Weekly wireless ratings wrap-up

Following is a list of wireless companies that were cited in financial reports from investment banking and financial services firms this week.

• Pacific Growth Equities upgraded its rating on RF Micro Devices from equal weight to overweight on expectations of higher revenues generated by new product cycles and increased handset demand. PGE said the company’s Polaris II could play a large role in the company’s upside potential. The firm also raised its revenue estimates for RFMD for the second quarter from $157.50 million to $159.3 million and its earnings-per-share estimates from 2 cents to 3 cents. In related action, PGE maintained its overweight rating on Skyworks Solutions Inc., saying the company is positioned as one of the top wireless component suppliers among the companies it covers.

• Robert W. Baird reiterated its outperform rating on Nextel Partners despite comments made by Nextel Communications Inc. that it believes the intrinsic value for Partners is below current trading levels. Baird said it continues to view $30 as a fair takeout value and noted it was not surprised by Nextel’s comments giving the increasing level of rhetoric between the two companies.

• Robert W. Baird maintained its outperform rating on Lucent Technologies Inc. following the company’s equipment contract announcement with MetroPCS. The firm said the contract is incrementally positive because it broadens the vendor’s customer base, which is heavily dependent on Verizon Wireless and Sprint PCS.

• Smith Barney Citigroup lowered its rating on Alamosa Holdings from buy to hold on valuation, saying it has limited upside potential to its revised $18 price target on the carrier.

• Lehman Brothers raised its price target on Motorola Inc. from $19 to $21 in advance of expected solid second-quarter results.

• UBS raised its global telecom capital expenditure estimates to 8-percent growth in 2005, up from its previous estimate of 6-percent growth. UBS said it expects wireless vendor revenue forecasts to increase over the next two years.

• Lehman Bros. raised its price target on Jamdat Mobile to $34 and maintained its overweight rating on the company.

• Robert W. Baird increased its price target on Alltel Corp. to $72 from $64 after the company received FCC approval for its merger with Western Wireless. Baird continues to rate Alltel at outperform.

• Standard & Poor’s Ratings Services placed US Unwired Inc. on CreditWatch with positive implications, following news the company is in an agreement to be acquired by Sprint Corp. Sprint remains on S&P’s CreditWatch with positive implications.

• Standard & Poor’s Ratings Services affirmed its BB- long-term foreign currency rating on Indonesia’s PT Telekomunikasi Selular
  . S&P also affirmed its BB long-term local currency rating on Telkomsel. The outlook on both ratings is stable, said S&P. “The positive outlook reflects that of Indonesia’s sovereign rating,” said Standard & Poor’s credit analyst Yasmin Wirjawan. “As Telkomsel’s rating reflects that of the sovereign, an upgrade in the rating on the sovereign is likely to result in an upgrade in the company’s rating.”

• Smith Barney initiated coverage of tower company Global Signal Inc. with a hold rating and a price target of $42.

• Moody’s Investors Service downgraded Telephone and Data Systems Inc.‘s senior unsecured debt rating to Baa2 from Baa1. Moody’s also downgraded the long-term ratings of U.S. Cellular Corp., which is owned 82 percent by TDS, to Baa2 from Baa1. The ratings firm said heightened competitive challenges and significant ongoing capital investments needed to maintain market share in existing markets will continue to suppress the company’s free cash flow. The TDS downgrade reflects the importance of its wireless business to TDS’ credit profile. The action concludes Moody’s rating review, which it began in March. The ratings outlook for both companies is stable.

• Fitch Ratings said it has maintained its Ratings Watch Positive position on Sprint Corp.’s BBB senior unsecured debt rating following the company’s announcement that it plans to acquire US Unwired Inc. for about $1.3 billion. Sprint was placed on Ratings Watch Positive along with Nextel Communications Inc. in December 2004, following their merger announcement.

• RW Baird reiterated its outperform rating on shares of STMicroelectronics, saying the company finished the second quarter on a strong note and could report quarterly revenues at or higher than the midpoint of the guidance range. Baird noted STMicroelectronics’ NOR flash business is picking up, driven by wireless, digital subscriber line modems and consumer products.

• UBS said it expects Nortel Networks Ltd. to report greater than 10-percent sequential growth in both CDMA and GSM/UMTS networks for the second quarter. UBS rates Nortel’s shares at neutral with a $3 price target. UBS also previewed Lucent Technologies Inc.’s third-quarter results, saying it expects the company’s U.S. wireless business to grow 2 percent quarter over quarter due to strength in Verizon net additions and an ongoing ramp up in EV-DO builds. UBS said it expects Lucent to cut between 3,000 and 5,000 employees as part of a new reorganization, which includes combining some product segments. UBS maintained its neutral rating in the company.

• Merrill Lynch downgraded America Movil from buy to neutral, saying the company’s current valuation limits its estimated 12-month return. Merrill Lynch said fundamentals remain solid at the Mexican carrier, but it said the company’s stock appears slightly overextended and its upside could be limited.

• Piper Jaffray analyst T. Michael Walkley said monthly channel checks suggest June domestic handset sales tracked in line with expectations, although some stores reported a slowdown in sales due to the start of the summer vacation season. He also said second-half handset sales are expected to come in strong due to new handset launches from the likes of Nokia Corp. and Motorola Inc. In related news, Piper Jaffray said Motorola’s GSM camera phone continued strong sell-through trends, with particularly strong demand for its RAZR and V.551 at Cingular and the V.330 at T-Mobile. The firm raised its second-quarter handset estimate for the company to 32.5 million units in addition to raising its revenue estimates to $34.8 billion from $34.2 billion and earnings estimates to $1.04 per share from $1.02 per share.