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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (432)	6/18/1999 4:06:00 PM
From: SteveG	Respond to of 1860

RECENT DEVELOPMENTS IN FIXED WIRELESS INDUSTRY Deutsche Banc Alex. Brown - US Equities Bo Fifer,Jeffrey L. Hines June 14, 1999 --------------------------------------------------------------------------- ---- WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY" TELIGENT INC. [TGNT] "STRONG BUY" ADVANCED RADIO TELECOM CORP. [ARTT] "STRONG BUY" Recent Developments In Fixed Wireless Industry --------------------------------------------------------------------------- ---- 52-WK Earnings Per Share FY Price Price 3-5 Yr Est. Ticker End 06/11/1999 Range 1998 1999 2000 Growth Chg? WCII 12 54.13 60-10 (11.89)A (13.34) (11.17) N TGNT 12 51.75 68-18 (5.35)A (9.53) (10.37) N ARTT 12 14.69 17-2 (2.06)A (2.61) (2.46) N --------------------------------------------------------------------------- ---- HIGHLIGHTS: --Last week was a busy one for Wireless Access Carriers (WACs, better- known as wireless CLECs). --FCC TO ADDRESS BUILDING ACCESS RIGHTS: The FCC issued a Notice of Proposed Rule Making on Thursday (10-Jun) that, among other things, addresses fixed wireless carriers' ability to quickly and fairly gain access to the roof space of target buildings. The FCC has indicated that it will explore at least three potential tools to facilitate competition in the local loop: 1) The FCC can obligate utilities to open their facilities to CLECs to the extent that such facilities may be found on a rooftop, 2) The FCC can make available any ILEC unbundled network elements for CLEC use, also to the extent that they may be on the roof, 3) The FCC may have ancillary jurisdiction under the 1996 Telecom Act to impose non-discrimination orders on real estate owners who have already allowed certain telco/utility companies into their buildings (although this path especially may be susceptible to drawn-out legal challenges). We believe preliminary FCC body language has been very favorable for the wireless CLEC group by potentially removing property owners' ability to "green mail" wireless carriers for roof rights, and should lead to more rapid growth of broadband wireless networks/footprints. --TELIGENT FILES SHELF REGISTRATION: On Friday (11-Jun), Teligent filed a shelf registration in the amount of $1 billion. While the announcement is not effective, it does cover a wide range of potential instruments including common and preferred stock, debt, or depository shares. The $1 billion amount is "in the ballpark" with our expected shortfall of $755 million in Teligent's funding requirements through the end of 2001 when we anticipate EBITDA-breakeven (cash + available credit - EBITDA losses - capex - cash interest). We believe the Company is simply preparing for any windows which may open in the capital markets in its goal to remain funded 18 months in advance. Of note, a selling shareholder has registered two million shares for possible sale (of an estimated 15 million shares held by that shareholder), which would of course help increase Teligent's relatively thin float position. --DEUTSCHE BANC ALEX. BROWN 1999 MEDIA & TELECOMMUNICATIONS WRAP-UP: Both WinStar and Teligent gave presentations to full houses at this year's conference (please see our notes dated 7-Jun and 9-Jun for more detailed highlights of Teligent's and WinStar's presentations, respectively). The common theme we took away from these presentations was that data is the real growth engine for the fixed wireless carriers. In fact, we refer to the group as the "wireless access" industry because we believe the opportunity is all about offering broadband access (on the order of 10s and 100s of Mbps) to customers independent of the services across the network, more than it is about competing for the diminishing volume of voice traffic relative to data. As such, we believe the value proposition (capacity versus cost) offered by wireless networks will help the carriers attract a disproportionately large share of future data traffic. The obvious challenge lies in defining just how large that future demand will be, and for now our models conservatively estimate very little data contribution relative to voice.

To: SteveG who wrote (432)	6/18/1999 4:08:00 PM
From: SteveG	Respond to of 1860

NXTL: INCREASE EXPECTATIONS--PRICE OBJECTIVE UP TO $55/SHARE--STRONG BUY Deutsche Banc Alex. Brown - US Equities Jeffrey L. Hines,Bo Fifer June 14, 1999 --------------------------------------------------------------------------- ---- NEXTEL COMMUNICATIONS INC. [NXTL] "STRONG BUY" Increase Expectations--Price Objective Up To $55/Share--Reiterate "Strong Buy" --------------------------------------------------------------------------- ---- Date: 06/11/1999 EPS 1998A 1999E 2000E Price: 37.0 1Q (1.53) (1.66)A (0.93) 52-Wk Range: 43 - 15 2Q (1.94) (1.38) (0.91) Ann Dividend: 0.0 3Q (1.56) (1.17) (0.79) Ann Div Yld: 0.00% 4Q (1.43) (1.06) (0.59) Mkt Cap (mm): 14,578 FY(Dec.) (6.46) (5.27) (3.22) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (6.46) (5.27) (3.22) Est. Changed Yes CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: COMMUNICATIONS Shares Outstanding(Mil.): 394.0 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: --WE ARE INCREASING OUR EXPECTATIONS FOR NEXTEL COMMUNICATIONS AND REITERATING OUR "STRONG BUY" (1) INVESTMENT RATING ON NXTL. Based on our DCF, our 12-month price objective is now $55/share, up from our previous objective of $51/share. --Drivers behind upgraded views: 1. $500 MM (+) CONVERTIBLE BOND OFFERING. Nextel completed a $500 MM convertible bond offering on Friday (11-June). With these funds ($600 MM if the "green-shoe" is exercised), Nextel is now fully-funded (U.S. & domestic) into 2001! Thus, not only has the financing risk of this story dropped to near nil, but Nextel has also increased flexibility to accelerate plans, which we belive they will (and have incorporated into our new forecasts for the Company). 2. MANAGEMENT BULLISHNESS SEEMS TO BE ON THE UPSWING. Recent discussions with senior Nextel management would indicate to us that even our newly upgraded expectations could fail to properly incorporate additional subscribers, revenues and cash flows from a whole series of new product and service roll-outs beginning with the i2000 (Nextel Worldwide Service) and i1000plus (Internet enabled phone) later this year. 3. AT $37/SHARE, NXTL HAS ALMOST 50% UPSIDE TO OUR PRICE OBJECTIVE OF $55/SHARE. Moreover, using Nextel's relative valuation to several other wireless names in the U.S. would imply that a significantly higher objective would be warranted. --STOCK PRICE PERFORMANCE: YTD, NXTL is up 57%, in-line with our PCS Index (up 53%) and ahead of the S&P500 (up 5%). DETAILS: We are increasing our expectations for Nextel Communications and reiterating our "strong buy" (1) investment rating. Based on our DCF, our 12-month price objective is now $55/share, up from our previous objective of $51/share. There are several elements behind our increased expectations and we have highlighted three of them below. Convertible debt financing leaves the Company fully-funded, with significant flexibility into 2001 Nextel completed a $500 MM convertible bond offering on Friday (11-June). The convertible bonds yield 4.75% cash interest payment, are non-callable for 3-years, and are convertible at $47.307 (up 27% from where the stock was trading when the bonds were issued). With these funds (which will rise to $600 MM if the "green-shoe" is exercised), Nextel is now fully-funded (U.S. & domestic) into 2001! Expected sources of funds (MM) 2Q 1999 - 4Q 2000 Cash (3/31/1999) $ 246 Credit facility 1,100 Microsoft investment 600 Convertible bond issue 600 Towers transaction 560 McCaw 1999 transactions 278 EBITDA U.S. 2,061 TOTAL EXPECTED SOURCES OF CASH $5,445 Expected uses of funds (MM) U.S. Capital Expenditures $3,191 International Capital Expenditures 745 International EBITDA losses 215 Cash interest expenses 970 TOTAL EXPECTED USES OF CASH $5,121 CURRENT EXPECTED CASH SURPLUS (12/31/2000) $ 324 We currently expect Nextel to be close to free cash flow positive in 2001. Thus, not only has the financing risk of this story dropped to near nil, but Nextel has also increased flexibility to accelerate plans, which we belive they will. We have incorporated this flexibility into our model in the form of upgraded expectations as are shown below. Management bullishness seems on the upswing and while 2Q 1999 will be better than 1Q 1999 we suspect that the rest of 1999 is likely to be above expectations as well Recent discussions with senior Nextel management would indicate to us that even our newly upgraded expectations could fail to properly incorporate additional subscribers, revenues and cash flows from a whole series of new product and service roll-outs beginning with the i2000 (Nextel Worldwide Service) and i1000plus (Internet enabled phone) later this year. The i2000, which is Motorola's dual-mode, dual-band (900 MHz GSM / 800 MHz iDEN) model is expected during 3Q 1999. When Nextel launches its worldwide roaming service (expected around this same time) the Company expects to have at least 60 countries where the i2000 phone will work (one phone, one number, one bill, all from Nextel). Nextel's own studies have shown that there are approximately 5.0 million U.S. residents who travel abroad at least three times per year and the Company's own experience in rent GSM phones to its subscriber base is that they currently generate $400 of service revenue per trip taken. While the exact size of this market is not known, even $200 per trip, would imply a $3 billion of revenue market ($200/trip x 3 trips x 5.0 million). Nextel's advantage will likely be twofold. One, its coverage is generally better than the GSM operators here in the U.S. Two, there is no GSM service in Mexico, Brazil, Argentina and Peru currently, and thus, for worldwide subscribers travelling to these regions the i2000 will be of critical importance. Secondly, we continue to expect Nextel to be the first company in the U.S. to roll-out a wireless/packet based Internet service on a broad scale. The Company announced last Monday (7-June at the Deutsche Banc Alex. Brown Telecom/Media conference in New York City) that it had begun receiving the i1000plus Internet enabled phone from Motorola already (i.e., ahead of schedule). Thus, while the Company will begin beta testing the service in 6 markets during 2H 1999, we suspect that when it launches the service in 2000 that it could have upwards of 1.0 million Internet enabled phones already in the hands of its subscribers. While the Company has not yet set pricing of the service, it is certainly plausible to look at a scenario where i1000plus wireless Internet subscribers pay an additional $5-10 per month and that these subscribers represent a significant percentage of the subscriber base. We have not explicitly added any line items for these data services in our model and continue to believe that significant upside exists due to these services (and not just for Nextel, but for the wireless industry as a whole). Finally, Nextel has all but conceded that 2Q 1999 results (subscriber growth, average revenue per subscriber, etc.) will be higher than 1Q 1999. We have incorporated these upwardly revised expectations, plus more, into our new expectations for the Company. For example, some of the changes are highlighted below: Metric OLD 1999 Estimate Current 1999 Estimate Net subscriber additions 1.603 million 1.633 million Average revenue per unit (ARPU) $69.23/month $70.10/month Cash flow (EBITDA) $620 million $645 million Source: Deutsche Bank estimates. Stock at significant discount to our underlying asset value and looks even cheaper relative to the comparable names in the group At $37/share, the stock has almost 50% upside potential to our 12-month price objective (based on our DCF) of $55/share. We note that the Company has consistently ranked as one of the best performing in the sector. In our quarterly PCS Value Metric study, which shows the relative performance between the eight publicly traded PCS companies that we track (Aerial, Clearnet, Microcell, Omnipoint, Powertel, Sprint PCS, and VoiceStream), Nextel has finished first (as the best performing company) in four of the past five quarters. Moreover, using Nextel's relative valuation to several other wireless names in the U.S. would imply that a significantly higher objective would be warranted. Relative valuation: Per POP, Per SUB Nextel's relative valuation would seemingly imply that an even higher than $55/share price is warranted. For example, Nextel currently trades at $78/POP (enterprise value per population) and $4,621/SUB (enterprise value per subscriber) versus the peer group average of $89/POP and $4,591/SUB. Moreover, Nextel trades at a significant discount to Sprint PCS -- the other nationwide wireless operator -- who is currently commanding a $150/POP and $6,286/SUB value: Metric NEXTEL SPRINT PCS U.S. PCS AVERAGE EV Per POP $78 $150 $89 EV Per SUB $4,261 $6,286 $4,591 EV = Enterprise Value = Equity value + Net debt. Source: Deutsche Bank estimates. Relative value: Multiple of cash flow On an enterprise value multiple of 1999 and 2000 cash flow, Nextel trades at 29.0x and 12.5x, based on our estimates of $645 and $1,498 million, respectively. Our estimates are not expecting any positive cash flow from any of the comparables for 1999 and only a small positive amount is currently expected from Powertel in 2000. Relative value: Multiple of revenues On an enterprise value multiple of revenues, we note that Nextel's valuation also pales relative to the comparables. Company 1999E Revenues Multiple of revenues Sprint PCS $2,587 14.1x VoiceStream $ 298 13.0x Clearnet $ 193 12.6x Omnipoint $ 320 12.1x Microcell $ 167 11.8x PCS Average $7,481 11.5x Aerial $ 218 8.6x Powertel $ 233 8.1x Nextel $3,175 7.2x Source: Deutsche Bank estimates. Moreover, our own analysis has indicated that the value of a Nextel subscriber is significantly higher than any of the peer PCS companies: Company Subscriber Value* Subscriber value versus Nextel Nextel $2,189 100% Clearnet $1,021 47% VoiceStream $1,016 46% PCS Average $ 818 37% Microcell $ 994 45% Powertel $ 864 40% Sprint PCS $ 719 33% Omnipoint $ 670 31% Aerial $ 446 20% * Subscriber value calculated by taking average revenue per unit divided by churn rate and discounted back over expected life of the subscriber by 15%, less cost of acquisition. Source: Deutsche Bank estimates. Thus, the average PCS company is currently generating subscribers with a net present value ("subscriber value") of just 37% ($818) of a Nextel subscriber ($2,189) and yet Nextel's current enterprise value per subscriber is actually slightly less ($4,261) than the average PCS company ($4,591). Even more interesting is Sprint PCS, whose enterprise value is at a 48% premium to Nextel despite the fact that a Sprint PCS subscriber is currently just 33% as valuable. Enterprise EV/SUB divided by Company Value per Sub Subscriber Value Subscriber Value Sprint PCS $6,286 $ 719 8.7 Aerial $3,682 $ 446 8.3 Omnipoint $4,336 $ 670 6.5 PCS Average $4,591 $ 818 5.6 VoiceStream $4,840 $1,016 4.8 Powertel $3,813 $ 864 4.4 Clearnet $2,797 $1,021 2.7 Microcell $2,303 $ 994 2.3 Nextel $4,261 $2,189 1.9 Source: Deutsche Bank estimates. The above chart is perhaps the most representative of the valuation difference between Nextel and its PCS peers. What it shows is that Nextel currently is trading at 1.9x its subscriber value (as is calculated above) versus the average PCS company which is trading at 5.6x and versus Sprint PCS which is trading at 8.7x. Incorporating a growth adjusted metric (like a P/E to growth calculation) leads to very much the same results: Growth adjusted Enterprise EV/SUB divided by Company Value per Sub Subscriber Value Subscriber Value* Aerial $3,682 $ 446 15.6 Omnipoint $4,336 $ 670 15.0 Sprint PCS $6,286 $ 719 8.7 PCS Average $4,591 $ 818 8.4 Powertel $3,813 $ 864 7.1 VoiceStream $4,840 $1,016 5.6 Clearnet $2,797 $1,021 4.0 Microcell $2,303 $ 994 3.2 Nextel $4,261 $2,189 3.2 * Sprint PCS subscriber growth rate is factored as 1.0 and all other growth rates relative to Sprint PCS Source: Deutsche Bank estimates. What is shown above is that Nextel currently is trading at 3.2x its growth- adjusted subscriber value (as is calculated above) versus the average PCS company which is trading at 8.4x and versus Sprint PCS which is trading at 8.7x. No matter how one slices it up, Nextel's relative valuation versus the peer group would seem to argue for a higher valuation.

To: SteveG who wrote (432)	6/18/1999 4:13:00 PM
From: SteveG	Respond to of 1860

WCII: UPDATE FROM THE DEUTSCHE BANC ALEX. BROWN 1999 MEDIA & TELECOMMUNICATIONS CONFERENCE... Deutsche Banc Alex. Brown - US Equities Bo Fifer,Jeffrey L. Hines June 09, 1999 --------------------------------------------------------------------------- ---- WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY" Update From the Deutsche Banc Alex. Brown 1999 Media and Telecommunications Conference --------------------------------------------------------------------------- ---- Date: 06/08/1999 EPS 1998A 1999E 2000E Price: 54.81 1Q (2.51) (3.72)A (3.10) 52-Wk Range: 60 - 10 2Q (2.77) (3.38) (2.99) Ann Dividend: 0.0 3Q (2.83) (3.18) (2.67) Ann Div Yld: 0.00% 4Q (3.80) (3.05) (2.41) Mkt Cap (mm): 4,241 FY(Dec.) (11.89) (13.34) (11.17) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (11.89) (13.34) (11.17) Est. Changed No CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: COMMUNICATIONS Shares Outstanding(Mil.): 77.378 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: * With new, lower-cost equipment, the FIRST customer in a new building covers WinStar's capital costs of adding that building to the network. To put that another way, the average customer requesting 20-21 lines actually pays for WinStar's cost to supply 672 lines of capacity or more, with the difference being "gravy." * Still have questions about the quality of a fixed wireless network? WinStar has reported 99.999% network availability in its most mature market--New York City--with a trouble rate of 0.6 (per 100 lines) versus the public benchmark of 4.6. Nationwide, WinStar achieved a trouble rate of 0.8 in a recent week, its first sub-1.0 rating. * WinStar's "sweet spot," as defined by the company, includes about 150,000 of the 750,000 commercial office buildings in the U.S. Those 20% of total office properties represent approximately 60% of business telecom revenue. * WinStar is actually pulling together the content with which to fill its massive local access pipes. Office.com, in which CBS recently took a 30% equity stake, is targeted at WinStar's small/medium sized customer base. Ultimately, WinStar expects to see 42% of Office.com revenue from advertising and 48% from i- and e-commerce. * Just how good is project Millennium? WinStar believes it can achieve 60%- 70% gross margins with 10% penetration of its on-net buildings. After just 4 months, WinStar has reached 14% penetration in its Millennium buildings--all while Millennium is a more profitable program to WinStar than its "plain-vanilla" contracts. * Separately, WinStar announced this morning (9-Jun) the commercial availability of its "Wireless Fiber" service in Japan. Through its joint venture, KDD WinStar, the company will offer high-speed data services in Tokyo, Osaka, and Nagoya, representing 3 of the top 50 global telecom markets. In May, WinStar launched its services in its first international market, Amsterdam.

To: SteveG who wrote (432)	6/18/1999 4:14:00 PM
From: SteveG	Respond to of 1860

TGNT: Update From The Deutsche Banc Alex. Brown 1999 Media & Telecommunications Conference Deutsche Banc Alex. Brown - US Equities Bo Fifer,Jeffrey L. Hines June 07, 1999 --------------------------------------------------------------------------- ---- TELIGENT INC. [TGNT] "STRONG BUY" Update From The Deutsche Banc Alex. Brown 1999 Media & Telecommunications Conference --------------------------------------------------------------------------- ---- Date: 06/07/1999 EPS 1998A 1999E 2000E Price: 56.97 1Q (0.73) (2.05)A (2.65) 52-Wk Range: 68 - 18 2Q (1.12) (2.41) (2.59) Ann Dividend: 0.0 3Q (1.49) (2.50) (2.68) Ann Div Yld: 0.00% 4Q (2.00) (2.57) (2.45) Mkt Cap (mm): 3,834 FY(Dec.) (5.35) (9.53) (10.37) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (5.35) (9.53) (10.37) Est. Changed No CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: COMMUNICATIONS Shares Outstanding(Mil.): 67.3 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: * Teligent is positioning itself to capture a piece of the rapidly expanding volume growth for data services, with a focus on the small- to-medium sized business market, which we believe currently accounts for approximately 2/3 of total business market. * At 1Q 99, 60% of Teligent customers were taking local services, 60% long-distance, and 20% DATA. About 1/3 of Teligent's customers are subscribing to the full bundle. * Among the data set, 20% of subscribers are taking a full T-1 (1.5 mbps), with 30% requesting at least 256 kbps and 50% taking 128 kbps. * Teligent's new service, "Smartwave DSL," is aimed at the entry level data user - while scalable to large customers - to further drive data penetration. * Management reiterated its financial goals for 1999, including #35 million of revenue, on EBITDA loss of $350 million, and capital expenditures of $300 million. * Prior to the market open, Motorola and Cisco agreed to acquire the U.S. division of Bosch Telecom, which specializes in Broadband fixed wireless equipment. The move further validates the fixed wireless model, in our opinion, and further reduces the technology risk associated with the industry.

To: SteveG who wrote (432)	6/18/1999 4:15:00 PM
From: SteveG	Respond to of 1860

NXTL: Update From The Deutsche Banc Alex. Brown 1999 Media & Telecommunications Conference Deutsche Banc Alex. Brown - US Equities Bo Fifer,Jeffrey L. Hines June 07, 1999 --------------------------------------------------------------------------- ---- NEXTEL COMMUNICATIONS INC. [NXTL] "STRONG BUY" Update From The Deutsche Banc Alex. Brown 1999 Media & Telecommunications Conference --------------------------------------------------------------------------- ---- Date: 06/04/1999 EPS 1998A 1999E 2000E Price: 37.19 1Q (1.53) (1.66)A (0.92) 52-Wk Range: 43 - 15 2Q (1.94) (1.37) (0.88) Ann Dividend: 0.0 3Q (1.56) (1.16) (0.80) Ann Div Yld: 0.00% 4Q (1.43) (1.06) (0.65) Mkt Cap (mm): 14,169 FY(Dec.) (6.46) (5.25) (3.25) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (6.46) (5.25) (3.25) Est. Changed No CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: COMMUNICATIONS Shares Outstanding(Mil.): 381.0 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: * 2Q 1999 results expected to remain robust with net subscriber additions expected to meet or exceed 1Q nets of 415,000. Our current estimate is 400,000 (obviously too low). * Will exceed $600 million of cash flow from domestic U.S. operations in 1999. * Operators in 42 countries now have roaming agreement with Nextel for Nextel Worldwide wireless service which will be launched in 2H 1999 with the Motorola i2000 dual-band, dual-mode phone. Expect 60 countries at launch. Trials suggest subscribers generate $400 of revenue per trip. Company notes 5 million business people leave U.S. at least 3 times per year. * i1000plus, Internet enabled phone from Motorola, ahead of schedule and will be launched later this WEEK. * Company has raised $1.3 billion cash in last five months which leaves domestic operations now fully-funded through YE 00 and Nextel International fully-funded through YE 99. * Net-Net: New products and services (e.g., i1000plus and i2000) could leave projections/consensus a bit light beginning 2000, stay-tuned. * Reiterate Strong Buy rating.

To: SteveG who wrote (432)	6/18/1999 4:21:00 PM
From: SteveG	Read Replies (1) \| Respond to of 1860

Wireless Telecom: The Wireless Review Cynthia M. Motz, CFA Robert J. Hordon CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research Americas U.S./Wireless Telecommunications Services The Wireless Review Issue #43 Summary Nextel reaches settlement with the DOJ, is now free to use 900MHz spectrum to grow its capacity. We view this as very positive for Nextel. Iridium reported to have cut 15% of its staff in an effort to reduce costs and revamp marketing strategy. Globalstar launches four more satellites, bringing the total number of satellites in orbit to 24. Following its first "Wireless Day," the FCC announced a Notice of Proposed Rule Making ("NPRM") as a result of which Calling Party Pays ("CPP") will become an option to wireless carriers. The FCC also prepared an NPRM to aid fixed wireless carriers against the wireline incumbents. We view both events as very positive developments for the wireless industry. Introduction Although a slower month than most (the first month without any earnings reports since December 1998), June began with a few interesting developments over the past two weeks. On June 14, Nextel Communications announced that it had reached an agreement with the United States Department of Justice for an out of court settlement of Nextel's challenge of a 1995 Consent Decree prohibiting them from owning more than a limited amount of 900MHz spectrum in 13 of the largest markets in the United States. It was reported in the Wall Street Journal on June 14, that Iridium has been cutting staff over the past couple of weeks, and attempting to reduce costs further to revamp its business and marketing strategy. The FCC issued two Notices of Proposed Rule Making that are supportive of Calling Party Pays and fixed wireless. As we discuss below, we believe both represent very positive developments for the industry. In other news, Globalstar successfully placed four more satellites into orbit, and Western Wireless closed on its transaction with CenturyTel through which it acquired two cellular properties in Texas. Nextel free to use 900MHz Spectrum to Expand Capacity On June 14, 1999, Nextel announced that it had come to a settlement with the United States Department of Justice for an out of court settlement of Nextel's challenge of a 1995 Consent Decree prohibiting Nextel from owning or managing more than a limited amount of 900MHz frequencies in 13 of the largest markets in the United States. Although subject to court approval, Nextel will now be permitted to own more than half of the 900MHz channels allocated for SMR and other uses in the Consent Decree markets. The Consent Decree will expire on October 30, 2000. The benefit to Nextel is that they will be able to add approximately 2.75 additional megahertz in some of the largest cities in the country. Presently, Nextel has about 15MHz in most of the largest cities in the United States, with options for an additional 5MHz in the 800 band and an additional 5MHz in the 900 band as well. Coupled with today's announcement, there is the potential in the future, Nextel could own as much as 20-27. 5MHz in the largest markets in the country which is almost at the level (or in some cases, even above) of other carriers. In order to use the 900MHz spectrum, Nextel will need to deploy an expanded-band 800/900MHz iDEN technology being developed by Motorola. Iridium attempts to cut costs, revamp business & marketing Although Iridium's problems should no longer be surprising news to anyone, the Wall Street Journal reported that the company has been cutting its staff over the past couple of weeks by about 15%, in order to reduce costs. It was reported that the company presently has about 15,000 subscribers, however, Iridium has not (consistent with its past practice) provided information about exact subscriber numbers, and may not give specifics before the end of the quarter. It was also reported that the company is attempting to revamp its marketing effort, and has previously been announced, Iridium has cut its price per minute, as well as the cost of the handset somewhat. Iridium is expected to take steps to further cut costs, as well as cut its per minute and handset pricing in the future. FCC Weighs in on Calling Party Pays and fixed wireless In conjunction with the release of its fourth annual report on competition in the wireless industry to Congress, the FCC held its first ever "Wireless Day" event and later held a press conference to discuss two Notices of Proposed Rule Making ("NPRMs") that address two major issues in wireless: 1) making Calling Party Pays ("CPP") an optional service for wireless carriers, and 2) expediting the installation of equipment on buildings and other structures for fixed wireless operators. We believe the NPRMs represent a positive step forward for wireless carriers in terms of leveling the playing field with wireline operators in the competition for local minutes. We are also very encouraged by the FCC's positive view of wireless as an ultra-competitive force in the telecommunications industry. We believe the FCC will have to mandate that the local exchange companies bill and collect for CPP or provide access to other billing companies who can do this. We think over the long-term, CPP will be a reality for the entire United States based on the fact that the ability to offer CPP will become a competitive advantage over time. In the interest of fairness as well as logic, there will have to be some kind of mechanism in place for the wireless carriers to "bill and collect" either through the incumbent local exchange companies or through other billing companies. However , if the FCC just goes a little further-and we understand why they probably could not make CPP mandatory at this point ( there likely would have been so many challenges and arguments that nothing would actually ever get put into place)-we believe the market/consumer will take over and mandate CPP. We believe this is what the FCC is hoping will occur-they will not need to mandate CPP, the market/consumer will do it for them. While we believe full implementation of CPP would be an ideal situation-and the one which is most beneficial to the consumer, we believe whatever progress is made is good for the wireless industry for several reasons. As FCC Chairman Kennard discussed on the conference call, the experience in other countries has shown that transferring the cost of wireless usage to the caller accelerates penetration and increases usage and ARPU. Promoting Fixed Wireless Another Notice also includes some proposed rules regarding the installation of network infrastructure equipment on buildings and other structures by fixed wireless operators, like Winstar and Teligent. As with mobile operators, the FCC wants to give fixed wireless players an opportunity to provide a competitive alternative to local wireline service. Fixed wireless carriers have been at the mercy of the wireline local incumbents as well. We believe the FCC adamantly supports these players and recognizes its responsibility to them in ensuring a more level playing field. The Wireless Industry Has a Powerful Ally in the FCC We believe the FCC's agenda with both the CPP and fixed wireless initiatives is to bring competition to the local markets, which is arguably the biggest unfulfilled objective of the 1996 Telecom Reform Act. In taking these steps, we believe it is clear that the FCC views wireless technology as its best shot at bringing competition to the local markets and accomplishing its Congressional mandate. Globalstar launches four more satellites Globalstar announced on June 10 that it has successfully placed four additional satellites into orbit, which brings the total number of orbiting satellites to 24. The satellites were launched from the Cape Canaveral Air Station aboard a Boeing Delta II rocket. The company commented that, with only two more launches of four satellites each, coverage will be adequate for a regional roll-out in September. Additionally, Globalstar believes its in-orbit satellites are performing well, as hundreds of test calls have been placed in both satellite and cellular mode. Call quality is reportedly excellent. Globalstar also noted that its service providers are now fine-tuning marketing and advertising plans that are expected to go into effect at the end of the summer. We are very encouraged by the progress made by Globalstar this year, and look forward to what will hopefully prove to be another two successful rocket launches in the very near future. The Wireless Review Issue #43 Western Wireless closes cellular acquisition Western Wireless announced on June 1 that it has completed its acquisition of the Brownsville and McAllen, Texas cellular markets from CenturyTel. Western paid approximately $96 million in cash for the properties, which serve a population of 855,700 in Brownsville, McAllen, Harlingen and South Padre. Western's total POPs now rise to approximately 8.5 million. Companies mentioned in this report: (Closing prices are as of June 14, 1999) CenturyTel (CTL, $38.06, Not Rated) Globalstar (GSTRF, $17.31, Buy) Iridium (IRID, $5.38, Hold) Nextel Communications (NXTL, $37.44, Buy) Teligent (TGNT, $51.13, Not Rated) Western Wireless (WWCA, $25.75, Buy) Winstar (WCII, $53.38, Not Rated)