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Following is a roundup of wireless companies that received ratings changes from financial services companies this week.
- JP Morgan lowered its rating on SpectraLink from neutral to underweight. The firm cited weak first-quarter results and second-quarter guidance along with three other factors for the downgrade. JP Morgan pointed to a lack of evidence of accelerating adoption of Voice over wireless local area network technology, slow development of the company’s Link and NetLink product lines, and the prospect of increasing head-on pricing competition from SIP-based handset manufacturers and the threat of substitute solutions from carriers.
- Moody’s Investors Service upgraded its ratings on Nextel Partners Inc.’s senior implied rating to Ba2 from B1, its 8.125-percent senior notes due 2011 to Ba3 from B3, its 12.5-percent senior notes due 2009 to Ba3 from B3 and its speculative grade liquidity rating to SGL-1 from SGL-2. The company also upgraded its rating on Nextel Partners Operating Corp.’s $100 million senior secured revolving credit facility expiring 2009 to Ba1 from Ba3. Moody’s said the company has continued to post strong subscriber and cash flow growth, and management has committed to reducing outstanding debt.
- Standard & Poor’s Ratings Services said its rating and outlook on Vodafone Group plc remain unchanged following the announcement that the company’s Vodafone Omnitel N.V. subsidiary in Italy plans to buy back $10.1 billion worth of shares.
- Legg Mason lowered its rating on Sonus Networks Inc. from hold to sell.
- Lehman Brothers raised its rating on Motorola Inc. from equal weight to overweight, saying the company’s core handset business should continue to see solid trends and a possible share buyback program could be accretive to 2006 earnings per-share estimates. The company pointed to several challenges Motorola faces, including pressure on its wireless networks business and its lack of W-CDMA awards. In related news, Lehman slightly increased its global handset market estimates from 725 million units to 745 million units this year and from 780 million to 798 million units in 2006.
- McAdams, Wright, Ragen downgraded its rating on Tektronix Inc. from buy to hold on news that the company cut its fourth-quarter guidance due to slowing orders, macroeconomic concerns and a slowing of technology.
- Credit Suisse First Boston upgraded its rating on L.M. Ericsson from underperform to outperform. CSFB cited stronger fundamentals at the Swedish vendor, including expected strong growth in wireless infrastructure. The firm said growth should slow to about 9 percent this year but re-accelerate to 12.5 percent next year. CSFB also said the company’s global mobile infrastructure share is sustainable at about 25 percent long term.
- Bank of America Securities raised its rating on American Tower Corp. from neutral to buy following news of the company’s merger deal with SpectraSite Communications Inc. last week. Analysts said the merger is positive for American Tower because it puts the company at the top of the tower industry in terms of scale and market share and provides a variety of positive financial impacts. Bank of America said it remains bullish on the overall wireless tower sector due to robust subscriber growth and capex budgets at wireless carriers.
- Needham downgraded its rating on @Road Inc., citing lowered 2005 guidance and other concerns including the departure of the company’s chief financial officer. In addition, Needham pointed to significant risks associated with the company’s CDPD operations. About one-fifth of @Road’s subscribers are on Cingular Wireless L.L.C.’s CDPD network, which is scheduled to shut down this summer, and an additional 10 percent are on Verizon’s CDPD network, which is scheduled to shut down at the end of this year. Needham said despite the company’s efforts to transition those customers to alternate GPRS and 1xRTT networks, there is still a risk the company will lose a significant percentage of its subscribers.
