Article re. auction and frequency values:
<<Wednesday March 25, 9:21 pm Eastern Time
Low bids for spectrum may reduce value for others
By Jessica Hall
NEW YORK, March 25 (Reuters) - The government's auction of radio wave spectrum brought lower bids than Wall Street expected, which could reduce the perceived worth of spectrum already held by companies such as WinStar Communications Inc. (WCII - news) and Teligent Inc (TGNT -
news), analysts said.
''The government has dumped so much spectrum on the market in the past few years. The economics of supply and demand say it's like buying a patch of sand in a desert. Sand may be valuable someday, but right now there's still a really big desert,'' said David Roddy, chief telecommunications economist with Deloitte & Touche Consulting Group.
The U.S. Federal Communications Commission raised a net $578.7 million for the U.S. Treasury in the auction for the rights to the Local Multipoint Distribution Service (LMDS) band of spectrum, which uses microwaves to send high volumes of information between fixed points.
Government budget analysts had estimated proceeds of $500 million from the LMDS auction, but some industry watchers expected bids to run much higher.
''It will be interesting to see how the market reacts to this (the auction bids)...there are discrepancies between the value of the bids and the value attached or embedded in the stock prices of WinStar
and Teligent,'' said Jack Reagan, an analyst with Legg Mason.
''They are still excellent, excellent companies. But they are fully valued now.''
WinStar and Teligent, among a new breed of companies using advanced digital wireless technology to provide voice and data services, have seen sharp increases in their stock prices in the past few
months.
WinStar has gained 75 percent to 43-9/16 since the end of 1997, while Teligent has risen about 34 percent to 33.
WinStar was among the leading bidders in the LMDS auction, along with WNP Communications, a private firm backed by seven venture capital funds, Nextband Communications, owned by Nextel Communications (NXTL - news) and Craig McCaw's Nextlink Communications (NXLK - news).
Some of WinStar's existing spectrum may now been seen as fully-valued or overvalued when compared with the prices paid in the recent auction, several analysts said.
WinStar did not return calls seeking comment.
Larry Winfield, a vice president with wireless and broadband consultancy Hardin & Associates, said the value of the spectrum remains to be seen.
''What is spectrum really worth? Spectrum does not have an actual worth. The PCS auction went at extremely high prices. Those who paid that are going out of business. For LMDS, it depends on what they build, the markets they have and their strategy. It remains to be seen,'' Winfield said.
The LMDS winners are seen as potential challengers to the entrenched local telephone and cable television monopolies. But costly network build-outs, other new competitors and customer uncertainty pose problems, analysts said. >> |
