Rural Cellular Corporation Reports Record Net Income, Revenues and EBITDA for 3rd Quarter of 1999

Business Wire, Oct 26, 1999

ALEXANDRIA, Minn.--(BUSINESS WIRE)--Oct. 25, 1999--

-- Net income of $3.5 million compared to $4.5 million net loss in

prior year

-- EBITDA increases 67% over prior year

-- Continues Positive Free Cash Flow

Rural Cellular Corporation (Nasdaq:RCCC) today reported record consolidated revenues of $46,942,000 for the third quarter ended September 30, 1999, an increase of 38% from $33,955,000 in the comparable period of the prior year.

The Company's consolidated net income applicable to common shareholders for the third quarter of 1999 was $3,522,000, or $0.39 per basic and $0.36 per diluted share, as compared to a net loss applicable to common shareholders of $4,469,000 or $0.50 per basic and diluted share in the third quarter of 1998. These amounts included preferred stock dividends of $4,032,000 and $3,528,000 in 1999 and 1998, respectively. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA)--a common performance measurement in the wireless industry--increased 67% to $23,991,000 in this year's third quarter, from $14,361,000 in the third quarter of 1998.

The Company's consolidated operating results are generated by:

-- RCC Cellular which operates cellular telephone systems in

Minnesota, Maine, Vermont, New Hampshire, Massachusetts and New

York. RCC Cellular also includes paging operations in Minnesota,

North Dakota, Vermont and Maine as well as long distance service

in Vermont.

-- Wireless Alliance, LLC, a joint venture that is 70%-owned by RCC

and 30%-owned by an affiliate of Aerial Communications, Inc.

Wireless Alliance launched PCS networks (operating as Unicel

Digital) in Minnesota, Wisconsin, North Dakota and South Dakota

in 1998.

"We strongly believe that the wireless role in the telecommunication industry is growing rapidly. RCC is meeting these challenges by providing superior wireless communication service. As shown in our 3rd quarter operating results, our customers agree. Combined with an industry wide upswing in wireless usage, I am proud to say RCC has utilized its operating efficiencies to exceed expectations by becoming profitable for this quarter," said Richard P. Ekstrand, RCC's president and chief executive officer.

At September 30, 1999, total wireless customers, including paging customers were 244,000. Of this total, RCC Cellular had 218,000 cellular customers at the end of this year's third quarter, up 24% from 176,000 in the comparable period of the prior year. The increase primarily results from continued strong growth in RCC Cellular markets and the acquisition of Glacial Lakes Cellular in February 1999.

Reflecting significant customer growth, strong levels of high-margin roaming revenues and increasing minutes of use, RCC Cellular revenues increased 44% to $44,661,000 in the third quarter of 1999 over the third quarter of the prior year. Roaming revenues increased 75% to $15,936,000 over the comparable period of the prior year. Operating income of RCC Cellular rose to $16,023,000 in the third quarter of 1999 from $7,852,000 in the prior year, while EBITDA rose to $24,750,000 in the current period from $15,434,000 in 1998.

At the end of this year's third quarter Wireless Alliance PCS penetration increased to 1.6% with 11,110 customers as compared to just over 2,000 a year ago. Including its remaining cellular reselling customers, Wireless Alliance's total customer base now stands at 12,950.

Revenues of Wireless Alliance declined to $2,355,000 in the third quarter of 1999, from $3,339,000 in the prior year primarily due to the lower number of cellular reselling customers. Operating losses improved to $1,928,000 for the third quarter of 1999 as compared to $1,949,000 in the prior year. Wireless Alliance's negative EBITDA for this year's third quarter, also improved to $759,000 as compared to $1,073,000 in the prior year.

The Company continues to incur interest expense related to the financing of its acquisitions and PCS network build-out. In addition to issuing high yield debt and preferred stock in 1998, the Company also has a long-term credit facility of $300 million, of which approximately $181 million was utilized at September 30, 1999. Given the unused balance of this credit facility, the Company anticipates its operating and capital needs can be met through fiscal 2000.

The Company expects its operations in the fourth quarter of 1999 to be affected by the traditional seasonal slowing in wireless usage in its service areas resulting in decreased revenue and EBITDA as compared to the third quarter of 1999. Fourth quarter revenues may also be affected by the Company's recent negotiations of roaming agreements with two of its major roaming partners. The Company is generally optimistic however about the combined affect on roaming revenue of these negotiations and the anticipated increase in roaming minutes over the comparable period of the prior year.

Statements about the Company's anticipated performance are forward looking and, therefore, involve certain risks and uncertainties, including but not limited to: competitive considerations, success of customer enrollment initiatives, the ability to increase wireless usage and reduce customer acquisition and other costs, the successful integration of newly acquired operations with the Company's existing operations, the ability to service debt incurred in connection with expansion, and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission.