Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : NEXTEL -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (8916)	3/25/1999 10:45:00 PM
From: SteveG	Read Replies (1) \| Respond to of 10227

from BTAB's Jeff Hines and Bo Fifer: PCS REAUCTION COMMENCES TUESDAY (MARCH 23) HIGHLIGHTS: -- What price a nationwide footprint? The reauction of C/D/E/F-block PCS licenses commences tomorrow (23-Mar), with the GSM carriers still looking to fill in strategic coverage gaps in four major markets. -- WHO'S BIDDING? In total, 66 entities have qualified to bid, including all of the public GSM carriers except Aerial. Western Wireless is the top qualifier based on up-front payments through its Cook Inlet partnership, followed by Omnipoint bidding as OPCS Three, and Powertel is backing Eliska Wireless. -- WHAT ARE THEY BIDDING ON? 134 15 MHz C-block, 208 30 MHz C-block, three D block, six E Block, and five F-block licenses (all 10 MHz) are on the table. The most interesting markets are likely to be Chicago, Dallas, New Orleans, and Las Vegas, which currently comprise the major holes in the GSM footprint. -- WHY ARE THEY LIKELY BIDDING? While most of the action is likely to be in the four major "GSM deficient" markets, we believe some carriers could be looking to fill in other coverage gaps. Adding capacity should not be an issue for C-block players, while the D- and E-block licenses do not cover strategically important locations for the larger players. -- NET-NET: By and large, we would expect this auction to wrap up much quicker than the original C-block auction (which took almost 5 months) and for winning bids to be more in line with the $3.33/POP average bid in the original D/E/F auctions than the $40/POP average bid in the original C-block auctions. DETAILS: The reauction of C-, D-, E-, and F-block PCS licenses commences Tuesday (23- Mar). In total, 66 entities have qualified to bid and all of the public GSM carriers are represented except Aerial, which elected to stay on the sidelines. Based on up-front payments, Western Wireless is the top qualifier under its Cook Inlet partnership, Omnipoint (bidding as OPCS Three) is the number two qualifier, and Powertel is backing Eliska Wireless. Top 10 PCS Auction Qualifiers By Up-Front Payment Up front Bidding Payment Name Backer/Control ($MM) Cook Inlet/VoiceStream PCS Western Wireless 50.0 OPCS Three Omnipoint 41.0 ConnectBid McCaw/Netscape 38.0 ABC Wireless* Telecorp 29.5 Beta Comm. Gabelli/Rivgam 20.4 Leap Wireless Leap/Chase 20.0 Viper Wireless* Telecorp 17.8 Zuma PCS Alta Comm. 10.0 Eliska Wireless Powertel 9.2 BCN Comm. Independent 6.1 * Commonly controlled entities, combined up front payment = $47.3MM. Source: Federal Communications Commission, BT Alex. Brown Incorporated. Most of the top ten bidders have qualified to bid on a large and geographically diverse set of licenses. Of course, this does not necessarily indicate where any given bidder may be setting its sights and, therefore, does not necessarily imply any particular bidding strategies. Of the four PCS-deficient markets (Chi/Dal/LV/NO), 7 of the top 10 qualifiers are qualified for Chicago and Dallas and 8 qualified for Las Vegas and New Orleans, with the top three qualifiers qualifying for all four markets. Overall, 37 bidders have qualified to bid on Chicago, 38 on Dallas, 40 on Las Vegas, and 41 on New Orleans. TOP 10 QUALIFYING BIDDERS BY UP FRONT PAYMENT #1 Cook Inlet/Voice Stream PCS. $50M up front payment. Backed by Western Wireless. Qualified in Chi/Dal/LV/NO. #2 OPCS Three. $41M up front payment. Bidding name for Omnipoint. Partners include Ericsson, Nokia, Siemens, VoiceStream, and Western Wireless, among others. Qualified in Chi/Dal/LV/NO, among other markets. #3 ConnectBid. $38M up front payment. Joint venture between Eagle River (Craig McCaw) and CCG (controlled by Netscape executives). Qualified in Chi/Dal/LV/NO, among other markets. We find ConnectBid (controlled by Craig McCaw and Netscape) to be one of the more intriguing bidders. #4 ABC Wireless. $29.5M up front payment. Controlled by Telecorp management and in discussions with AT&T Wireless. Company is commonly controlled with Viper Wireless (#7) with no overlapping bidding. Together, the two entities have mad up front payments of $47.3M. Qualified in Dal/LV/NO, among other markets. #5 Beta Communications. $20.4M up front payment. 49% controlled by Mario Gabelli, who in turn is affiliated with Rivgam (NE corridor licensee) and Lynch PCS, which is affiliated with another bidder, BCDJMS, with no plans for overlapping bidding. Qualified in Chi/Dal/LV, among other markets. #6 Leap Wireless. $20.0M up front payment. Recently purchases ChaseTel licenses in Tennessee. Qualified in Chi/LV/NO, among other markets. #7 Viper Wireless. $17.8M up front payment. Controlled by Telecorp management and in discussions with AT&T Wireless. Company is commonly controlled with ABC Wireless (#4) with no overlapping bidding. Together, the two entities have mad up front payments of $47.3M. Qualified in NO, among other markets. #8 Zuma Wireless. $10M up front payment. Affiliated with Alta Communications. Qualified in Chi/Dal/LV/NO, among other markets. #9 Eliska Wireless. $9.2M up front payment. Financially backed by Powertel, which has agreed to extend a credit facility to the company. Qualified in Chi/Dal/LV/NO, among other markets. #10 BCN Communications. $6.1M up front payment. Independent bidder. Focused solely on licenses in and around Philadelphia. Look For A Quicker, Less Painful End Given the hotly competitive state of the wireless industry in the U.S., and the less-than-enticing prospects of being the 6th or 7th competitor in a market, we would expect this auction to wrap up much quicker than the original C-block auction (which took almost 5 months) and for winning bids to be more in line with the $3.33/POP average bid in the original D/E/F auctions than the $40/POP average bid in the original C-block auctions.

To: Anthony Wong who wrote (8916)	3/25/1999 10:47:00 PM
From: SteveG	Respond to of 10227

from BTAB's Jeff Hines and Bo Fifer: PCS Reauction Update: Day 2 HIGHLIGHTS: -- The re-auction of PCS frequencies continues after day 2 (24-Mar). After 4 rounds of bidding, the auctions have yielded net bids of $144 million. Early results, while not terribly significant, are nonetheless interesting (please see our note dated 22-Mar for identification of the top 10 qualifying participants). -- TOP FIVE BIDDERS BY NET BID (we note that an entity's bid amount can fluctuate from round to round-as opposed to necessarily rising each round-if it loses a high bid position) Bidder Markets Bid ($Mil) ConnectBid 4 57.9 Cook Inlet/VoiceStream PCS 22 12.3 OPCS Three 10 11.6 BCN Communications 3 10.8 Leap Wireless 8 9.1 Source: Federal Communications Commission. -- TOP FIVE MARKETS BY NET BID Market Bidder Bid ($Mil) Chicago (30MHz) ConnectBid 29.9 Dallas (30MHz) ConnectBid 18.9 Philadelphia (15 MHz) BCN Communications 10.4 Phoenix (30 MHz) Cook Inlet/VoiceStream PCS 8.0 St. Louis (30 MHz) OPCS Three 7.7 Source: Federal Communications Commission. -- NET-NET: No surprise that Chicago and Dallas, as the auction's "crown jewels" are attracting the most bidding attention. Bidding seems to be dominated by just three companies in these two markets so far, however: Beta Communications, ConnectBid, and OPCS Three. Cook Inlet/Western Wireless (22 high bids) and ABC Wireless (35 high bids) are amassing the largest footprints so far (based on geography, not POPs)... Stay tuned.

To: Anthony Wong who wrote (8916)	3/25/1999 10:50:00 PM
From: SteveG	Respond to of 10227

from BTAB's Jeff Hines and Bo Fifer: PCS Reauction Update: Day 3 HIGHLIGHTS: -- The re-auction of PCS frequencies continues after day 3 (25-Mar). After 6 rounds of bidding, the auctions have yielded net bids of $183 million. Early results, while not terribly significant, are nonetheless interesting (please see our note dated 22-Mar for identification of the top 10 qualifying participants). -- TOP FIVE BIDDERS BY NET BID (we note that an entity's bid amount can fluctuate from round to round--as opposed to necessarily rising each round--if it loses a high bid position) Bidder Markets Bid ($Mil) ConnectBid 4 79.4 OPCS Three 21 15.5 Beta Communications 7 14.2 ABC Wireless 33 8.9 Leap Wireless 9 7.5 Source: Federal Communications Commission. -- TOP FIVE MARKETS BY NET BID Market Bidder Bid ($Mil) Chicago (30MHz) ConnectBid 43.0 Dallas (30MHz) ConnectBid 27.1 St. Louis (30 MHz) OPCS Three 11.0 Philadelphia (15 MHz) BCN Communications 10.4 Phoenix (30 MHz) Beta Communications 8.8 Source: Federal Communications Commission. -- RECENT BIDDING ACTIVITY BY ROUND New Net % Eligible Round High Bids Bids Chg. Bidders 4 77 $144M 15% 67 5 60 $159M 11% 67 6 75 $183M 15% 63 Source: Federal Communications Commission. -- NET-NET: No surprise that Chicago and Dallas, as the auction's "crown jewels" are attracting the most bidding attention. Bidding seems to be dominated by just three companies in these two markets so far, however: Beta Communications, ConnectBid, and OPCS Three. ABC Wireless (33 high bids) continues to hold the broadest footprint of licenses as represented by high bids, while ConnectBid is tops in POPs covered with its bids... Stay tuned.

To: Anthony Wong who wrote (8916)	3/25/1999 10:51:00 PM
From: SteveG	Respond to of 10227

from BTAB's Jeff Hines and Bo Fifer: WWCA: Too Early To Speculate, But What The Heck HIGHLIGHTS: -- After round #5 of the PCS auction, Cook-Inlet/VoiceStream had high bids (totalling $79 million) in several major markets including Chicago, Dallas and St. Louis (covering almost 22 million people or POPs) implying a per POP bid of just $3.60. -- While 5 rounds of an auction that could go on for weeks and weeks is not likely indicative (in any way) in regards to how the auction may end, it is likely worthwhile to examine what the stock implications could be for current top bidder Cook-Inlet/VoiceStream. -- WHAT ARE THE IMPLICATIONS TO WESTERN WIRELESS / VOICESTREAM EQUITY HOLDERS REGARDING VOICESTREAM'S PARTICIPATION IN THIS AUCTION? 1. VoiceStream Wireless Corporation is currently the 80.1% owned PCS operations within Western Wireless Corporation. We expect VoiceStream to be spun-off into a separate company sometime during 2Q 1999. Currently our 12-month price objective on VoiceStream is $20/share based on our DCF (see note dated 16-Mar-99 where we established a $41/share price target on pre- spin Western Wireless Corporation composing of a $21/share price objective on post-spin Western Wireless Corporation and $20/share on VoiceStream Wireless Corporation). 2. VoiceStream is a 49.9% equity owner of Cook-Inlet. Cook-Inlet is the "designated entity" that VoiceStream has bid with in previous auctions set aside for so called designated entities (e.g., small businesses) and is the entity bidding in this auction. Cook-Inlet currently holds PCS licenses across the U.S. covering over 11 million gross POPs. 3. We believe VoiceStream would likely have to contribute 49.9% of the amount bid by Cook-Inlet/VoiceStream in this auction in terms of a cash payment to Cook-Inlet (e.g., if the auction had ended after round 5, approximately $39.5 million). We then believe that Cook-Inlet, given current market conditions, could raise all additional funds to build-out the networks, fund startup losses, etc., through outside sources (e.g., bank, high yield debt, vendor, etc.). 4. VoiceStream is currently building out PCS properties covering approximately 29 million POPs and owns proportionate interests in operators building out approximately 3 million non-duplicated POPs. Thus, total VoiceStream proportionate POPs are approximately 32 million. 5. Will our price target on VoiceStream change post the auction? It could. The back of the envelope calculation would be to take any additional POPs won in this license and compare them to the existing 32 million proportionate POPs. Thus, if Cook-Inlet/VoiceStream were to win say PCS licenses covering an additional 15 million POPs the number of proportionate POPs covered by VoiceStream would increase from 32 million to 39.5 million, a 23% increase. While this will not (at least in our model) result in an exact one-to-one 23% increase in our equity price target it could, depending on price paid, POPs purchased, timing of roll-outs, each markets competitive position, financing, etc., result in an increase of up to 23%. Stay tuned!

To: Anthony Wong who wrote (8916)	3/25/1999 10:53:00 PM
From: SteveG	Read Replies (1) \| Respond to of 10227

from BTAB's Jeff Hines and Bo Fifer: CDMA Handsets/Accelerated 3G Deployment Stand To Benefit HIGHLIGHTS: -- Ericsson and Qualcomm announced a wide-reaching agreement this morning (25-Mar) that settles the manufacturers' long-standing battle over "CDMA" technology patents and opens the door for more rapid development/deployment of third generation wireless (3G) services (e.g., high speed data). Nearer term we expect to see additional cdmaOne handset competition. Under terms of the deal, which ends all legal engagements between the companies, Ericsson will acquire Qualcomm's infrastructure business, and Qualcomm will attain rights to sublicense Ericsson patents on ASICs technology. -- POSITIVE NEW NEWS: While today's agreement carries many implications for the wireless industry, we would focus on the following two key points regarding implications for service providers: 1. 3G IS NOW A STEP CLOSER. The deal should streamline the process of developing a third generation (3G) wireless platform which incorporates high-speed data into the mobile voice platform. Before today, Ericsson (backing something called W-CDMA technology as a 3G platform) and Qualcomm (backing something called CDMA2000) were on opposing sides of the technology fence. Today's agreement should facilitate the move toward (more or less) a single platform, which in turn should speed the time to market for wireless carriers introducing new higher speed wireless services (still likely a 2001/2002 event). Advances through 3G technology are likely to result in greater penetration and higher usage for the wireless service providers. 2. cdmaOne HANDSETS LIKELY TO SEE MORE COMPETITION. Ericsson indicated intentions to supply cdmaOne handsets beginning in 2000. To date, cdmaOne carriers (e.g., AirTouch (U.S.), Clearnet, Bell Atlantic Mobile, Sprint PCS, etc.) have been disadvantaged relative to carriers who have deployed GSM and TDMA based digital wireless networks due to both the higher prices and lack of choices associated with cdmaOne phones. While we look for both Motorola and Nokia to become a bigger force in 2H 1999, certainly the addition of global handset titan Ericsson to the field of cdmaOne handset manufacturers can only be bullish for more choices and accelerating price declines in the arena. -- NEGATIVE NEW NEWS: None, for the service providers. -- NET-NET: cdmaOne carriers are likely cheering Ericsson's planned entry into the cdmaOne handset arena. One carrier that certainly is taking note is likely Clearnet. Clearnet PCS disappointed in 1998 partly due to lack of a compelling cdmaOne handset product. Without an economical handset, the Clearnet PCS is effectively precluded from offering prepaid services because of the necessary subsidies. We believe that smaller, lighter, cheaper phones will be introduced over the next several quarters, culminating in Ericsson's first-ever CDMA phone in 2000, and that this will drive down equipment costs for Clearnet and other cdmaOne carriers.