Printed version of the recent conference call follows:
For those of you who might not have had a chance to listen to the recent conference call, this is a printed version which was the reason for the 8K filed yesterday.
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Item 5 - OTHER EVENTS
(A) On January 14, 1998, members of the senior management of CAI
Wireless Systems, Inc. held a conference call for financial analysts concerning
the public comments received by the Federal Communications Commission on the
Notice of Proposed Rulemaking for two-way use of MDS and ITFS frequencies.
Excerpts from the conference call are set forth below:
"CAI Wireless Systems, Inc.
Update on Notice of Proposed Rulemaking for
Full Two-Way Use of MMDS Spectrum
Excerpts from a Conference Call
held on January 14, 1998 at 4:00 PM (EST)
Operator: Welcome to the CAI Wireless update conference call. I
would now like to turn the conference over to Mr. Michael Glickman at
Lippert/Heilshorn. Please go ahead, sir.
Michael Glickman: Let me introduce who is on the call today. With
us, from management, we have Jared Abbruzzese, Chairman and CEO; John Prisco,
President and COO, and Gerry Kittner, Senior Vice President-Spectrum
Management. And now I'm going to turn the call over to Jared Abbruzzese.
Jared Abbruzzese: Thank you. First of all I want to start out and say we
recognize, to say the least, the last year and a half has been very, very
difficult for everybody involved in CAI. It has been very difficult
for our shareholders, challenging for our bond holders, and it's been very
difficult and challenging for management, also.
[FCC RECEIVES SUPPORTIVE COMMENTS ON TWO-WAY USE OF
MMDS SPECTRUM]
Last week the comment period expired for the Notice of Proposed Rulemaking
that would govern the two-way use of wireless spectrum. CAI was one of the
sponsors of and a very strong supporter of the NPRM. All the
comments filed at the FCC were generally supportive, which we think presents
reasonably good news. In fact, it represents excellent news for our company's
move towards flexible, two-way use of our spectrum.
[SHIFTING AWAY FROM RAPID DIGITAL VIDEO ROLL-OUT]
I want to step back for a quick second and remind you all about what has
transpired over the last year. Many of you probably don't need reminding, but
I want to explain it from management's perspective. Late in '96, management
and the board of CAI came to the conclusion that Bell Atlantic and NYNEX would
not fulfill what we perceived as commitments in rolling out their digital
video systems. And that conclusion eventually precipitated the
December 13{th} agreement whereby we agreed to separate.
We knew this decision would have a devastating effect on our company. It was
done because the management felt sincerely that if we had continued on the
prior course, the damage would have been more severe than breaking off and
trying to reinvent ourselves.
Management here, over the course of the holiday seasons in 1996 and early '97,
put together a comprehensive business plan, based on looking at the cash that
CAI had available to it, the reputation and weak position of MMDS in the
marketplace and assessing where the telecommunications marketplace would be
over the next several years. We laid out a strategy that we felt offered the
best chance for this company, its shareholders and its bondholders to benefit
long-term and near-term.
[TWO-WAY TECHNOLOGY; REGULATORY AUTHORITY; STRATEGIC PARTNERING]
The strategy was a three-tiered strategy. First, was to take our
spectrum into a two-way environment. That required the development of two-way
equipment that heretofore had never been developed. This was all going to be
alpha and beta equipment. This would require CAI going out to vendors
throughout North America, trying to get them to take equipment that
was geared toward PCS and other technologies and having it reconfigured and
tuned for MMDS Spectrum (which is primarily in the 2.5 to 2.7 Gigahertz range).
This was going to be a very challenging effort for a company that had a poor
balance sheet and had just been spurned by Bell Atlantic and NYNEX. But we
recognized that without the technology, we would not be able to demonstrate the
capabilities of the spectrum.
The second thing we had to get done was dealing with the regulatory
environment. At that point in time, as of December 13, 1996, the FCC had
indicated an interest in allowing owners of spectrum to have flexibility in how
they used their spectrum and had indicated to CAI a willingness to allow CAI to
use their spectrum for data and other uses beyond just video. But
the concept of ,and the guidelines for, two-way flexible use of the spectrum
for services such as telephony and other things was beyond what was currently
being pursued by MMDS operators at the FCC.
Therefore, CAI had to lay out a very comprehensive plan to approach
the FCC. We laid out a series of benchmarks that we intended to hit over the
course of 1997, in order to achieve a dual set of final regulatory goals for
CAI -- one of which was getting a permanent flexible two-way authority in
one of our major markets. We decided we would target Boston where we
decided to load in all of our two-way equipment. And the second goal was to
push for establishing rules at the FCC governing full two-way flexible use
authority.
If you look back over '97, we were able to announce a permanent two-
way authority for two of our channels in Boston. During that time, our
engineering group, under the leadership of John Prisco, our COO, and Bruce
Kostreski, our head of engineering, both former Bell Atlantic employees, led a
group of wireless industry engineers and management in something called the
Ticket Two Task Force, where we compiled engineering data on how two-way
MMDS would be used in the market place. This data was submitted as the basis
for the rulemaking for operating two-way MMDS going forward.
Our belief was, from day one, that any rulemaking at the FCC would not be for
PERMISSION to do two-way, but rather to establish the rules on HOW two-way
would be utilized for the industry. We believed that was consistent with the
FCC rules, and we believed also that the two-way authority we received in
Boston prior to the NPRM being filed and going on public notice,
indicates that we were correct in that assessment.
In the Fall, the FCC accepted for filing the NPRM and it went on public
notice. Comments were required to be filed as of last Thursday
evening, on or about 5 o'clock. We were all very concerned about what those
comments would look like. Specifically, we were very concerned about whether
PCS companies that have invested billions of dollars in auctions would be
coming in and saying, "You know we're not going to pay our bills if MMDS gets
two-way." We felt that wouldn't happened. And there were no such comments.
We have now gone through all the comments. I'm going to let Gerry
Kittner talk to you about them in a second. Most of them were in
support of MMDS operating two-way and supportive of the technical rules that
would govern two-way use of MMDS going forward.
This whole regulatory effort was the second piece of our triad approach or
business plan for 1997 and early 1998. The third component was that
if we were successful in getting good technology in place and if we could
remove the regulatory barriers or, better said, enhance the regulatory
environment for two-way authorization, then those two together would help us
pursue and develop a relationship with large strategic investors or large
strategic partners going forward.
We have spent the year working with other companies in testing the technology.
It takes time. CAI had to get [people] over misperceptions and
misunderstandings about MMDS because of our history to start with. We have
worked aggressively to build systems in Boston that have demonstrated two-way
capability. And we think they hold great promise.
I want to be clear though. One of the other key decisions that CAI management
and the board made back in December and January of 1996 and early '97 was that
we had a fixed amount of money available to us, and we had a decision
to make. We had to make a decision whether to strip everything down and
live off that fixed amount of money for as long as we could, or we could go
out and change the rules and demonstrate what the real capabilities of the
spectrum would be. We made the decision that we would spend our money building
this new technological platform and pursuing this regulatory agenda in order to
attract strategic partners.
We felt that this was the best track and the best use of our money, and that to
pursue the more complacent agenda would end up almost certainly in disaster.
And understand that there is no guarantee that the direction we have taken
won't present SIGNIFICANT problems ahead. But we felt that this offered the
best promise. And I think that if everybody looks back over the course of the
year, we have made great strides in everything that we have done.
We spend most of our efforts demonstrating this equipment and these platforms
up in Boston.
We want to talk to you today about the success we achieved in the regulatory
environment. We're very happy about it. We think it is worth discussing
briefly so everybody can understand why it's important; it's the
second of the three things that we wanted to accomplish. The first was the
technology. We feel we have workable equipment in Boston now. We have three
workable platforms in Boston that are operating in various types of services
that are being tested by other companies: fractional T-1, and symmetrical and
asymmetrical services. We think they have some very attractive promise. But
again, time will tell. Some of the things in Boston are deployed no
where else in the world, that we're aware of.
[THE REGULATORY ENVIRONMENT-COMMENTS ON THE NPRM]
And now the second effort we feel we've achieved some [excellent] success in is
the regulatory environment. Gerry, if you could take five minutes to explain
to everybody what the comments were like and who was in support and where any
negative comments, if any, were found.
Gerry Kittner: There was only one entity outside of the ITFS and MMDS industry
that filed comments questioning whether the spectrum should be used for two-
way. That was a company called Webcell, a company that wants to be in the LMDS
industry. They have filed comments before in this same proceeding, and the
Commission has dismissed their comments and given that position absolutely no
credence.
The other comments questioned elements of "how to" implement two-way, not
"whether to" implement two-way. Primarily, you had commentators who didn't
really understand the petition for rulemaking or the notice of proposed
rulemaking, and that were concerned with the potential for interference to
existing ITFS downstream facilities. The task force, of which CAI is a member,
that put the petition for rulemaking together approached this whole process on
a very conservative basis, knew that one of our absolute top priorities would
have to be protecting the existing ITFS community. And we think we did that.
We have some work to do, now that the initial set of comments were filed.
There is a reply comment deadline coming up on February 9th, after which the
Commission takes all of the comments under advisement and eventually issues a
report and order with the actual rules. We intend to use the
opportunity to talk to the other commentators, explain why we think the
interference concerns that they have are unwarranted and, more importantly,
talk to the Commission and make sure the Commission understands.
Twenty comments is very small relative to other rulemaking proceedings.
Everybody involved in this effort is very encouraged and we remain very
optimistic that we'll see a final set of rules. Our target is the next
wireless cable convention in July and we hope that Chairman Kennard, at that
point, will be able to announce the issuance of that report and order.
Jared Abbruzzese: We should state that the FCC has been very cooperative.
We don't look for that to change. Again, I want to say, this is important stuff.
[COMPANY'S FINANCIAL CONDITION]
We recognize underneath all of this, the reality is that we are running out of
money. We have stated that over and over. We recognized that this would
eventually happen. We have been spending a lot of effort on trying to find
alternative sources of funding for the company, both from a strategic investor
perspective and from financial investors. There is no certainty as to whether
we'll be able to achieve that before some sort of a restructuring may or may
not have to be undertaken. But we're certainly working towards that effort.
There are a lot of big financial institutions that cozied up to us over the
late summer and early fall, who were saying this could be a great restructuring
or reorganization. We've resisted that. We've tried to, at all
turns, do what management felt was right for CAI's shareholders and
bondholders.
We continue to develop this technology, we continue to develop this broadband
platform that we think is unique. There is nothing else like it. There's
nothing else available today at the price points we can provide that would
match what we have developed up in Boston. And, as I say, we think it holds
promise. But there are financial realities that encircle all of our issues.
And we are trying to deal with those.
Management has been dealing with the concept of restructuring or reorganization
for months now, and has been looking at that as an option. You know, we hope
it's not an option that has to be pursued, but it's certainly an option that
everybody has to recognize is in the realm of possibility. At the end of the
day, we're doing everything we can to keep that from happening to the degree
that it doesn't injure the company.
I think, we have made a lot of progress. Two of the three things CAI wanted
to get accomplished, have been accomplished. And we are working our hardest at
the third, which is probably the most important: getting a strategic
partner that can help stabilize our balance sheet.
[STRATEGIC PARTNERING]
I want to state categorically, CAI has, for years now, been looking at
strategic partners as a requirement for us doing business going forward.
That's why we did Bell Atlantic and NYNEX to begin with, recognizing that we
needed their type of a balance sheet in order to assist us in our funding
requirements going forward. That has not changed. That's not inconsistent.
The deal with Bell Atlantic and NYNEX was a good one in concept. The bad part
was it was an option. We will do our best not to allow an option to ever occur
again.
[NASDAQ DELISTING]
The last thing we want to say is that we sincerely regret what happened with
the de-listing last week. It was beyond our control. We believe in
the direction we're taking. We're very concerned about the pain of our
shareholders and bondholders over the last year or more.
So, at this point, any questions anybody may have we're happy to answer. If
there are none, we appreciate your time. Thank you.
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VanGo101...Van |
