Is Street too worried about telecom?
Barron's article points to buying opportunities
By CBS.MarketWatch.com
Last Update: 11:23 AM ET Feb. 16, 2002
NEW YORK (CBS.MW) -- Wall Street jitters over telecom shares may be overdone, analysts say.
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According to an article in this week's Barron's, buying opportunities could exist within the sector, thanks to the increased likelihood for consolidation among at least some of the big U.S. telecom names.
But the industry has been dogged by ever-tighter competition and some liquidity issues pounded shares, particularly for AT&T Wireless, a division of AT&T (T: news, chart, profile), Sprint PCS and Nextel Communications (NXTL: news, chart, profile).
Sprint on Friday announced it would cut 3,000 jobs at wireless arm Sprint PCS (PCS: news, chart, profile). Get the full story.
The big fear is that wireless will follow the downward path of the long-distance phone industry without generating the profits that business once enjoyed, the article says.
As for Sprint PCS, analysts say the company would regain some investor confidence if it would scrap or limit its "Clear Pay" plan that allows consumers with weak credit ratings to secure a wireless phone without a deposit. The plan has significantly raised the debt level at Sprint PCS.
But investors could warm to some substantial mergers within the U.S. market, considering the domestic industry is less concentrated than telecom markets overseas. This equates to more efficient competition and lower margins.
According to the Barron's piece, the most likely telecom marriages are AT&T Wireless with Deutsche Telekom's (DE:555750: news, chart, profile) Voicestream Wireless or Cingular Wireless with Voicestream.
Analysts are cooler toward Nextel however, suggesting that if investors are interested in the company, they look at the Nextel's 20-percent junk bond yields versus its shares. |
