Wireless phone firms called 'undervalued' Friday, March 6, 1998
By PHILIP DEMONT
Telecom Reporter The Financial Post
Canadian stock analysts are using the wrong indicators to assess wireless phone carriers, telecom guru Charles Sirois said yesterday.
As a result, such companies as Clearnet Communications Inc. and Microcell Telecommunications Inc. wind up undervalued while management tries to satisfy company watchers, not boost the value of the carriers' business, said Sirois, chairman and chief executive officer of Telesystem Inc.
Telesystem owns 33.4% of Microcell. "Analysts focus on the number of subscribers and APRU [the average revenue per unit] and forget all the rest," he said during a talk in Toronto.
Variables, like ARPU, tell only part of the story and investors need other pieces of information to make a proper evaluation of the wireless companies, he said.
Company watchers look at the simple indicators and then dump the stock at the first sign of a downturn. Then, the wireless companies try to maximize these figures, whether or not the actual economic value of the company is increasing.
In recent months, Microcell and Clearnet have watched their stock values slide as the companies posted mixed results for certain indicators but overall had good results.
In fact, institutional stock buyers, not analysts, may be the problem, said Robert McFarlane, Clearnet's chief financial officer.
"Some pay attention. Others say 'just give me some easy benchmarks,' " he said. "Then, the analysts try to accommodate them."
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