The Wireless Industry is the Strongest it's Ever Been, Banc of America Securities' Analyst Tells Investors
Updated 9:03 AM ET October 5, 1999
SAN FRANCISCO, Oct. 5 /PRNewswire/ -- The following is
being issued by Banc of America Securities, a member of the
National Association of Securities Dealers, CRD number 26091:
Subscriber growth is good, and incremental penetration gains are
accelerating as prices fall and service improves in the wireless
industry, according to Banc of America Securities' wireless
telecom analyst, Steven Yanis.
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"The wireless industry is in the second year of a sweetspot," said
Yanis. "Incremental penetration gains are increasing, and, as the
value quotient of wireless communications continues to increase
for consumers, these growth trends appear to be sustainable."
Yanis' comments came at the 29th Annual Banc of America
Securities' Investment Conference, which ran through October 1
at the Ritz-Carlton Hotel in San Francisco. This former
Montgomery Securities' conference had a new name but boasted
a program that lived up to its impressive reputation. The five-day
conference featured 250 presentations from companies that are
driving the Business Services, Consumer & Retail, Energy,
Entertainment, Media & Telecom, Financial Services, Health
Care, Industrial Growth, Real Estate & Lodging and Technology
industries.
According to Yanis, there are approximately 80 million
subscribers for wireless services, with total penetration at greater
than 30 percent, and incremental penetration -- the growth of the
growth -- at approximately 6 1/2 percent. In addition, while
average revenue per user (ARPU) has been declining over the
last several years, ARPU may have actually improved slightly
year-over-year in the first and second quarters of 1999 and
sequentially from the first to the second half of 1998.
Furthermore, wireless operating costs are also declining.
Competition and the popularity of "bucket" plans, or volume
discounts, continue to drive down prices in the wireless industry.
Yanis says that in medium usage plans (400-600 minutes), prices
in New York City have gone from more than $.40 per minute in
1997, to approximately $.15 in 1999. Phone service also
continues to improve. As a result, the value quotient of wireless
service for consumers has more than doubled Yanis said. These
decreases in price per minute charges benefit carriers as well
since consumers' monthly bills are still increasing.
In 1999, the industry was characterized by a number of mergers
and acquisitions, with most companies attempting to create a
large regional or national facilities-based wireless presence. This
trend towards consolidation leads to economies of scale, and a
push towards vertical integration, but in the long term, the
wisdom of this strategy is uncertain, Yanis said.
What is certain is that as the popularity of bundled services
grows, it becomes increasingly important for telecommunications
companies to become fully integrated service providers, offering
long distance, wireless, local access, Internet/ISP, and an
Internet backbone. Such integration is cost-effective,
advantageous in providing end-to-end service, and it lowers the
rate of consumer switching, said Yanis.
Yanis estimates that as technology improvements allow for faster
data transmission speeds, wireless data subscribers could reach
more than 25 million by 2006 and could become a $9 billion
industry. Other areas of potential growth include prepaid plans, a
market that could grow to more than 13 million subscribers by
2006.
The wireless stocks recommended by Yanis include Voicestream
Wireless Corporation* (VSTR, $62-11/16, Buy), Sprint
Corporation PCS Group (PCS, $78-11/16, Buy), Nextel
Communications, Inc.* (NXTL, $75-3/8, Buy), and Western
Wireless Corporation* (WWCA, $48, Buy). |
