Nippon Telegraph & Telephone to Invest $100 Million in Teligent

WASHINGTON —  A bid by former AT&T; President Alex Mandl to build a national telephone network got a boost Tuesday when Nippon Telegraph & Telephone Corp. agreed to invest $100 million in Mandl’s company, Teligent.

In return, Tokyo-based NTT, Japan’s leading telephone carrier, will receive a 12.5% equity stake in Teligent and a seat on the Teligent board of directors. Teligent’s corporate parents, Associated Group Inc. of Pittsburgh and Digital Services Corp., said they also will contribute an $60 million to Teligent.

The investment positions NTT to better compete with other foreign carriers that have invested in or acquired several U.S. telephone companies in an effort to survive in the increasingly competitive global telecommunications market.

The cash infusion will help Mandl, who left AT&T; in August 1996 to become Teligent chairman, as his Alexandria, Va.-based company prepares for an initial public offering of stock this fall.

Proceeds from the IPO will be used to finance expansion to give Teligent’s wireless telephone network a broader reach. The network uses high-frequency microwaves to relay phone conversations and data traffic between customers equipped with a small rooftop antennae and a network of microwave towers connected to the public phone network.

Analysts said the NTT and Associated investments will give Teligent a potential market valuation of nearly $1 billion.

Teligent has negotiated telephone service interconnection agreements with local phone companies operating in the Los Angeles and Washington, D.C., areas, and the company has said its service will be commercially available in 34 states and the District of Columbia and that it could reach more than half the nation’s 50 million business telephone lines by 2001.

But some analysts say Teligent’s plans to challenge the powerful regional Bell telephone companies remain a longshot because of delays resulting from a protracted fight over wireless airwaves between Teligent and Teledesic, a satellite company founded by Microsoft Corp. Chairman Bill Gates and cellular phone mogul Craig McCaw.

Winstar Communications in New York is already using similar technology to offer telephone, data and Internet access in Los Angeles and seven other cities for businesses with telephone bills between $1,000 and $20,000 a month.

“They are facing an uphill battle,” said Daniel A. Taylor, a senior telecommunications analyst at Aberdeen Group Inc. in Boston. “In fact, I’m still befuddled as to why somebody would take a 12.5% stake in a company that has virtually no customers and no revenue. [NTT] could have easily invested the same money in a company that’s already out there operating.”

But some phone executives are more optimistic about Teligent’s prospects. They say the investment by NTT will go a long way toward giving their fledgling industry credibility.

“We are excited that there is another company with the type of dollars they have, to move forward to deliver services,” said Louise Goodman, a vice president at Winstar. “None of us [alone] can afford the huge advertising budgets to tell customers they now have a choice.”