Hi ww,
Well, that was some kinda reply. Thanks a billion**! I sometimes am amazed at the learning I can do here at the nFCTF. :)
[[Aside: As regards NexWave and my interest in the wireless sector, I was just about at the newbie phase when they defaulted. Thus I've been having a dickens of a time trying to figure out why there are so many zealots around SI who felt NextWave got a raw deal. I don't get it. After all, it wasn't the FCC that reneged on payments. Maybe someday someone will explain to me why NextWave should be treated like some of the "too big to fail" banks. ]]
I do seem to recall the DCF model from my MBA studies. As I recall, unless one is spot on with the inputs into the model it's simply a GIGO operation. And today, I discount any cash flow projections beyond 18 months as being too prone to be OTBE (overtaken by events). I think we can categorically say that every, and I do mean 100% of every, projection of growth in the telecom sector from 12 months ago are now junk. (Unless maybe Bill Fleckenstein or Jim Grant had an opinion, but that's a 'stopped watch is right every 12 hours' sort of analysis.)
So, OK, back to DCF. Beyond 18 months, I call that Delusional Cunning Finagling of the figures. Call it what you will. <g> Though, I dare say, the PTTs must have presented something to their bankers and I doubt they labeled it Delusional, or Deceptive, and if I were them, I'd steer away from that "Discounted" word too. Bad connotations. OTOH, when Irwin Jacobs came out today an started yammering on about how WCDMA was going to be delayed by 24 months, well, on second thought, maybe delusional does apply to the profligate testosterone-induced license bids. Kinda reminds me of the dread I ultimately achieved in my building contracting bidding. When I did win one, I'd start to really sweat it and wonder how much I left on the table, did I make a mistake or was I about to take a bath on a suspect estimate. Hard to feel like a winner after a while......
Re: Free Cash Flow - Yes, sir, I do think that this is the gold standard for measuring these sorts of things. It is after all, the mother's milk of bidness, without FCF, a business is in the process of running the debt meter to an extreme, getting ready for one of the Chapters (i.e. 7, 11 or the new kid on block, 22***) or is maybe so immature that it is running on ROV, er, Return on Vision. Funny how we don't hear that one much in dot.coma land any more.
Re: Basically, that's how you get to a bid price.
While I respect the rigor of your EBITDA, FCF, P/E, etc. analysis of how to rationally arrive at a bid price in the spectrum auction, in the event, in both the British and the German auctions, they were open bid and it sure seems to me that none of the "winners" were basing their bid price on anything other that topping the other guy. It was only in the final phases of the German auction that Li Ka Shing and Hutchison-Whampoa seemed to actually have a cap and withdrew from the bidding. Else what appears to have possibly happened is that the bidders outdid each other in a 'beggar thy neighbor' bidding war, something McCaw has excelled at in the past. Somehow, I just feel that in the heat of the moment, that the really smart guys running these PTTs just forgot to call you or me and get a sensible upper limit established.
On par with present day AMPS systems? That's bad?
My cell phone is AMPS and it is fine. My point is that the marketing hype will be all over 5G and that 3G will be so 'yesterday', y'know. Who will want 3G if it isn't the latest rage? And, BTW, what kind of churn can we expect in the industry by then? Hopefully less than today's market.
As an initial point, don't confuse debt service with going concern value. How do you think Craig McCaw got to be a multi-billionaire.
Good point, maybe that's why he's a bit better off than me. I have no debts and that may not be the wisest business stance to take, but it sure brings the odds of bankruptcy way down. <g>
Furthermore, I expect spectrum allocations in other parts of the RF spectrum to take away the specific bleeding edge lead that UMTS enjoys in the current scheme of things.
Agreed - now quantify that diminution
Well, ww, since I haven't seen any figures in your marvelous post, I'll follow suite - the diminution will be somewhere between enough to wreck the FCF and major league annoying to the beancounters at the SPs. How's that for vague yet poignant? I do see new future allocations to be problematic. Because I always like to look at these situations from the point of view of the customer. And the customer is perpetually going to be put on the latest technology by the marketing guys, so once 3G is old hat, (and they are rolling out the vaporware on 4G as I write,) 3G loses its panache and cachet, and well, it starts to bore the restless early adaptor crowd.
I see I can be long-winded as well. Seems a worthy subject however. And I'm very grateful to be discussing the 3G system in economic and financial terms as opposed to the technology side. I see so many contributors to these threads who have the delusion that just because someone has a great technology that it is a great business. It ain't necessarily so.
Best, Ray :)
**Turkish lira
***Some creative types are taking bidnesses into Chapter 11 twice in two years these days. Thus, Chapter 22. First bankruptcy with the original management, and then after the rag pickers have come by with steeply discounted bond/debt assumptions and snarfed the A/R for all they can get, and parted out the company, then they let'r RIP after all the rendering is over. |
