Racal Telecommunications Plc yesterday announced that the share offer price for Racal Telecommunications Plc – which operates the Vodafone cellular network – will be between 155p and 185p, valuing the company at between UKP1,550m and UKP1,850m. Details of the planned flotation, which is being handled by brokers Hoare Govett, are contained in a draft pathfinder prospectus published yesterday which forecast pre-tax profits of UKP71.7m for the year ending March 31 1989. The company suffered pre-tax losses of UKP17.5m and UKP3.8m in 1986 and 1987, mainly due to the high capital investment involved in the establishment of a cellular network, but turned in a pre-tax profit of UKP37.1m this year. As part of the process of floating Racal Telecom on the Stock Exchange it is being recapitalised and will be debt-free on flotation. Approximately 200m ordinary shares will be offered, representing 20% of the issued share capital following the offer. Three quarters will be offered in the UK to existing shareholders and holders of convertible loan stock on the basis of approximately one share for every four and a half Racal shares, the remainder will be offered in the US and on the continent. There will also be a UK public offer, including priority rights for Racal Telecom employees, of approximately 14m shares drawn from any shares not taken up in the shareholder offer or by shares re-allocated from the international offer. 2,500 subscribers a week The company says there are now 211,500 subscribers on the Vodafone network, which represents 55% of all cellular subscribers in the UK, and that new subscribers are being connected at an average rate of 2,500 per week. Racal Telecom’s other businesses include Vodac, its wholly-owned cellular service marketing division which, though it has the largest number of Vodafone subscribers, has yet to hit profitability – the company exists because Vodafone is not allowed sell diectly to the public. Vodata provides message, third-party charging, data transmission facilities and access to information services while Vodapage operates a radiopaging network which covers 80% of the UK population. Other mobile telecommunication interests include Band Three Radio, a stake in Cofira SA of France plus 50% of the Orbitel Mobile Communications manufacturing joint venture with Plessey Co. Racal chairman Sir Ernest Harrison described the flotation as the most exciting event in the history of Racal. There are no publicly quoted European cellular companies so Racal will provide the only opportunity outside the US for direct investment in the cellular industry. Sir Ernest believes the UK cellular industry has a number of advantages over America due to the UK’s high population density, the preference for car travel and the fact that American companies are only granted 10 year regional licences. As to the future, management denied any intention to sell off any more than 20% of the company – unless it be to partners that can help deliver foreign markets. Investment in infrastructure is running at UKP75m a year in preparation for the establishment of the pan-European digital cellular network and it is looking to establish partnerships in a number of other European countries in addition to its small stake in Cofira. The full prospectus will be out in mid-October; Racal is being advised on the float by N M Rothschild & Sons Ltd and Goldman Sachs International Corp.
