WildBlue Reveals Terms, Purpose of $50 Million Financing

[Satellite News 09-08-08] WildBlue Communications Inc. will use $50 million in equity financing secured Sept. 3 to boost customer services and not to pay debt.
    WildBlue had to state its case for the $50 million to investors who also did their own financial analysis to determine if the satellite Internet provider was worth it, CFO Mark Adolph told Satellite News. “Our largest shareholders have been in this business for a long time and they realize that we are just hitting the knee of the curb in terms of growth,” he said. “They are intimately involved with the company.”
    The terms of the financing, led by Liberty Media, Intelsat, the National Rural Telecommunications Cooperative and the private equity firm of Kleiner, Perkins, Caufield and Byers, were not disclosed. However, Adolph said that terms involved his company restructuring the provisions of its debt instruments and providing proof of additional equity support in WildBlue’s business.
    None of the creditors involved in the deal would comment.
    “Our creditors know that we are growing our customer service to keep up with the growth of business, which is rapid,” said Adolph. “… Primarily, the funds will be spent to purchase the equipment that will be leased by customers through our new equipment lease program. This is to provide our services at the cheapest rate possible.”
WildBlue introduced its equipment lease program for new customers Aug. 25. Under the program, customers will no longer be required to purchase the WildBlue equipment and will receive free standard installation of the service. Customers will pay a monthly lease fee of $5.95 and have the option to prepay their first 24 months of lease fees.
    "The upfront fee has always been the most challenging hurdle for new WildBlue customers, particularly in this economy," said Steve Cimmarusti of Blacksheep Satellite, a WildBlue dealer.
    In addition to the lease program, WildBlue is expanding its field service operation force and internal resources to improving customer experience, Adolph said. “We are engaging a number of field service technicians to expand on our existing dealer network and service workforce in the field so that we can more effectively support both our wholesale partners and our retail channel to resolve our customer issues more quickly.”
    In providing service technicians to WildBlue’s target market — areas with less than 100 homes per square mile or less — Adolph said high gas prices make it difficult to provide immediate response to customer issues. “At four dollars per gallon, it is tough for our service technicians to travel out to our customers in a timely manner,” he said. “We are structuring a workforce that will help us keep service and installation call lead times to a bare minimum.”
    In addition to the workforce structuring, WildBlue is establishing a customer action team to expand services. “We plan on working more closely with our wholesale distribution partners to provide them incentive support to continue expanding business with WildBlue,” said Adolph.
    Adolph claims the financing plan provides the company with general working capital and that the securing of the financing would not alter the company’s business model for 2008, hinting that the deal has long been in the works. “Our business plan for the year was key to this financing all along. We will hit our shareholders’ metrics both this year and next,” he said.