PRESS RELEASE: S&P Revises Metricom Outlook To Negative
11/29/0 15:23 (New York) Following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's CreditWire) Nov. 29, 2000--Standard & Poor's
today revised its outlook on Metricom Inc. to negative from stable.
At the same time, Standard & Poor's affirmed its ratings on Metricom Inc. and
wholly owned subsidiary Metricom Finance Inc. (see list below).
The outlook revision is based on the fact that Metricom will require about
$500 million in additional capital to complete its full network deployment
plans, the source of which has not yet been identified. Cash balances, which
totaled $714 million as of Sept. 30, 2000, will only provide partial funding
for the company's expansion plans in 2001. In 2001, additional funds will be
required to enable the company to build and service a network covering a total
of 46 markets and 100 million population equivalents by year-end 2001.
The ratings on Metricom Inc. reflect the significant operational, deployment,
and marketing risks the company faces as it constructs a nationwide wireless
high-speed data network. Risks are partially mitigated by the strategic and
financial backing of major equity investors Vulcan Ventures Inc., the private
investment vehicle of Microsoft co-founder Paul Allen, and WorldCom Inc.
Los Gatos, Calif.-based Metricom currently provides the fastest wireless data
access service commercially available. The company's Ricochet2 technology,
which had been launched in nine markets as of Sept. 30, 2000, allows laptop
computer users to download data at speeds in excess of 128.0 kilobits per
second (Kbps), significantly faster than the 19.2 Kbps to 28.8 Kbps speeds of
competing cellular-based data technologies. Metricom's Ricochet2 product is
based on a proprietary combination of off-the-shelf radio frequency technology.
Ricochet2 uses spread spectrum technology and operates in license-free 902
megahertz (MHz) to 928 MHz spectrum, the same spectrum used by cordless home
telephones. Minicells, located on and powered by light poles, transmit to the
wireless laptop modems, which can roam at up to 70 miles per hour.
Higher-frequency wireless links bring the data back to the network from the
pole.
Metricom's ambitious network construction plans pose a number of
implementation risks. The company has already encountered delays in its
deployment schedule due to the challenges posed by the zoning approval
processes and utility agreement negotiations. In addition, Metricom has
outsourced the manufacturing and installation of its network, which could pose
control problems.
The company is following a nonexclusive wholesale sales model. WorldCom is
currently the company's largest sales agent, and it has guaranteed sales of at
least $388 million over five years. Under this agreement, the product is being
co-marketed under the Ricochet and WorldCom brands. Expected continued
explosive growth in demand for high-speed Internet access, and trends toward a
more mobile workforce, should bode well for the product if it can be
aggressively rolled out on a timely basis.
OUTLOOK: NEGATIVE
The company will need substantial additional funds in 2001 to complete its
full network and market expansion plans. Absent receipt of such funding in the
first half of 2001, the ratings will be lowered, Standard & Poor's
said.-CreditWire
RATINGS AFFIRMED
RATING
Metricom Inc. Corporate credit rating B-
Senior unsecured debt (Co-issued by Metricom Finance Inc.) B-
Shelf registration:
Senior unsecured debt preliminary B-
Preferred stock preliminary CCC
(END) DOW JONES NEWS 11-29-00
03:23 PM- - 03 23 PM EST 11-29-00 |
