This is for those of you who are in WIRL:
LATE LAST WEEK, the giant telecom company spent
what traders tell me could have been as much as $300
million to $400 million on the purchase of bonds and equity
issued by CAI Wireless, and bonds issued by wireless
cable companies CS Wireless, People's Choice TV and
Wireless One.
WorldCom, trading sources tell me, may now control
between 50 and 60 percent of the bonds of these
companies and appears to control much of the equity of
CAI Wireless as well. CAI Wireless declined comment.
WorldCom purchased the bonds and stock from
Merrill Lynch and Moore Capital. These two firms were
widely known as the largest holders of the debt of the
wireless cable companies — most of which are still trying to
reorganize after failing in their attempt to send cable
television signals to customers without using a cable.
Moore Capital declined comment, citing confidentiality
requirements. A Merrill Lynch spokesperson has not yet
responded to a request for information.
Each of the wireless cable companies save CAI is
restructuring, meaning control of the company is in its debt,
not its stock. CAI emerged from bankruptcy last October,
and Merrill Lynch's Global Allocations fund was a big
holder of its new bonds and its equity — a result of holding
the old bonds and providing financing for the company to
emerge from bankruptcy.
CAI was once a major contender in the emergence of
wireless cable and boasted partners such as Bell Atlantic.
But it failed to translate its holdings of so-called MMDS
spectrum into a viable business.
While WorldCom had no comment, the speculation
about its intent here centers on the use of the spectrum
controlled by these wireless cable companies.
MMDS is a part of the telecommunications spectrum
that did not prove effective for transmitting analog video.
But with these companies controlling what is 200 megahertz
of broadband spectrum, it is clearly of value to WorldCom.
Michael Whelan, PCTV's CFO, believes the company
may try to win control of these companies so as to use the
spectrum for its UUNet Internet unit.
UUNet currently pays the Baby Bells for the T-1 lines
that connect it to customer homes over the so-called last
mile. WorldCom also pays the Baby Bells for that last mile
connection. But if it can bypass that with its own wireless
broadband solution, its costs go down. PCTV and CAI
alone cover close to 50 percent of the country with their
spectrum. Whelan says his company is currently offering
high speed data transmission to 2,000 of its customers.
Industry sources tell me WorldCom may have made its
move in a backhanded way to beat competitor Sprint to the
punch.
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