UPDATE 2-AirGate warning drags down wireless sector
(Adds byline, details, updates stock prices) By Yukari Iwatani
CHICAGO, June 6 (Reuters) - Shares of wireless telephone companies plunged on Thursday after AirGate PCS Inc. <PCSA.O> cut its subscriber growth forecast for the current quarter, scaring off investors already jittery about slowing growth in the industry.
AirGate shares fell $5.52, or 65.7 percent, to $2.88 in morning trade on Nasdaq, where it was the top percentage loser. The shares have fallen 97 percent since peaking at $114.50 more than two years ago.
AirGate, which sells wireless service under the Sprint PCS Group <PCS.N> brand name, late on Wednesday said it expects to add between 22,000 and 27,000 net new subscribers in its fiscal third quarter, ending June 30, instead of the 35,000 to 40,000 it forecast earlier.
It blamed a greater-than-expected decline in new customers with bad credit, after it instituted a deposit requirement for Clear Pay, a plan with a spending limit designed for customers with poor credit histories.
AirGate also warned that it may fail to meet minimum customer requirements under a senior credit agreement.
"Visibility is shockingly low at the company, as guidance was given only four weeks ago," John Bensche, wireless analyst for Lehman Brothers, said in a research note.
Following the AirGate news, shares of other Sprint PCS affiliates also dropped as investors feared that Clear Pay would hurt their results as well.
Sprint PCS dictates pricing plans for services including Clear Pay. When Clear Pay was first rolled out last year, it required no deposits, but Sprint PCS affiliates began requiring deposits earlier this year after the plan started attracting a disproportionate number of customers with bad credit.
Among other Sprint PCS affiliates, Alamosa Holdings Inc. <APS.N> shares fell $1.70, or 46.6 percent, to an all-time low of $1.95 on the New York Stock Exchange, where it was the top percentage loser.
Shares of US Unwired Inc. <UNWR.O> fell 96 cents, or 19.4 percent, to $3.99, and UbiquiTel Inc. <UPCS.O> fell 40 cents, or 28.8 percent, to 99 cents on Nasdaq. Both hit all-time lows earlier in the day.
Shares of Sprint PCS, the nation's No. 4 wireless operator, fell $1.78, or 18 percent, to $8 on the New York Stock Exchange, even though it requires no deposits for Clear Pay and should not see similar declines in new customers with poor credit histories.
Spring PCS' parent, Sprint Corp. <FON.N>, fell $1.56, or 11.8 percent, to $11.64.
Some analysts said AirGate's problems were likely unique to that company and stemmed more from its failure to integrate and improve results at recently-acquired iPCS.
Even so, investors are abandoning Sprint PCS affiliates because they are questioning the companies' business model, said Frank Marsala, wireless analyst with Robertson Stephens.
"People are saying that being affiliates of Sprint, following Sprint's marketing programs, the model that they've created now for acquiring subscribers is not working," Marsala said. "Bad debt expense is too high, churn levels are too high and now subscriber growth is slowing."
Other wireless stocks were also hurt, even though analysts said this was unjustified.
Shares of AT&T Wireless Services Inc. <AWE.N> fell 73 cents, or 9 percent, to an all-time low of $7.25 on the New York Stock Exchange.
Shares of Nextel Communications Inc. <NXTL.O> fell 55 cents, or 12.5 percent, to $3.86, and shares of Triton PCS Holdings Inc. <TPC.N> fell $2.13, or 21 percent, to $7.98.
On a broader basis, the Philadelphia wireless telecommunications |
