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Technology Stocks : Vodafone-Airtouch (NYSE: VOD) -- Ignore unavailable to you. Want to Upgrade?

To: JungleCat who wrote (1942)	9/20/1999 3:20:00 PM
From: MrGreenJeans	Respond to of 3175

Better call your broker Analyst sees continuing rapid growth for wireless stocks By Colleen Bazdarich, CBS MarketWatch Last Update: 2:51 PM ET Sep 20, 1999 Personal Finance News Join the discussion ST. LOUIS (CBSMW) -- You know the scene -- the finale of that riveting mystery movie or the moment when the fat lady sings -- it's the exact moment when someone's cell phone starts ringing. A few years ago you would have cursed the owner of that phone, maybe even yelled something unkind. "We think the high earnings growth has potential to continue for a long time -- a lot longer than you can project with most industries." Lately, though, that someone with the cellular phone is likely to be you. "Currently in the U.S. there's about 70 million wireless subscribers. That's about 27 or 28 percent of the overall population," says Mel Marten, telecom analyst for St. Louis based Edward Jones. "We expect that that number will double in four or five years." The numbers are bad news for cranky theatergoers but great news for cellular stock investors. Colleen Bazdarich of CBS MarketWatch talked with Marten about how the incredible growth of cellular communications has affected stocks and what the future of wireless data transfer has in store. How has the wireless sector of telecommunications been doing lately? Marten: Wireless has been one of the few highlights in telecom, which has been a little weak overall the past few months. Most of the telecom stocks in general are trading at great values right now. Wireless stocks have been very strong as investors start looking toward the long term potential of wireless. There are several big trends going on in wireless, one of which is that the pure number of subscribers is growing very rapidly, due to the declining prices for the service. Another factor that contributes to the overall explosion of wireless usage is that not only are the subscribers growing very quickly but they are using their wireless more and more in place of their other phones. The total number of minutes is growing at an even faster rate than the (number of) subscribers are. What are the numbers for that growth? Marten: Overall, wireless subscribers are growing at about 20 percent. A lot of companies, such as Sprint PCS (PCS: news, msgs), are seeing numbers higher than that. What we have seen recently is that a lot of customers are looking toward Sprint PCS and AT&T (T: news, msgs), that can provide nationwide or at least close to nationwide coverage. That has been the whole purpose behind the recent news releases that Vodafone AirTouch PLC (VOD: news, msgs) and Bell Atlantic (BEL: news, msgs) are expected to announce a joint venture to combine their wireless networks, to create closer to a nationwide coverage. Are a lot more people going to buy digital soon? Is that taking over the cellular service? Marten: The digital wireless service really incorporates all the features of your kitchen phone at home. You can get caller ID, voice mail, call waiting, etc. The phones are much cheaper and the battery lives are a lot better. With all these features, a wireless phone is really becoming a replacement for a lot of people's home phones. Just very recently we have had a lot of companies looking to provide data over wireless phones, and I think that that has been a pretty big driver behind the recent run-up in the stock prices as well. Do you have any picks? Marten: We continue to like Vodafone AirTouch. It is the largest wireless company in the world, formed by the recent merger this summer of Vodafone, the largest wireless company in the U.K., with AirTouch, the largest single wireless company in the U.S. Both of those companies have great management teams, great track records. They are very good at operating their assets. They are also very good at dealing with the market. They exceed analyst's expectations for growth every quarter. Anybody else? Marten: There are some other leaders. Not a pure wireless ticker, AT&T, is one of the largest wireless companies in the country. It has a nationwide network, very good management and operational capabilities. We also do like Sprint PCS, which is the nationwide wireless network built by Sprint in 1996 using purely digital PCS frequencies. What about the future for these stocks? What do you see in the next few years? Marten: As cell phones continue to become cheaper and easier to use, we think a lot more people are going to be getting them. We also are going to see a lot more applications for them such as data, Web pages, e-mail, etc. The nice thing about wireless is that the outlook of above-average earnings growth for these companies extends very far into the future. With a lot of high-tech, high-growth stocks, you can really only bet that they are going to maintain above-average earnings growth for a couple or three or four years out. With wireless, however, we think that with the coming advent of data applications -- the next generation of networks, currently called 3G or third generation -- there are a lot of things on the horizon that we can look at and expect that these wireless companies will be returning above average earnings growth for probably five or seven years out into the future. We think the high earnings growth has potential to continue for a long time -- a lot longer than you can project with most companies or most industries. Is there anything the long-term investor should watch out for in these stocks? What are the risks involved in cellular stocks? Marten: Well, these are typically pretty high-growth stocks and that makes them more volatile than the overall market is. In market downturns, these stocks could see a bit more of a dip, but overall we think the outlook is very good and the leading companies have a pretty good potential ahead of them.