoming the latest in a string of upstart phone companies to collapse in recent months.
The company, based in Vienna, Va., said in a statement that it has interim agreements with lenders to fund its operations during the bankruptcy process. Teligent filed its petition in U.S. Bankruptcy Court for the Southern District of New York, listing $1.2 billion in assets and $1.65 billion in debts.
Newark-based IDT Corp., a telecommunications company, is Teligent’s largest shareholder. Analysts believe that IDT might try to combine Teligent with ICG Communications Inc., another bankrupt telecommunications company in which IDT owns a stake.
Teligent sells phone and high-speed data service to business customers in 43 major U.S. cities, including Los Angeles, Sacramento, San Diego, San Francisco and San Jose. It also has financial stakes in wireless operations in Germany, Spain, Hong Kong, Argentina and France.
Teligent won financial backing from Microsoft Corp., Japan’s NTT Corp. and Liberty Media Corp. and distinguished itself by using a fixed-wireless technology that sent data between rooftop antennas, providing high-speed services to buildings not served by fiber-optics.
The company’s network covered more customers at lower cost than is possible with traditional wired systems, but it was nonetheless an ambitious endeavor that would cost billions of dollars to complete.
Analysts say Teligent, like so many of its telecommunications brethren, ran out of time and money.
“The issue is that it requires a tremendous amount of capital to build telecommunications networks, and you just have to hope that the funding window remains open until you complete your build-out,” said Bo Fifer, senior telecommunications analyst at Deutsche Banc Alex. Brown. “Teligent never really got their network built out fast enough, so they never generated the revenue they needed to.”
Teligent has lost money since its founding in 1996, largely due to the enormous expense of building its wireless network. In the most recent three years, Teligent posted losses of more than $1.6 billion.
The company had been trying to raise additional funds, but it has been a difficult task given its mountain of debt and its stock price below $1. The company’s problems were compounded by Wall Street’s abrupt retreat from funding telecommunications companies in recent months.
In 2000, Teligent lost more than $800 million, or $14.19 per share, on sales of $152 million.
This month, Teligent announced a 35% cut in its payroll, leaving about 1,500 employees after three layoffs in seven months. Alex J. Mandl, a former AT&T; president and Teligent’s high-profile chairman and chief executive officer, left the company last month, along with several board members.
Trading in Teligent’s stock was halted by Nasdaq on May 11. It last traded at 56 cents, down 98% from its 52-week high of $31 last June.
Teligent has had its problems, but analysts say the company is just one of many technology and telecommunications firms to collapse since funding dried up on Wall Street.
“The truth is that people got caught up in the bull market, and capital was so available for so long that no one believed the music would stop,” said Ryon Acey, a vice president at BB&T; Capital Markets in Richmond, Va. “Teligent did not raise enough money to fund their whole business plan. . . . These guys kind of bit off more than they could chew, financially.”
Similar woes have hit Teligent’s rivals. Since November, NorthPoint Communications Inc., Advanced Radio Telecom Corp., WinStar Communications Inc. and ICG Communications--all upstarts in the Baby Bell-dominated phone market--have filed for bankruptcy protection.
Others are expected to follow.
“The shakeout has begun but it’s far from over,” said Fifer of Deutsche Banc. “If you look at who is left standing on Dec. 31 of this year, you’ll have a pretty good look at who the long-term players will be going forward.”
