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To: DadisKing who wrote (46)	11/2/1999 1:43:00 PM
From: William F. Wager, Jr.	Read Replies (1) \| Respond to of 60

Profiled in today's IBD... Voicestream Makes Splash In GSM Wireless Market Date: 11/2/99 By Reinhardt Krause Investor?s Business Daily If smaller U.S. wireless carriers that use a digital standard called GSM agree to live under one roof, will someone buy the house? Voicestream Wireless Corp. might soon find out. The company has been buying up U.S. wireless firms that own networks using GSM, short for global system for mobile communications. GSM is the dominant format for wireless service in Europe and much of Asia. In the U.S., other standards hold sway, and GSM players are mostly smaller carriers. But by building a near-nationwide network of GSM systems, Voicestream looks like a prime takeover candidate, analysts say. SBC Communications Inc. and BellSouth Corp. have been cited as possible buyers. But other scenarios could unfold. One could involve Hong Kong-based Hutchison Whampoa Ltd., which already owns a 30% stake in Voicestream, and Germany?s Mannesmann AG. Mannesmann has been on a wireless buying spree, most recently snapping up Orange PLC in the U.K. "The speculative buys of Voicestream are SBC and BellSouth," said Harvey Liu, analyst at CIBC Oppenheimer Inc. in New York. "But the European guys, like Mannesmann, will definitely vie hard in this space, because Voicestream controls a lot of GSM traffic that terminates in the U.S." Janco Partners Inc. analyst Tom Friedberg says another potential Voicestream bidder is Mannesmann?s archrival Deutsche Telekom AG. "A GSM alliance in the U.S. would do Deutsche Telekom a lot of good," he said. Voicestream Connecting In June, Voicestream said it will buy Omnipoint Corp. for $3 billion in cash and stock. In September, Voicestream said it will buy struggling Aerial Communications Inc. for $1.8 billion. To boost its stake in Voicestream and fund the acquisitions, Hutchison put up $957 million in June. Hutchison had invested $325 million in the wireless carrier in early 1998. Bellevue, Wash.-based Voicestream has partnered with GSM players such as Cook Inlet Region Inc. It also may be interested in buying such GSM firms as Powertel Inc. and Canada?s Microcell Telecommunications Inc., analysts say. More than 620,000 people in the U.S. and Canada signed up for GSM-based wireless service in the third quarter, says an industry trade group. About 4.8 million people subscribe to GSM service in North America. But the service is spread among 15 carriers, many of which are financially weak. These operators must compete with larger, more cost-efficient rivals like AT&T Corp. The larger a network a wireless carrier owns, the cheaper it is to provide service. If Voicestream succeeds in pooling GSM properties, the bigger company could target more high-end wireless phone users that travel frequently. One reason many analysts expect a big player to buy Voicestream is the track record of its management. Its chief executive, John Stanton, cobbled together a cell-phone empire in the 1980s with wireless pioneer Craig McCaw. After combining many wireless licenses throughout the U.S., they sold off McCaw Cellular Communications to AT&T in 1994 for $11.5 billion. Stanton then founded Western Wireless Corp., which obtained GSM licenses auctioned off by the government in 1996. In May, Western Wireless spun off its GSM assets ? which cover markets like Denver, Portland, Ore., Seattle and Phoenix ? as Voicestream. The bids for Omnipoint and Aerial soon followed. Investors are betting that Voicestream could fetch big bucks if acquired. Shares in Voicestream have soared from 16 in May to as high as 93. The stock closed Monday at 95. Like other GSM players, Voicestream isn?t yet profitable because of the high cost of building a digital network. For the first nine months of this year, Voicestream?s sales almost tripled to $300 million from $112 million in the year-ago period. But its loss widened to $303 million from $182 million. Voicestream has about 676,000 customers, up from 265,000 in Sept. 30, 1998. SBC and BellSouth remain possible buyers of Voicestream, some analysts say. SBC already owns GSM networks in California and Texas, which would fit nicely with Voicestream?s markets. Buying Voicestream also would give SBC access to key Northeast markets, including New York and Boston. SBC says it?s keeping its options open. "SBC should be all over Voicestream," said Cynthia Motz, an analyst at Credit Suisse First Boston Corp. in New York. An alliance among Deutsche Telekom, SBC and Voicestream "also makes tons of sense," she said. Some analysts say SBC is waiting for Voicestream to do the grunt work of buying up many of the small GSM providers. It then may snatch up the GSM carriers in one swoop. Mannesmann also bears watching, analysts say. In buying Orange last month, it grabbed the third-biggest U.K. wireless carrier. As part of the $33 billion deal, Mannesmann acquired Hutchison?s 49% stake in Orange. U.S. Presence Hutchison swapped its stake in Orange for cash and about 10% of Mannesmann?s equity. Hutchison also gets a board seat at Mannesmann, which plans to split off its engineering and automotive businesses into a separate company. Mannesmann, a conglomerate, has quickly moved into telecommunications since Europe liberalized its markets in 1998. It also owns wireless firms in Germany and Italy. Buying Orange will make Mannesmann a powerhouse in Europe, alongside Vodafone AirTouch PLC. But it needs a U.S. presence, analysts say. Hutchison?s ties to Voicestream could help. "When Mannesmann goes public, they?re currency (shares) is going to trade very well, and they?ll make acquisitions in the U.S. using that currency," Liu said. --Bill