NEWS out..
Bond stuff and nice summation of MCOM
biz.yahoo.com
NEW YORK, Jan 10 - Standard & Poor's today assigned its single-'B'-minus rating to the $425 million (gross proceeds) senior notes and senior discount notes of Metricom Inc. and its wholly owned subsidiary Metricom Finance Inc. Standard & Poor's also assigned its single-'B'-minus corporate credit rating to Metricom Inc.
The outlook is stable.
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 somewhat 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 MCI WorldCom Inc.
In November 1999, each acquired $300 million in preferred stock in the company. These investments, plus the planned bond offering and a planned concurrent, though not contingent, equity offering, prefund Metricom's ambitious network construction plans.
Los Gatos, Calif.-based Metricom currently provides the fastest wireless data access service commercially available. When launched for commercial service, the company's Ricochet2 technology will let laptop computers download data at speeds in excess of 128.0 kilobits per second (Kbps), significantly faster than the 19.2Kbps to 28.8Kbps speeds of competing, cellular-based data technologies.
The company's technical advantage is expected to last at least 18 to 24 months, after which speeds comparable with digital subscriber lines should be available over the Metricom network. To capitalize on this window of opportunity, the company has an aggressive buildout plan to provide network coverage of a 100 million population (pop) area.
Metricom's Ricochet2 product is based on a proprietary combination of off-the-shelf radio frequency technology. The initial Ricochet product has been in use for a number of years, and Ricochet2 has been extensively beta tested with existing Ricochet customers in a 42-square-mile area of the Silicon Valley. Ricochet2 uses spread spectrum technology and operates in license-free 902 megahertz (MHz) to 928MHz 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 from the pole to the network.
Metricom's ambitious network construction plans pose a number of implementation risks. The company plans to have coverage of 62 million pops by the summer of 2000, covering 12 major metropolitan markets, and to complete a 100-million pop, 36-market footprint by mid-2001. Although small radio cell sites should face less zoning problems than voice cellular towers, any installation and testing problems could delay network rollout and reduce the market window. In addition, Metricom has outsourced the manufacturing and installation of its network, which could pose control problems.
Metricom is following a nonexclusive wholesale sales model. MCI WorldCom is currently its only sales agent, and it has guaranteed sales of at least $388 million over five years. The product will be co-marketed under the Ricochet and MCI 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 rolled out on a timely basis.
OUTLOOK: STABLE
Cash from strategic investors Vulcan Ventures and MCI WorldCom, along with anticipated proceeds of a planned bond and equity offering, prefund Metricom's ambitious network construction plans. The company's ability to implement its business plan should allow it to carve out a significant niche in the fast-growing, high-speed, Internet access market.
-- Hungry |
