NeuStar IPO Gets Enthusiastic Reception

NeuStar's (NSR Quote) IPO is getting a warm welcome on Wall Street as investors seek a piece of an exclusive telecom property.

Shares of the nation's phone-number management shop opened at $25 Wednesday, $3 higher than the $22 offering price. Fans see the Sterling, Va., telco contractor as a relatively low-risk way to play growth in areas like voice-over-Internet-protocol, or VoIP, service and wireless expansion. NeuStar has a virtual monopoly on the North American phone-numbering plan.

And though the offering of 27.5 million shares will presumably generate about $600 million in proceeds, not a penny will go to the company. Private equity investors Warburg Pincus, which purchased the numbering unit from Lockheed Martin (LMT Quote) in 1999, will pocket all the cash.

NeuStar serves as a clearinghouse for phone number porting, the service that allows customers to keep phone numbers when switching carriers. NeuStar is also in charge of allocating new phone numbers.

For example, all phone companies like Verizon (VZ Quote), AT&T (T Quote), Nextel (NXTL Quote), as well as cable companies that offer calling like Comcast (CMCSA Quote) and Time Warner (TWX Quote) use NeuStar to hand off or receive phone numbers as customers join or leave the service.

For its part of the deal, NeuStar collects about $1 for every transaction.

The company has had five years of top-line growth and swung to a profit in 2003. Last year, the company posted adjusted net income of $45 million on $165 million in sales. The company generates a healthy amount of cash and had about $75 million in cash and investments on had as of March 31. NeuStar has about $7 million in debt.