re: gsm/GPRS v. cdma2000 in Canada - Microcell "Fido"
>> Canada: Microcell Expected To Take A Beating - Analyst - Technology Lagging
Reuters
Financial Post
National Post
03/23/2001
Microcell Telecommunications, operator of Canada's fourth-largest cellular network, is facing a rough ride as its technology falls behind those of better-financed competitors and the market questions whether its shares warrant a takeover premium, an analyst's report said yesterday.
Stock in Microcell fell as much as 12% yesterday and hit a 52-week low of $21.25 after Dundee Securities Corp. analyst Mark Hugh Sam issued a report titled "The little train that could?" with a recommendation to sell Microcell shares.
"It's not that I believe the company is going bankrupt, I still think they are very innovative ... I just don't believe in their technology and financing. They are very highly leveraged," Mr. Sam said in an interview from a trade show in Las Vegas.
He said Microcell's GSM-based network - which is the wireless network standard in Europe but not in North America - will be inferior to its competitors, which use the cdma2000 standard, when they make the transition to the 3G standard.
3G is expected to bring high-speed Internet access to wireless phones and other handheld devices.
"The company told us they will not go to 3G unless viable, which means they will be reduced to a 2.5G player, which we don't think is a viable alternative in the long term," Mr. Sam said.
Thane Fotopoulos, a Microcell spokesman, said Mr. Sam has been known to "flip flop" on his opinions about GSM operators, and market conditions make it unlikely that any Canadian carrier will surpass the 2.5G threshold in the near future.
"We are all in the same boat when it comes to 3G. It requires new cell sites, and towers and everything ... for the vast majority of users, 2.5G will be sufficient," said Mr. Fotopoulus.
Mr. Sam said Microcell has benefited from cheap GSM phones, allowing it to acquire customers at a lower cost than its competitors, and that it has the highest prepaid monthly revenue per subscriber at $27.14.
But these advantages are likely to reverse as its dated technology pushes it into the realm of lower-revenue customers using voice rather than data services, he said.
Mr. Fotopoulus said not only will the move to 3G be slower than Mr. Sam thinks, but that manufacturers will continue to churn out cheap handsets for GSM networks because they are the world's dominant standard.
"Half a billion people use GSM. The manufacturers know which part their bread is buttered on," he said.
There are about 8.7 million mobile subscribers in Canada, about 30% of the population. Market penetration is expected by analysts to grow to about 60% in 2005.
Microcell's current market share is 11% with 933,000 subscribers, Rogers has a 29% share at 2.5 million, while Telus Mobility serves 2.2 million subscribers and BCE Inc.'s Bell Mobility boasts a 36% share with 3.2 million customers.
On the Toronto Stock Exchange, Microcell's shares closed down 60c at $21.75, BCE was off 50c at $36, while Rogers was down 80c at $17.
Mr. Sam said Microcell's financial backers are on shaky ground, compared with its deep-pocketed competitors, who also benefit from cable television, Internet and phone service cash flows.
Telesystem International Wireless, with a 31% stake in Microcell, is unlikely to be able to support the company as it sheds Brazilian assets and fights to find financing for its startup mobile operation, Dolphin, in Europe, he said. <<
- Eric - |
