NEW YORK-The continued expansion of commercially available new wireless services is extremely important to the future success in public capital raising for the entire sector, said Norman C. Frost, Jr., managing director of Bear, Stearns & Co. Inc., New York.
“Now, unfortunately, there isn’t a lot of observable data, especially in the wireless voice sector, and this tends to favor incumbents, Frost said at a recent “Communications & Media Finance” conference sponsored by the Institute for International Research, New York.
“A continued rollout is absolutely crucial, moving from soft to hard, where you can actually use the phone,” Frost argued.
Besides commercial rollouts, the investment community is gleaning important information from the now-completed Federal Communications Commission personal communications services auctions and from the federal Telecommunications Act of 1996, which Frost said he believes has created more uncertainty for wireline than for wireless carriers.
“The only positive spot on the landscape (last year) was the CLECs (competitive local exchange carriers), so investors indicated they don’t know what in the world is going on in wireless,” he said. “In the presence of uncertainty, they voted with their feet and traded off every one. But we at Bear, Stearns think investors will forget their panic and pick winners and losers.”
Bear, Stearns, he added, is managing the book for General Wireless Inc. PCS’ initial public offering, expected soon. In this role, the investment bank is keeping records of activity in the account of the syndicate that will underwrite this IPO.
From the vantage point of Wall Street, there are two important countervailing forces-competition and technology.
“Competition obviously eats market share, but by the same token it keeps the pie growing rapidly,” Frost said, adding that so far, “the financial markets have been focused more on the downside of these parameters than the upside.”
Technological advancements, on the other hand, are seen in a more universally positive light, but they too raise further questions.
“Technology is driving a vast amount of capacity, enabling a paradigm shift to usage from subscribers,” Frost said. “As pricing comes down, the issue we’re grappling with is what is the elasticity of demand.”
However, selection of a particular technology isn’t so much a matter of concern anymore.
“The CDMA-TDMA-GSM debate has more or less quieted down,” he said. “I think investors are technology agnostic.”
Pricing experiments are one of the more interesting things happening in wireless today from Wall Street’s view, Frost said. Microcell Telecommunications, InterCel Inc. and PriCellular Corp. all have introduced fixed-price, all-you-can-eat-plans. “We will at least see the effects on subscriptions, if not usage, depending on what the carriers are willing to share with us,” he said.
