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HomeNewsArchivesSource Analysis: What's Vitelco Really Worth? (Pt. 2)

Source Analysis: What's Vitelco Really Worth? (Pt. 2)

Jan. 18, 2007 — Jeffrey Prosser, owner of Innovative Telephone (also known as Vitelco), has reportedly offered to sell the V.I. phone company and some other, rather less valuable properties, to the territorial government for $650 million.
According to a previous Source estimate, the phone company, alone, accounted for $552 million of the offer's total.
There now is more data available on the per-line worth of a rural phone company. (Vitelco is regarded as a rural system.) Incorporating this new information, one arrives at a figure much less than the $552 million Vitelco was valued at in the Prosser offer.
The data comes from the decision by Verizon to sell its telephone operations in Vermont, New Hampshire, and Maine to another firm as reported by the Associated Press.
In an earlier article (See "Source Analysis: What's Vitelco Really Worth"), we noted values for proxies of Vitelco, ranging from $104 million to $242 million, based primarily on public information on the value of medium-sized phone companies, generally.
The low figure, $104 million, was for the net value of Vitelco in 2003, before secrecy was imposed on the company's finances; $130 million to 150 million was the sale price of the quite-similar Guam phone company; and $207 million to $242 million was the price range for a typical 69,000-line rural system, comparable to Vitelco's reported line capacity.
The last estimate was provided by a mainland telephone business analyst with no ties to the U.S. Virgin Islands, and was, in turn, based on a per-line price of $3,000 to $3,500 being paid for rural systems.
The newest information, based on the Verizon deal, is that the upper New England phone system, together with some other assets, was being purchased for $1,833 a line.
Using that as an approximate model for comparative purposes would create a value of roughly $125 million for Vitelco. That number is within the range of estimates provided by the Source, but only a fraction — not even one-fourth — of Prosser's asking price.
The $125 million figure, based on the New England model, is probably a bit low for Vitelco. On the mainland, telephone competition is the rule, but because of rulings by the V.I. Public Service Commission, Vitelco has monopoly privileges, and monopolies are usually more valuable than firms that must face competition.
The Source will provide further analysis of Vitelco's worth as more data becomes available.
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