CAWS - Wireless Cable (New and Improved) Message Board

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Technology Stocks : CAWS - Wireless Cable (New and Improved)

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To: Kirce Stojanovski who wrote ()	11/22/1996 11:31:00 AM
From: John A. Young	of 5812

DCR Places the Rating of CAI Wireless Inc. on Rating Watch -- Down CHICAGO, Nov. 22 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has placed the 'BB-' (Double-B-Minus) debt rating of CAI Wireless Inc. (CAI) on Rating Watch -- Down based on the uncertainty concerning Bell Atlantic and NYNEX's (BANX) complete implementation of its strategic business relationship (BR) with CAI. The rating is predicated on the timely implementation of the BR agreement between CAI and BANX. The BR will allow BANX to utilize CAI's transmission systems in service areas that are collocated with its respective operating territories. Twelve of CAI's 14 markets are within BANX operating territories. Under the BR, CAI was to receive contractual monthly revenues for BANX's use of its system. Revenues would be based on the number of serviceable homes and subscribers in each service area and be subject to a minimum payment. CAI was to receive contract revenues from BANX after the conversion of a market to digital technology. Currently, digital tests are being run by BANX in CAI's Virginia Beach and Boston markets. BANX has until September 1997 to exercise the right to use CAI's markets. Digital wireless cable technology can provide picture quality and channel capacities that are competitive with direct broadcast satellite and hard-wired cable systems. The BR shifts the cost burden of the digital set-top boxes along with marketing and sales expenses to BANX. CAI would benefit from a stable and growing revenue stream from the contract payments by BANX. Due to build times experienced with the Boston and Virginia Beach upgrades and delays in the availability of digital set-top boxes, both CAI and BANX have proposed amendments to the BR. These amendments include length of exercise period, length of time in which CAI must build a digital system and other performance items. This amendment process has not been completed and the possibility of further implementation delays or nonimplementation of the BR have increased. Absent the BR, CAI's credit quality would be extremely weak for its current rating category and the rating would be downgraded. Another concern is that delays in implementation of the BR have decreased the expected pace of credit quality improvement at CAI. CAI operates multichannel, multipoint distribution (MMDS) cable television systems in 14 markets concentrated in the mid-Atlantic and northeast regions of the United States. MMDS delivers video signals to homes using microwave towers and its service territory is defined by all homes that are in line of sight (LOS) of the tower or one of its repeaters. CAI has approximately 81,000 subscribers with a LOS household total of 14 million. CAI reported yearend 1995 (March 31) revenues of $31 million. SOURCE Duff & Phelps Credit Rating Co.

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