The wireless industry’s love-hate relationship with Wall Street appears to be on the mend as investors again flocked back to the segment that just over a year ago was offering investors a broad selection of stocks for less than a dollar. While most wireless carrier stocks have yet to regain their once lofty prices, many have seen a several-hundred-percent increase in value during the past 12 months, with some smaller operators posting growth in excess of 1,000 percent.
“Over the past several years anything that had to do with telecom was hands off, everything was put on hold,” noted telecommunications industry analyst Jeff Kagan. “But that trend has begun to change and over the past six months investors are becoming more comfortable with the wireless industry.”
That comfort has helped push stock prices to levels not seen in years and also has been spread around to carriers of all sizes.
AT&T Wireless Services Inc., which is the largest independent carrier in the country, has seen its stock price more than triple from as low as $3.25 per share in mid-2002 to more than $11 per share last week. Analysts note that much of AWS’ recent stock price jump can be attributed to the potential sale of the company, but even without the premium value, AWS’ stock was trading at around $7 per share.
Other nationwide operators have seen similar results, including Sprint PCS’ tracking stock price more than doubling from around $3.50 per share last May to more than $8 per share last month, and Nextel Communications Inc.’s stock nearly tripling from just over $11 per share last March to nearly $30 per share at the beginning of this year.
Carrier affiliates, which at one point were left for dead by many investors, have seen an even more dramatic rebound. Sprint PCS’ four public affiliates have posted at least 1,000-percent increases in their stock prices during the past year, led by AirGate PCS Inc.’s stock price jumping more than 2,500-percent from a low of 13 cents per share in January 2003 to $3.79 per share last month. Smaller jumps have been witnessed by Alamosa Holdings Inc., US Unwired Inc. and UbiquiTel Inc.
AWS affiliate Triton PCS Holdings Inc. has posted a more than 300-percent increase in its stock price from $1.63 per share last February to $6.80 per share last month, while Nextel Partners Inc. has seen its stock price increase from less than $4 per share last March to more than $15 per share earlier this year.
Rural carriers also have benefited from the recent stock surge, with Dobson Communications Corp. posting a near 400-percent increase in its stock price from just more than $2 per share in January 2003 to $10 per share last September, and Western Wireless Corp. posting a similar percentage jump from $4.85 per share last April to $23.73 per share last month.
Kagan attributed some of the growth to carriers being more fiscally responsible with their own investments, which is likely to lead to bottom-line improvements and not just pumping money into projects with a questionable return. “Carriers are more focused on profitability instead of just writing blank checks. That fiscal responsibility makes investors more comfortable.”
Beyond the fiscal restraint shown by wireless carriers, SG Cowen telecommunications analyst Tom Watts attributed the wireless industry’s stock growth to other factors, including the lower-than-expected impact of local number portability and recent merger-and-acquisition fever and its perceived positive impact on the industry.
“LNP is being viewed as the wireless industry’s Y2K in that the impact was much less than hype,” Watts said. “Investors are also looking for positives out of M&A activity.”
Watts also noted the wireless sector has benefited from the general influx of capital into the stock market witnessed by the more than 44-percent increase in the Dow Jones Industrial Average during the past year from just over 7,400 to as high as 10,700 and a more than 70-percent increase in the NASDAQ from 1,253 to more than 2,153 over the past 12 months.
“Wireless is definitely reaping the rewards of investors coming out of their telecom slump,” Kagan added.
