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June 1, 1988


By CBR Staff Writer

Centel Corp, the Chicago telecommunications and cable company which has an investment group led by Asher Edelman breathing down its neck, has triggered a swift reaction from Edelman with its agreement to pay United Telecommunications Inc $775m for its United Telespectrum cellular telephone operations (CI No 940). Edelman’s group, which includes small cellular operator Metro Mobile CTS Inc of New York, and currently has just 5.5% of Centel, is offering $65 a share, $2,680m all told, for Centel on condition that it abandons the proposed acquisition of United Teleshphere. If Centel goes ahead with that deal, the Edelman offer price would drop to $60 a share, $2,480m, on the grounds that Centel has agreed to pay so much – a pricey $85 per head of population in Telesphere’s catchment area – that the acquisition would reduce its value. Centel shares rose $4.875 to $50 even on the announcement. Edelman’s group is seeking proxies among Centel shareholders to support a slate of three of his candidates for the board, and his takeover proposal is widely seen as a tactic in the proxy battle rather than a serious offer for the company, which is why the stock is $15 shy of his proposed price. If $85 per pop becomes the going price for cellular operators, what price Racal Vodafone when Racal comes to float it off with one or two other interests as Racal Telecommunications Plc? Since Vodafone covers substantially the whole of the UK, that values the business at a stratospheric $4,250m or UKP2,300m. It won’t go for that much, but against the argument that the UK market is much more competitive than are many of the US franchises, where although there are nominally two firms licensed, one is frequently very sleepy, is the fact that almost all US operators are very far from profitability and have enormous investments still to make, whereas at Vodafone, most of the upfront investment has already been made, and profits are flowing in.

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