Summary
The following summary highlights certain significant aspects of our business and the resale notes, but you should read this entire prospectus, including the financial data and related notes, before making an investment decision. Under the terms of the agreement and plan of merger described herein, TSI Telecommunication Holdings, Inc. acquired TSI Telecommunication Services Inc. by merging its wholly-owned subsidiary, TSI Merger Sub, Inc., into TSI Telecommunication Services Inc., with TSI Telecommunication Services Inc. as the surviving corporation which, as a result, became liable under the notes. In this prospectus, unless the context otherwise requires, references to the “issuer” or the “company” refer to TSI Telecommunication Services Inc. The terms “we,” “us,” “our” and other similar terms refer to the consolidated businesses of TSI Telecommunication Holdings, LLC and all of its subsidiaries, including the company. The term “successor” refers to TSI Telecommunication Holdings, LLC and all of its subsidiaries, including the company, following the acquisition of the company on February 14, 2002. The term “predecessor” refers to TSI Telecommunication Services Inc. prior to being acquired by TSI Telecommunication Holdings, Inc. on February 14, 2002. You should carefully consider the information set forth under the heading “Risk Factors.” Certain capitalized terms used in this prospectus are defined in the glossary appearing at the end of this prospectus.
TSI Telecommunication Services Inc.
We are a leading provider of mission-critical transaction-processing services to wireless telecommunication carriers throughout the world. Our transaction-based technology interoperability, network and call processing services simplify the interconnection and management of complex voice and data networks. We address technology interoperability complexities as the largest clearinghouse in the United States for the billing and settlement of wireless roaming telephone calls, with an estimated market share of over 60% in 2000 based on billable wireless roaming telephone call transaction volume. We also own one of the largest unaffiliated Signaling System 7 (“SS7”) networks in the United States. SS7 is the telecommunication industry’s standard network signaling protocol used by substantially all carriers to enable the setup and delivery of wireless and wireline telephone calls. Our network services also allow our customers to access intelligent network services and monitor network performance and subscriber activity on a real-time basis. In addition, we are the industry’s leading developer and provider of call processing solutions that enable seamless regional, national and international wireless roaming telephone service. Our revenues and EBITDA increased from $234.7 and $67.2 million, respectively, in 1998, to revenues of $361.4 million and EBITDA of $124.5 million for the year ended December 31, 2001.
Demand for our services is driven primarily by the number of wireless telephone subscribers, the volume of wireless roaming telephone calls and the increasing technological complexities associated with the proliferation of different communication standards and protocols within telecommunication networks. The number of U.S. wireless subscribers has grown from 14.7 million in 1993 to 103.6 million in 2000, according to the Cellular Telecommunications and Internet Association (the “CTIA”). The U.S. wireless subscriber base is expected to grow to over 215.0 million by 2005 (Kagan World Media). Similarly, the annual number of billable wireless roaming telephone calls has increased from 407.8 million in 1993 to 6.1 billion in 2000 according to the CTIA. In conjunction with the projected growth in the number of U.S. wireless subscribers, we believe the annual number of billable wireless roaming telephone calls will also continue to increase. Growth in wireless subscribers and wireless roaming telephone calls has been driven by improved wireless service quality, decreased cost of service and increased wireless telephone service coverage both in the U.S. and abroad. Wireless telephone service coverage has increased due to the buildout of networks in new and existing markets and increased roaming arrangements among carriers that allow subscribers of one carrier to use another carrier’s network while traveling out of the subscribers’ home market.
These developments have been accompanied by increased technological complexities associated with the proliferation of different network architectures, including various mobile switch types (e.g., Lucent, Nortel, Ericsson and Motorola), diverse signaling standards (e.g., CDMA, TDMA and GSM), distinct billing record formats (e.g., CIBER and TAP) and multiple network protocols (e.g., X.25, Frame Relay, SS7 and IP). Despite these complexities, wireless carriers are required to provide seamless regional, national and international wireless telephone service coverage in order to attract and retain subscribers. We expect these complexities to increase as wireless carriers introduce new network technologies to enable wireless messaging, data and e-commerce solutions.
These technological challenges have made revenue assurance, cost management and delivery of quality service increasingly difficult for carriers. As a result, we believe wireless carriers will increasingly utilize trusted third-party service providers that offer outsourced solutions to assist in the management of interoperability, network and call processing complexities. We believe we offer the most comprehensive and advanced suite of services to meet these carriers’ needs. Our proven capabilities position us well to continue developing innovative solutions to enhance the technological advantage of our services and meet the industry’s evolving requirements.
We provide a diverse set of services to meet the evolving requirements of the telecommunication services industry. These services include:
Our revenues are primarily generated from transaction-based processing fees. In addition, we earn fixed monthly fees for network connections, principally to our SS7 network, as well as circuit and port fees. The following chart sets forth a break-down of our revenues for the year ended December 31, 2001 for our four principal business services:
We believe that the following strengths will allow us to continue to enhance our operating profitability and cash flow:
We intend to continue to strengthen our market leadership position, maximize profitability and enhance cash flow through the following strategies:
On February 14, 2002, TSI Telecommunication Holdings, Inc. acquired the company by merging its wholly-owned subsidiary, TSI Merger Sub, Inc., with and into TSI Telecommunication Services Inc. Pursuant to the merger agreement, Verizon Information Services Inc. received merger consideration equal to $770.0 million in cash. TSI Telecommunication Holdings, Inc. is a corporation formed by TSI Telecommunication Holdings, LLC, which is owned by GTCR Fund VII, L.P., certain of its affiliates and co-investors, G. Edward Evans and certain other members of our management, who we collectively refer to as the “equity investors.” For ease of reference, we refer to TSI Telecommunication Holdings, LLC as “TSI LLC,” TSI Telecommunication Holdings, Inc. as “TSI Inc.” and TSI Merger Sub, Inc. as “Merger Sub.” The following events occurred pursuant to the merger agreement and related documents and are collectively referred to as the “Transactions”:
Concurrently with the closing of the Transactions, the company entered into an agreement pursuant to which it contributed on May 14, 2002 certain of the assets and liabilities associated with its network services group to a newly-formed corporate subsidiary, TSI Networks Inc. (“TSI Networks”). The outstanding ownership interests of this subsidiary consist of voting participating preferred stock and non-voting common stock. The company owns all of the voting participating preferred stock, which accrues dividends at a rate of 10% per annum, compounded annually, and has a liquidation preference equal to the fair market value of the transferred assets as of the date of transfer. All of the shares of non-voting common stock are owned by TSI LLC.
Our business was founded in 1987 as GTE Telecommunication Services Inc., a unit of GTE. In 2000, when GTE and Bell Atlantic merged to form Verizon Communications Inc., we became an indirect, wholly-owned subsidiary of Verizon. In addition, in June of 2000, we acquired GTE’s Intelligent Network Services business to further broaden our network services offering and expand our wireline customer base. In February 2002, the company was acquired by TSI Inc., a corporation owned by TSI LLC, whose members include affiliates and co-investors of GTCR Golder Rauner, LLC and members of our senior management. Our principal executive offices are located at 201 N. Franklin Street, Suite 700, Tampa, Florida 33602, and our telephone number is (813) 273-3000. Our website is www.tsiconnections.com. Our website and the information included therein are not part of this prospectus.
The form and terms of the resale notes are the same as the form and terms of the outstanding exchange notes, except that the resale notes are currently restricted securities and will remain so until transferred pursuant to this prospectus or pursuant to an available exemption from registration in which the restrictions on transfer lapse. The resale notes represent the same debt as the exchange notes. Both the resale notes and the exchange notes are governed by the same indenture. Unless otherwise required by the context, we use the term “notes” in this prospectus to collectively refer to the resale notes and the exchange notes and the term “guarantees” to collectively refer to the resale guarantees and the exchange guarantees.
As part of the Transactions, TSI Merger Sub, Inc., the original issuer of the notes, was merged into TSI Telecommunication Services Inc., which was the surviving corporation and became liable under the notes.
The Transactions were completed on February 14, 2002. As of June 30, 2002:
Before February 1, 2005, the issuer may redeem up to 35% of the aggregate principal amount of notes issued under the indenture with the net cash proceeds of certain equity offerings, provided that at least 65% of the aggregate principal amount of notes issued under the indenture remains outstanding after the redemption.
Each of the covenants is subject to a number of important exceptions and qualifications. See “Description of the Notes—Certain Covenants.”
For a discussion of certain risks that should be considered in connection with an investment in the notes, see “Risk Factors.”
The following table sets forth our summary historical and unaudited pro forma condensed consolidated financial data for the periods ended and at the dates indicated. We have derived the historical consolidated financial data as of December 31, 2000 and 2001 and for each of the three years in the period ended December 31, 2001 from our audited financial statements included elsewhere in this prospectus. We have derived the historical consolidated financial data as of June 30, 2002 and for the six months ended June 30, 2001, the period from January 1, 2002 to February 13, 2002 and the period from February 14, 2002 to June 30, 2002 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have derived the historical consolidated financial data as of June 30, 2001 and as of February 13, 2002 from our unaudited condensed consolidated financial statements which are not included in this prospectus. We have derived the historical consolidated financial data as of December 31, 1999 from our audited consolidated financial statements which are not included in this prospectus. We have derived the pro forma information as of and for the year ended December 31, 2001 and the six months ended June 30, 2002 from our unaudited condensed consolidated pro forma financial statements included elsewhere herein.
The term “successor” refers to TSI Telecommunication Holdings, LLC and all of its subsidiaries, including the company, following the acquisition of the company on February 14, 2002. The term “predecessor” refers to TSI Telecommunication Services Inc. prior to being acquired by TSI Telecommunication Holdings, Inc. on February 14, 2002.
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