<A> =Going Once...Wireless Auction Makes Spy Game Of Phone Bids
By Brian Steinberg
NEW YORK (Dow Jones)--Recently, the FCC issued a list of potential
new-technology phone companies. Somewhere in this jumble of letters and acronyms is the name of some company that could win big, and in turn, cause problems for established players.
Consisting of bidders for what are essentially chunks of valuable
airwaves, the list may hold the name of a new phone-service giant. Investors are curious to learn how such a company, if it is formed, will affect the wireless phone-service market.
The Federal Communications Commission is auctioning off licenses that
allow for the transmission of phone calls through microwaves. Should a
single player garner enough of the stakes, companies already building a reputation in the burgeoning local wireless phone service market - namely WinStar Communications Inc. (WCII) and Teligent Inc. (TGNT) - could face new and unwanted rivals.
Because of the fierce competition in the wireless phone industry,
companies are trying to keep their identities hidden during the bidding so not to tip off their strategy to the other players.
Your mission, should you choose to accept it: Find out who wants what.
"Everyone is using a nom de guerre to bid," said Simon Rose, a partner at the New York brokerage firm Prime Charter Ltd., "and there certainly are a tremendous amount of bidders."
What's up for bid are licenses in the 28GHz microwave spectrum in 493
markets. A company can bid for as many licenses as it wants. Teligent's holdings are chiefly in the 24GHz band, while WinStar's are in the 38GHz band. Rose believes the auction could fetch as much as $4 billion when the dust clears.
"It will be fun to see who's behind all the bidding," said Richard
Mastain, who manages a $20 million hedge fund for Twenty-First Century
Advisors in Park City, Utah. "It's like beachfront property. There's only so much of this."
Mastain said his fund holds shares in Associated Group Inc. (AGRPA,
AGRPB), which owns a $516 million stake in Teligent.
Bidders had to put money down Monday, which industry observers view as the only true sign of interest. Before Monday, the total number of bidders came to 210, with 145 applications accepted for filing, 10 rejected and 55 marked as incomplete. Those who are part of the last category could act to fix their filings and join the ranks of approved bidders.
"If someone gets in all top 50 (markets), it's less than good news for
Teligent and WinStar, because they're going to have a new competitor,"
observed W. Jack Reagan, an analyst with Legg Mason Wood Walker who bucked a recent Wall Street trend of predicting sky-high numbers for WinStar stock. Until the results of the auction are known several weeks from now, he said, the company's position remains uncertain.
Still, should the auction create a "Balkanization" of licenses, or a
hodgepodge of owners, "it would be very good for Teligent and inStar,"
Reagan added. "Many different parties would be splitting up all the claims."
The current list of entrants reads like a spy manual. Names of well-known players are slotted next to those who prefer bidding from under a veil of secrecy.
WinStar is there, under the name WinStar LMDS. Rival Teligent prefers to use the acronym AUCO, which a company spokesman said stood for "Auction Company." Baby Bells SBC Communications Inc. (SBC) and U S West Communications Group Inc. (USW) are present, as are cable leader Comcast Corp. (CMCSA) and cable upstart RCN Corp. (RCNC).
One popular rumor holds that entrant "Nextband Communications" is actually an alliance of Nextlink Communications Inc. (NXLK) and cellular-telephone pioneer Craig McCaw. Another theorizes that even Microsoft Corp. (MSFT) is present, under the name MSM Inc. Here's a surprise - MSM is bidding on all the licenses available. The company couldn't comment immediately.
Spokesmen for both Teligent and WinStar would say little, except that they were involved. But neither company appears likely to spend great sums of money unless the licenses have some strategic value. After all, both already boast wide-ranging service areas.
Should a single entity emerge with its clutches around a large number of the licenses, it could change how the market values both WinStar and Teligent, suggested Legg Mason's Reagan.
"What I'm looking for is when the bidding is all said and done, who is
going to come out of it, and what footprint they're going to have," he said.
But Prime Charter's Rose disagrees. "There's plenty of room for
competition in the local loop, and WinStar and Teligent would only be helped by another quality player in the marketplace to boost their visibility."
And Twenty-First Century's Mastain said the auction will help investors get a true sense of what the wireless phone companies are worth. Once the market knows how the competition shapes up, it will be able to assign a more certain value to Teligent, he said.
"Nothing is a sure thing, but in this market, with so much volatility and so much uncertainty, we love a situation like this," he said. "The auction will help place a value and give you some downside protection."
Although the bidding and final awarding of licenses could take several
weeks, rumors of who's in the game should end soon. An FCC spokeswoman said the bidders' true identities could be posted on the organization's Web page by the end of the week. |
