Playing It Safe with Wireless
wired.com
updated 9:00 a.m. 23.Mar.99.PST
Reuters
3:00 a.m. 23.Mar.99.PST
An auction of wireless phone licenses starting
Tuesday won't be met by a bidding frenzy.
Bidders will seek to add new markets to their
networks while trying to keep prices at more
reasonable levels than past sales, analysts said.
The 66 participating companies will bid on 356
available wireless phone licenses. Some firms
will aggressively go after a few key markets, but
they are expected to bid conservatively. Some
licenses may not get any bids at all, analysts
said.
Licenses for Chicago and Dallas are among the
most attractive available in this auction and will
draw the highest bids, analysts said.
The companies qualified to participate included
Cook Inlet, an affiliate of Western Wireless
Corp.; a venture of Omnipoint Corp. called
OPCS Three LLC; and Leap Wireless
International Inc. which was spun off from
Qualcomm Inc. last year.
Bidders also included dozens of little-known
firms, such as ABC Wireless and ConnectBid
LLC. In previous auctions, well-known investors
and companies bid through such anonymous
entities.
"We expect some companies to be aggressive,
but the important thing is that they are rational,
and don't force markets like Chicago and Dallas
into the stratosphere," said John Bensche, a
wireless telecommunications analyst at Lehman
Brothers.
Most of the winners in a 1996 Personal
Communications Service (PCS) wireless
auction, for example, found they were unable to
raise capital to back their bids. They later
declared bankruptcy and returned the rights to
the FCC. Those licenses will be included in the
latest auction.
Issaquah, Washington-based Western Wireless,
which serves mostly rural and smaller
metropolitan areas, is expected to aggressively
pursue -- and likely win -- the Dallas license.
Omnipoint is expected to bid for Chicago,
analysts said.
"Western and Omnipoint have ready access to
vendor financing so they can build out those
markets. Both companies could bid for, buy,
build those markets," said David Freedman, a
wireless telecommunications analyst with Bear
Stearns.
1 of 2 Next Page >>
continued
Western Wireless and Omnipoint are not likely
to face much competition for those markets,
since other bidders do not have the capital
necessary to create businesses there.
"I don't think you'll [see] an independent
entrepreneur go after those markets who would
have to start from scratch [in building a
network]," Freedman said.
Western Wireless has the strongest financing
among the bidders and could possibly pursue
both Chicago and Dallas, though the chances of
winning both markets are slim, analysts said.
Omnipoint president George Schmitt recently
assured analysts and investors at a conference
that the company "will not be bidding
imprudently or with resources we do not have."
Omnipoint has been searching for a strategic
partner or investor since November and
continues to hold discussions with both
domestic and international companies. The
acquisition of a market such as Chicago would
make it more attractive to potential suitors,
analysts said.
Companies such as Leap Wireless and Powertel
Inc. will focus on smaller and less competitive
markets.
"I would assume, based on the kind of markets
Leap has tried to get in the past, they are not
major-market focused," Freedman said.
Leap owns interests in international
telecommunications companies in Mexico,
Russia, and Chile, but has only a small
presence in the United States.
"They have diverse interests internationally, and
they're turning their sights to the US to see if
they can do some bargain hunting," Bensche
said.
Leap has been "conditionally" approved as a
bidder in the upcoming auction, but its status
may not be known for several weeks or until after
the auction closes.
Leap is talking with the FCC about whether it
qualifies as a "very small business" and has a
right to participate in the auction. Leap will be
allowed to bid on licenses, but its right to keep
them will depend on the outcome of the talks.
Powertel, meanwhile, is expected to focus on
smaller properties in the Southeast that mesh
well with its existing markets there, analysts
said.
<< Back 2 of 2
Send us feedback | Work at Wired Digital | Advertise with us
About Wired Digital | Our Privacy Policy
Copyright © 1994-99 Wired Digital Inc. All rights reserved.
|
