Anyone have any other undiscovered wireless plays? I had ATS
APT Satellite @ $4.25 couple weeks ago now trading @ $7 7/8.
Friday January 21, 2000 (5:19 pm ET)
The Golden Age of Wireless
NEW YORK, Jan. 21 (Standard & Poor's) - The sky is not necessarily the limit for the wireless communications industry, as the market has expanded beyond unwired phones and cell sites to include a few strong satellite players. The evolution of the wireless industry will translate into a new-found freedom for consumers, who will be able to access information and communicate anytime, anywhere.
Competition, the rapid evolution of technology, and the quick pace of consolidation have reshaped the telecommunications industry. Driven by such high-growth markets as the Internet, data communications, international services, and wireless, the primary industry players continue to reinvent themselves. We expect global wireless subscribers to top 250 million in 2000, establishing wireless as one of the more attractive segments of any industry. In line with this growth forecast, wireless investments sport a higher risk/return profile than their wireline counterparts.
Domestic revenues for wireless services are projected to expand to about $50 billion in 2000. Based on forecasted growth of about 25% per year in the U.S. subscriber base, the number of subscribers should increase to over 100 million this year.
Wireless hookups
Wireless service in the U.S. has been ushered into the mainstream market by industry powerhouse AT&T T . It plays a major role in nearly every communications market and is currently the leader in wireless. Running a close second is Sprint PCS PCS . Along with its wireline counterpart, Sprint Corp.'s FON Group, Sprint PCS agreed in September 1999 to be acquired by MCI WorldCom Inc. This should be a potent combination.
The trend toward telecom consolidation saw another major landmark with the September 1999 merger of wireless giants Vodafone Group plc and AirTouch Communications to form Vodafone AirTouch VOD Subsequently, the combined company agreed to form a national wireless joint venture with Bell Atlantic BEL (and its merger partner GTE Corp. GTE .
With three such prominent competitors already in place, it probably won't be long before Baby Bell SBC Communications SBC enters the national scene. Nextel Communications NXTL , a national enhanced specialized mobile radio ESMR operator, is also readying its personal communications services PCS spectrum to enter the fray. Nextel's existing customer base is mostly business-related, but the lucrative consumer market looms large. With the wireless industry experiencing robust growth, well-positioned companies with a large footprint are virtually guaranteed to experience a healthy rate of subscriber additions.
Pricing made simple
The industry has responded to customer demands for simplified pricing structures by offering a fixed-rate package of minutes, with no roaming charges. The average monthly bill for wireless service declined to $40.24 at June 30, 1999, from $52.45 in June 1995, as the wireless landscape became more populated.
Industry consolidation, combined with the escalating tug-of-war for each and every customer, has led to a drop in net average revenue per unit ARPU, a figure that accounts for the marketing and related costs of acquiring customers. The figure reached $39.43 by year-end 1998, down from about $68.00 five years earlier, according to data released by the Cellular Telecommunications Industry Association. In that five-year span, the number of wireless subscribers in the U.S. more than quadrupled, rising from 16.01 million in 1993 to 69.21 million at the end of 1998.
Space program
Hughes Electronics GMH , the space and wireless communications subsidiary of automaker General Motors, has committed to invest $1.4 billion for the build-out of its Spaceway global broadband satellite network. This advanced network will provide affordable, high-bandwidth, high-speed communications for broadband and multimedia applications. The first system is scheduled to begin operation in North America in 2002, and Hughes plans to roll out additional systems with similar capabilities in other regions including Europe, Middle East and Africa, Latin America, and Asia as these markets develop, thereby producing an integrated worldwide system.
Spaceway will provide bandwidth-on-demand. The system will have the ability to transmit and receive data, video, voice, audio, and multimedia, with customers using and paying for only the amount of bandwidth needed for their specific applications, from e-mail to high-bandwidth, high-speed corporate networks.
This satellite system, combined with other effective industry players, such as Globalstar, Teligent, and EchoStar Communications, will not only boost the visibility of the industry, but will also provide a tremendous support for incumbent land-based wireless companies. By providing subscribers with more complete voice and data coverage, wireless companies will be able to reap the rewards of offering higher-margin services.
Win-win
With the wireless industry growing at a pace surpassed only by the Internet, companies associated with this sector will surely benefit. As companies make more advanced data services available to subscribers, the affordability and versatility of a wireless phone will undoubtedly create a "win-win" situation for both wireless carriers and consumers.
There's no doubt that wireless service companies and equipment manufacturers are experiencing unbridled global demand. In many world markets, the expansion has been accelerating for years, providing a blueprint of what is to come in less mature markets such as the United States, Latin America, and Asia. Among winning strategies that should prove effective in these markets, competitors are utilizing PCS, calling party pays, prepaid services, and a combination of data/Internet services.
Our wireless calls
S&P is currently recommending five wireless communications stocks ranked (buy): Sprint PCS PCS and Vodafone Airtouch VOD are two more traditional wireless companies with rapidly expanding subscriber bases and increased market penetration. Three other companies that we like are digital satellite television providers, Hughes Electronics GMH and EchoStar Communications DISH , and fixed wireless provider Teligent, Inc. TGNT
A peek into the future reveals a wireless industry shared by both satellite-based and ground-based technology. This will give birth to a wireless phone that will not only be smart, but will also transmit voice and data communication to any location. We also expect to see a handful of global wireless carriers that will provide consumers with effective roaming solutions at attractive price points. This competitive environment should be a real bonanza for both companies and consumers for at least the next five to 10 years.
21-Jan-2000 17:19:43 (02492284) Copyright 2000 Standard & Poor's Investment Advisory Services LLC. The information contained in this report may not be published, broadcast, rewritten or otherwise distributed without prior written consent from Standard & Poor's.
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