Does anyone have the exact dates JA was selling his shares?
I am trying to put a few pieces of this puzzle together.
According to the New York Times article (see below), dated
December 6, "At a critical meeting at Bell Atlantic's offices in
Arlington, Va., two months ago, according to one person familiar
with the companies, Nynex executives informed their Bell Atlantic
counterparts that they no longer had confidence in wireless cable
technology."
On October 3, 1996, Gerard Klauer Mattison & Co. lowered CAWS to a buy
(see below). This is approximately two months before the December
6, 1996 article which mentioned the meeting between Nynex and Bell
Atlantic where "Nynex executives informed their Bell Atlantic
counterparts that they no longer had confidence in wireless cable
technology."
If memory serves me correctly, it was around, or right after this time
period, that JA started selling shares and the insider selling
increased. That is why I am curious as to the exact date JA and
friends started selling.
NY Times, Dec 6 1996
Two Bell Units Back Away From TV Plan
By MARK LANDLER
Bell Atlantic and Nynex, which announced a $22 billion merger
last April, are retreating from a key part of their strategy to
expand into television, according to people familiar with the two
regional Bell companies.
The decision makes it almost certain that they will reorganize
their ambitious programming venture, Tele-TV --either shutting it or
folding it into Bell Atlantic.
Bell Atlantic and Nynex had intended to offer Tele-TV to tens of
thousands of East Coast telephone customers, using a microwave
transmission technology called wireless cable. But the technology has
proven to be fatally flawed because the signals are obstructed by
trees, hills and structures.
After receiving a disappointing response to preliminary market
tests of the technology, executives said, the companies have now
decided to shift their focus to direct-broadcast satellite, a
fledgling television service that has attracted almost 4 million
subscribers since it became widely available through DirecTV and Prime
Star two years ago.
"The wireless penetration did not come in at the levels we
expected," Eric Rabe, a spokesman for Bell Atlantic, said.
Frederic Salerno, the vice chairman of Nynex, cautioned that the
companies had not made a final decision to shelve wireless cable. But
given its technical problems, Salerno acknowledged, "You have to
question how much of it we can deploy, and how quickly."
Bell Atlantic and Nynex are beginning to coordinate their video
strategies. At a critical meeting at Bell Atlantic's offices in
Arlington, Va., two months ago, according to one person familiar with
the companies, Nynex executives informed their Bell Atlantic
counterparts that they no longer had confidence in wireless cable
technology.
The retreat is the latest in a series of retrenchments by the
Bell companies. Bell Atlantic, in particular, has been forced to scale
back its ambitions, as the technology to deliver video over phone
lines has proven costlier and more difficult to develop than expected.
Rabe said Bell Atlantic was still committed to getting into
television by upgrading its telephone networks to deliver video
programming. And he said Nynex and Bell Atlantic still planned to
introduce wireless cable on a limited scale next year in Boston and
Newport News, Va.
Several executives said the two companies were also negotiating
to buy an equity stake in American Sky Broadcasting, a service being
started by Rupert Murdoch's News Corp. and MCI Communications Corp.
Rabe declined to comment on any talks.
The retreat from wireless cable has hammered the stock of CAI
Wireless Cable, a small company in which Bell Atlantic and Nynex
agreed to invest up to $100 million last year. After reaching a high
of $10.50 last June, the shares of CAI Wireless closed Thursday,
unchanged, at $2.75 in Nasdaq trading.
OCTOBER 3, 1996
CAWS- Concerns Over Roll-Out Delays - Lowering Rating to HOLD
10:25am EDT 3-Oct-96 Gerard Klauer Mattison & Co. (Newman, A. 212-885-4054) BE
CAI Wireless *+ (CAWS)- Concerns Over Roll-Out Delays - Lowering Rating
to HOLD from BUY
Arthur Newman Jill Loesberg
(212) 885-4054 (212)885-4094
anewman@gkm.com jloesberg@gkm.com
October 3, 1996
________________________________________________________________________
Price: 7 1/4 52-Wk Rng: 17 1/2 - 6 1/4 Price Target: NA S&P 500: 694
Shrs Out/Mkt Cap: 40Mil/$290Mil 5YR Est Growth Rate: 34%
Avg Daily Vol: 325,673 Book Value $5
Float: 27Mil Cash Per Share $4
_________________________________________________________________________
FY Ends Earnings Per Share
March Curr Prior
95A $(0.93)
96A $(1.73)
97E $(2.50)
98E $(3.10) $(1.53)
_________________________________________________________________________
Qtrly -- 1Q -- -- 2Q -- -- 3Q -- -- 4Q --
EPS@ Curr Prior Curr Prior Curr Prior Curr Prior
95A $(0.10) $(0.14) $(0.21) $(0.48)
96A $(0.49) $(0.48) $(0.45) $(0.37)
97E $(0.51)A $(0.60)E $(0.64)E $(0.75)E
_________________________________________________________________________
NM - Not Meaningful.
@ Quarters do not total due to issuance of new shares on 9/29/95
associated with acquisitions of ACS and ECNW.
o We are lowing our rating on CAWS to HOLD from BUY, due to launch
delays by the telcos resulting in minimal anticipated revenue growth
over the next 9-12 months. We are lowering our FY 1998 EPS estimate
to $(3.10) from $(1.53).
o We believe Bell Atlantic (BEL - $67 7/8, NOT RATED) may be
losing its enthusiasm for wireless cable due to the recent and
unexpected loss of an internal champion and perceived uncertainty
regarding line-of-sight (LOS) coverage. It is not clear whether LOS
coverage is truly a major concern or simply a smoke screen used by
supporters of a wired broadband strategy. While we continue to
anticipate launches in Virginia Beach and Boston during early Q2'97,
we believe that BEL and NYNEX (NYN - $45 1/2, NOT RATED) are unlikely
to launch other systems until there are clear figures for LOS and
customer penetration. We continue to anticipate an aggressive launch
by Pacific Telesis (PAC - $33 3/4; HOLD) in Los Angeles during Q1'97.
o In the absence of near-term growth prospects, we do not believe
that CAWS can continue to maintain a valuation premium over People's
Choice TV (PCTV - $15; BUY) and American Telecasting (ATEL - $11 1/2,
NOT RATED), its closest comparable. With a similar line-of-sight
(LOS) value of $22-$23, CAWS would have a share value of $5.50.
o Over the near-term, we believe the most attractive investment
opportunities in the wireless cable industry are the rural operators,
specifically Heartland Wireless (HART - $24 3/4; BUY) and Wireless
One (WIRL - $15 1/4; BUY), which are experiencing strong subscriber
growth.
INVESTMENT CONCLUSION
We are lowering our rating on CAWS to HOLD from BUY. We believe the
combination of launch delays in Virginia Beach and Boston with
growing internal uncertainty in BEL's video plans is likely to
further delay CAWS' ability to generate meaningful revenue growth.
Without near-term growth prospects, we do not believe that CAWS can
continue to maintain a valuation premium over other urban wireless
cable operators. As a result, we believe that there is 20%-25%
downside risk in CAWS' share price to about $5.50.
Bell Atlantic's Video Strategy is Becoming Less Clear
Bell Atlantic has repeatedly stated that its preferred method of
video delivery is via a switched broadband network cable of
supporting telephone and full video-on-demand. However, because of
the enormous cost of building such a network and the 15-20 years
required to replace the 20 million access lines in its service
territory, BEL has searched for a viable alternative, even if only an
interim solution. Wireless cable offers BEL a far more rapid
deployment, a much lower cost of entry and, acknowledging these
advantages, BEL and NYN invested $100 million in CAWS.
Despite the advantages of wireless cable, BEL is apparently becoming
increasingly concerned about LOS difficulties in its markets. The
company expects to achieve 75% LOS coverage in Virginia Beach only
after considerable engineering effort. As a result, the company is
concerned about LOS in markets such as Pittsburgh and Philadelphia.
These LOS concerns may be becoming an issue, in part, as BEL
recognizes that its earlier predictions of around 90% LOS are not
achievable in northeastern markets (CAWS contractually agreed to
provide 75% LOS to the telcos).
Management suggested that LOS coverage below 75% might be acceptable
if penetration were sufficiently high. For example, we suspect that
30% penetration in a 65% LOS market would be considered acceptable.
(Philadelphia has an estimated 68% LOS coverage using analog
equipment.) However, until the Virginia Beach and Boston systems are
launched and there are clear indications of long-term penetration
rates, we believe that BEL is unlikely to launch any additional
wireless cable markets. Due to its pending merger with BEL, we
believe NYN will act similarly.
We continue to believe that the benefits of using wireless cable are
overwhelming, regardless of whether LOS is 65% or 90%. We do not
believe that BEL has a viable alternative to wireless cable. If it
does not use wireless, the company will likely endure an expensive 15-
20 year video roll-out, ceding market share to the cable companies in
both video and telephone.
It is not clear whether LOS coverage is truly a major concern or
simply a smoke screen used by supporters of a wired broadband
strategy. We believe that since BEL entered into its agreement with
CAWS there has been strong internal disagreement between supporters
of a wireless cable strategy and advocates of a wired broadband
deployment. Two of BEL's strongest internal supporters of wireless
cable are no longer with the company, with the unexpected departure
of one advocate last week. The current indecision may be due to the
lack of a strong internal advocate.
BEL has until the end of September 1997 to notify CAWS if it wants to
operate the company's wireless systems. Due to a six month make-
ready period, BEL could potentially delay paying CAWS for the use of
a system until second calendar quarter of 1998.
As part of its long-term goal of creating a switched broadband
network, BEL announced that it will begin laying fiber in
Philadelphia in anticipation of offering commercial services in 1998.
By itself, we do not consider this statement a source of concern, as
we have believed that the telco would slowly roll out a broadband
network in high density regions simultaneous with its use of wireless
cable.
Negotiations Over Business Relationship Agreement Continue
CAWS and the Bells are currently negotiating over certain terms of
their Business Relationship Agreement. We speculate that these terms
may involve the number of towers per market and Internet access - two
issues not specified in the agreement. While the outcome of these
talks may be positive for CAWS, we do not expect that it will be
sufficient to overcome our concerns regarding BEL's and NYN's roll-
out schedules.
Valuation Analysis
CAWS is currently valued at $28.01 per LOS households, a premium of
26% and 20% over ATEL and PCTV, respectively. In the absence of near-
term revenue growth and clear signals from BEL and NYN, we do not
believe that CAWS can sustain this valuation differential. With a
similar line-of-sight (LOS) value of $22-$23, CAWS would have a share
value of $5.50. CAWS currently has a book value of about $5 per
share and we estimate that its investment in CS Wireless is worth $1-
$2 per share. CAWS remains the largest wireless cable company,
controlling spectrum covering about 20% of the households in the US. |
