Promising Paragraph On NXTL and Nextwave Spectrum!!
The Wall Street Transcript Publishes Wireless Industry Issue
PR Newswire - September 13, 1999 17:51
NEW YORK, Sept. 13 /PRNewswire/ -- Five leading analysts examine the Wireless sector in the latest issue of The Wall Street Transcript (212-952-7433). In a vital review of this sector for investors and industry professionals, this 38-page report features:
1) In an in-depth roundtable forum on the Wireless sector (20,000+ words), five leading analysts: Jeffrey Hines of BT Alex. Brown, Thomas Lee of Salomon Smith Barney, Harvey Liu of CIBC World Markets, Cynthia Motz of Credit Suisse First Boston and Michael Rollins of JP Morgan examine the VoiceStream/Omnipoint merger, NextWave's wireless license problems, Calling Party Pays, service bundling, competing technologies, Voiceover IP and lifting spectrum caps.
The expert panel explores the competitive horizon, M&A activity, growth segments, investor sentiment, management performance and investor concerns. They analyze specific sector firms, and each analyst offers their recommendations with some stocks receiving a consensus of positive opinion, with the outlook for others hotly disputed.
Because NextWave Telecom is in bankruptcy, the FCC is seeking a company that is capable of deploying the assets to purchase the wireless licenses, Motz asserts, "I don't feel that Nextel (Nasdaq: NXTL) being allowed to pursue the spectrum would necessarily indicate that the rules are being changed. There are no small companies at this point that can make the government whole, and there may not be any large companies that would do it either, because the bid was so outlandish in the first place. Nextel is in the best position to get the spectrum. They're one of the few that doesn't have spectrum cap issues."
Vodaphone and Bell Atlantic are watching the spectrum proceedings closely, Hines states, "Reportedly these two are in discussions regarding how to best piece together Vodafone's (NYSE: VOD) largely Western U.S. footprint with Bell Atlantic (NYSE: BEL) Mobile's largely Eastern U.S. footprint. If Nextel gets the spectrum currently claimed by bankrupt NextWave, then there goes a big potential piece of the footprint filler out the door. And if Vodafone can't work out a deal with Bell Atlantic and VoiceStream (Nasdaq: VSTR) gets Omnipoint's (Nasdaq: OMPT) largely Eastern U.S. footprint, then all of a sudden it looks pretty iffy as to whether Vodafone will be able to build and buy an Eastern presence in the U.S. anytime soon."
Service bundling is a hot topic for the sector and the source for much M&A speculation, Motz declares, "Since late 1997 the mergers have really accelerated, and have continued through the 1998 time frame. They're continuing now, and I believe they are driven by carriers' wanting to provide the consumer with a full bundle of services. We see AT&T and Sprint out there offering $0.10 a minute, whether it's a wireless minute, a long-distance minute, sometimes with local and Internet bundled in, and I think eventually every player will want to do this. I think players will have to offer a full line of products and services. I feel like WorldCom (Nasdaq: WCOM) is going to need a wireless voice play. With players like AT&T out there offering a digital one-rate plan, there is a need to look at the economics of such a plan, and the way to rationalize plans like this is probably by buying up other players. You have options -- you can build it or you can buy it - but in a lot of these areas, the rural areas, like Western Wireless's (Nasdaq: WWCA) areas, it's just too uneconomic for players to build out digital at this point. AT&T (NYSE: T), Sprint PCS (NYSE: PCS), and Nextel, have designated an affiliate. In many areas, though, it just simply doesn't make sense, so you might as well buy the analog carrier there -- especially if the carrier is going to subsidize "off-net" roaming like AT&T does."
While bundling is an excellent retention strategy, not all consumers will be interested, Lee suggests, "Alltel (NYSE: AT), which we believe has been very early on the bundled strategy, has found it is attracting high-end telecom consumers with its bundle, to buy local service, long-distance, wireless paging, Internet. But this customer is also someone making $75,000 a year. 50% of this population lives in households that make less than $40,000 a year. The bundled strategy makes sense especially for that high-value consumer, but not necessarily for every consumer."
The panel goes on to offer recommendations about which sector stocks are most likely to reward investors.
Hines states, "For the smaller cap names we like the Canadian players, Clearnet (Nasdaq: CLNTF) and Microcell (Nasdaq: MICTF), just in terms of deep value relative to what we think the assets are worth, and certainly deep value relative to where other names in the sector trade. Readers can also look at the rural cellular operators. They are attractive because they are seeing the strong growth of the U.S. market but without the rising levels of competition. Top names here would be Price Communications (Amex: PR) and Western Wireless, which not only are showing stellar results, but have two of the top management teams in the space."
Hines continues, "For those looking for a bit lower valuation, but perhaps not as clean a story, we'd suggest U.S. Cellular (Amex: USM), which trades at a big discount to the group as a whole."
In the wireless messaging sector, Motz offers, "With a lot of caution, on a valuation basis, and because it might get taken over, Paging Network (Nasdaq: PAGE). PageNet is going through a restructuring, which has been extremely frustrating, because it has been a long time in coming. Additionally, the restructuring has not generated what people would have expected it to by this time. However, when you look at a company that has almost 10 million customers, in addition to there being value in the network, there should be value in having that size of a customer base."
Liu shares his favorite sector stock, "We don't think it's unrealistic for Powertel shareholders to be awarded with two takeout premiums in the next two to three years. Powertel's (Nasdaq: PTEL) our top pick right now."
2) A review of management performance at 14 Wireless firms asked market insiders about the ability of management teams to create shareholder value. In a sector where many management teams are criticized for failing to adjust to the changing landscape, some CEOs receive top marks for their efforts:
Richard Ekstrand, President and CEO of Rural Cellular Corp. (Nasdaq: RCCC), impresses a buy sider, "Rick Ekstrand of Rural Cellular has been a revolutionary thinker as a rural carrier. The company went public three and a half years ago, and they've done everything they said they were going to do since."
Glen F. Post III, President and CEO of CenturyTel (NYSE: CTL), is praised by an executive, "Not only has he run one of the most efficient, stable, cash flow, and profit producing cellular operations, but CEO Glen Post also balanced it with success in the rural wire telephone world."
But several sector managements are criticized to the point that insiders see their only hope is to be acquired.
This survey is a unique resource for checking the "Street's" view of senior management.
To obtain a copy of this insightful 38-page report, see twst.com or call 212-952-7433. This special section is also included in the Financial Services Sector of TWST Online at twst.com. Also included are the recent e-Health Issue at twst.com and the Semiconductor Industry Issue at twst.com
The Wall Street Transcript is a premier weekly investment publication interviewing market professionals for serious investors for over 35 years. Available at twst.com TWST Online provides free Interview excerpts. For highlights and recent recommendations by analysts and money managers visit twst.com.
The Wall Street Transcript does not endorse the views of any interviewee nor does it make stock recommendations.
SOURCE The Wall Street Transcript
/CONTACT: Peter McLaughlin of The Wall Street Transcript, 212-952-7433/
/Web site: twst.com
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