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Technology Stocks : Glenayre Technologies(GEMS)- a pure cellular PCS play? -- Ignore unavailable to you. Want to Upgrade?

To: 4finger who wrote (2172)	10/21/1997 2:55:00 PM
From: Thomas C. White	Read Replies (1) \| Respond to of 3431

1. Can't tell you anything about that, although probably most important to GEMS is how things are going at their Quincy, Illinois facility which is where most of the paging transmitter equipment is manufactured. GEMS still needs healthy paging transmitter business to do well for the quarter. 2. I think I need to reflect a bit on the issue raised by some about the slowing growth pace of pager sales in areas such as China mentioned by MOT. This does not necessarily have anything to do with the infrastructure business. In fact, in an odd way, it can actually indicate potential opposite effects regarding infrastructure buildouts. In order to understand this, you have to have some understanding of how a lot of the operators in developing countries conduct their business. I have very good contacts in the largest paging operator in Brazil, one of the largest of the developing country markets, and the structure there is I believe very similar to other developing countries. A. Typically the paging market is divided into (1) local franchisees and (2) national franchisees. The local franchisees primarily serve low-end requirements in a single city, while the national franchisees typically have a license to do paging in any city in the country. Typically, licenses for local franchises are under control of local municipalities while national franchises are governed by the central government. Local franchises usually cannot provide "advanced" services such as paging to/from other cities. National franchises can provide intercity and international paging services. B. What I've seen is that the national franchisees generally at first heavily concentrate their activity in the cities where business is most lucrative and high density. In Brazil this means Sao Paulo and Rio, for example. I think the situation is quite similar in other large developing country markets such as China, Indonesia, India etc. They often don't bother with secondary markets for a long time until their position is well built up in the core markets. C. The national franchisees have gradually been reaching saturation levels in these core markets. This results in slowing of growth in pager sales and in operation revenue, especially if saturation results in increased competition based upon price, subscriber churning, etc. D. Subsequently the national franchisees start buildouts in new cities that they have previously ignored in order to continue to grow. This results in a new cycle of infrastructure purchasing. I think in all the major developing country markets there is considerable room for increasing coverage by the major players. Overall, I don't think that there is a paging saturation taking place, I think that what we will now see in a lot of cases is movement into the second tier markets in many of these countries. My thinking is that this will primarily be one-way paging though, I don't detect any inclination by the national franchisees to go after two-way paging.