More Good News
BellSouth deal lifts gloomy wireless cable bonds
By Douglas Brown
NEW YORK, March 19 (Reuter) - A deal between BellSouth Corp and American Telecasting Inc
has partially lifted the gloom that was hanging over junk bonds in the wireless cable sector for the
past several months, analysts said.
"This provides some confidence after a period in which there was real concern that there wasn't any
value left in the spectrum assets of these companies," said Alan Ginsberg, head of high-yield
research and cable analyst for Smith Barney Inc.
BellSouth announced on Wednesday it plans to acquire American Telecasting's wireless cable
operations in several Southern states for between $67.9 million to $103 million.
American Telecasting zero coupon bonds of 2005 rose as much as 18 points to 37 on the news,
traders said. Junk bonds from other wireless cable companies, such as CAI Wireless Systems Inc
and People's Choice TV Corp ( Peoples Choice TV Corp ) were also lifted.
"The bonds should be up," said Stevyn Schutzman, high-yield cable analyst at Salomon Brothers Inc.
"The pendulum has swung the other way. Another (regional Bell operating company) stepped up and
this shows there is value in these assets."
Junk bonds of wireless cable companies sank to record low levels after Bell Atlantic Corp and
NYNEX Corp suspended an agreement to develop a wireless network with CAI Wireless last
December.
Market players interpreted this as a sign that deep-pocketed investors such as the Bell companies
were no longer interested in using this technology to provide video services to their customers.
"Pricing of these bonds and stocks were dropping and seeking a bottom. There is a sense that (the
BellSouth) deal puts a floor underneath the value of assets in this group," said Ginsberg.
He added that the purchase price indicated BellSouth paid $16.5 to $34 per line-of-site home. That
estimate assumes BellSouth paid $1,000 for the 35,000 existing subscribers in the system, he said.
"This deal doesn't solve the industry's problems, which is a need for capital and a need to move
forward with converting to digital service. However, it provides some cause for optimism," said
Ginsberg.
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