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Technology Stocks : Microcell ( mictf mtib.m mtib.to ) -- Ignore unavailable to you. Want to Upgrade?

To: 2MAR$ who wrote (19)	11/3/1999 9:30:00 PM
From: Don England	Read Replies (1) \| Respond to of 29

The Great White North's Clearnet and Microcell Become Likely Takeover Targets By Derek Moscato Special to TheStreet.com 11/3/99 4:56 PM ET VANCOUVER -- The wireless industry in the Great White North understands its mobile telephone customers well: Build the brand and they will call. Loyalty, after all, is a known Canadian trait, so developing feel-good relationships in the early stages of the game can pay big dividends over the long haul. Need proof? Look at a Canuck's undying love for a Tim Horton's doughnut or a pint of Molson beer. But as acquisitions and takeovers become the calling card of the global wireless industry, it comes as no surprise that two of the brightest northern lights in the biz, Toronto-based Clearnet Communications (CLNTF:Nasdaq) and Microcell Telecommunications (MICTF:Nasdaq) of Montreal, are being watched closely as takeover targets. Both companies have impressed -- even surprised -- their fellow countrymen with rapid growth in the personal communications systems game. And unlike their rivals BCE (BCE:NYSE) and Rogers Cantel (RCN:NYSE), both Clearnet and Microcell are perceived as relative upstarts. Their clever and catchy advertising campaigns play up to their respective reputations as rebels. Clearnet serves up an almost dizzying array of wilderness imagery to promote its Clearnet and Mike PCS networks, while cute pooches do the trick for Microcell's Fido brand. Both are prodding Canadians (in an uncharacteristic display of fickleness) to dump their home telephone lines and switch to wireless products. And the targeted audience seems to be lapping up the ad blitz. Microcell has increased its subscriber base by more than 154% in the past 12 months to about 460,000, while Clearnet announced in mid-October that it has passed the 500,000-subscriber mark. The market, meanwhile, should only continue to swell. A recent study by International Data Corp. indicated that more than half of Canadians will be using mobile phones within the next four years -- increasing the mobile-phone market to 16.6 million in 2003 from 6.7 million subscribers in 1999. The successes of Clearnet and Microcell, in addition to their future promise, help to explain why investors and other wireless outfits have taken such a keen interest in these companies. Analysts reckon Microcell could be targeted as an investment by Washington-based VoiceStream Wireless (VSTR:Nasdaq), a company that has already been active on the acquisition front and is itself a takeover target. Both companies use the same wireless technology, Global System for Mobile Communications, or GSM, which would give VoiceStream access to the Canadian network. Thanks to foreign ownership restrictions, however, an American suitor like VoiceStream would be capped at a 33% direct-voting stake in a Canadian telecommunications company. Regardless, shares of Microcell -- which traded as low as 4 11/16 during the past year -- have enjoyed a dramatic rise recently and now hover in the 20 range. Dvai Ghose, a Toronto-based telecommunications analyst with CIBC World Markets, attributes the valuation to Microcell's ownership stake in Saraide.com, an Internet portal dedicated to the wireless world, as well as aggressive bidding from stateside investors who believe ownership laws will be lifted in the near future to make way for a takeover of Microcell. "The market is beginning to assume that Microcell is an immediate takeover target, which I believe is unrealistic," Ghose argues. "U.S. investors have diminished the importance of the foreign ownership restriction environment when valuating Microcell." Clearnet's stock, meanwhile, has enjoyed a similar ride and now trades at about 22, compared with its 52-week low of 7 1/8. Unlike its Quebec-based counterpart, however, much of the interest in Clearnet as a takeover candidate stems from telecommunications companies within Canada. Both BCE and BCT.Telus Communications are attracted to Clearnet because of its technology, which is compatible with their mobile-phone networks. And because both companies are Canadian, ownership restrictions aren't an issue. For that reason alone, Canadian analysts such as Ghose are looking to Clearnet as a more credible short-term acquisition target. Clearnet and Microcell now find themselves caught up in a four-way race with BCE and Rogers Cantel for Canadian wireless dominance. And their incredible branding efforts should ensure that they're not swatted away by the big boys anytime soon. "Both Clearnet and Microcell have been extremely innovative when it comes to selling the wireless product," Ghose says. "Both management teams should be quite proud of their achievements on that front. And the two incumbents have been forced to match." It's reason enough for wireless players on both sides of the border to keep their eyes on the upstarts. Ironically, Clearnet's national advertising effort would have us believe that "the future is friendly." But given the current jockeying for position among Canada's wireless outfits, the next few months may be anything but. -------------------------------------------------------------------------------- Derek Moscato is a freelance financial journalist in Vancouver. -------------------------------------------------------------------------------- Send letters to the editor to letters@thestreet.com. Top Read our conflicts and disclosure policy. Enter symbol or name: TALK TO US Send your feedback and comments to letters. -------------------------------------------------------------------------------- Check out reader letters here. INTERNATIONAL ARCHIVE Read past stories. 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