Today, DT and FT announced that they were shedding their interests in FON by the end of Q2 01. This ought to knock 40% or 50% off the market cap of FON. In view of this and the negative reaction we can expect from the bondsmen, do you think it is realistic that FON will move ahead on the timeframe you have proposed, or are they more likely to prefer to preserve cash?
I still havent figured out if they are planning on selling PCS or just FON (only one article mentioned the distinction and stated that it was only FON). I am actually long some LEAP's on PCS....they violate a couple of my rules on investing (not profitable, no real lock) but the valuation is pretty compelling. You do bring up a good question. Previously, PCS had stated that they were going to raise cash by going to the equity market this year....dont think that this is going to be a viable option for awhile. I'm still not too worried about the 1x upgrade path, they seem pretty well comitted to that. The key is the fact that 1x will provide a doubling of the voice capacity. Getting 1x to market quickly would allow them to slowdown on spectrum acquisition as well as build-out. I feel reasonably secure that 1x can be justified without even including data revenues.
I dont believe that US wireless companies are going to be strapped for cash in general. They are generally supported by RBOC's with strong balance sheets (Verizon, SBC, BLS). Off hand, I know that Verizon has raised a couple of billion over the last couple of months.
biz.yahoo.com
Also, AT&T raised $10B by selling off a portion of their wireless unit to Docomo. The real problem for these operators is that VZ, AWE and Cingular were all supposed to be spun off last year. With the state of the equity market, I dont know when they will be able to go public. This will effect them if the situation continues....but probably not until the 4th quarter of '01 (at the earliest).
Overseas, I think the situation might be a little different. France Telecom, BT and Deutche Telecom look like they will need to sell off various assets that they have acquired over the last couple of years to raise cash (Orange, PCS, and BLU). OTOH....both NTT Docomo and Vodafone have continued their acquisition spree. It is interesting to note that overseas, the pure-play wireless companies seem to be doing better than those associated with their fixed-line parents.
Like the wired side....it all depends on the company. However, unlike the wired side, I believe the companies that need to raise the cash have the resources to do it.
Slacker |
