Subject: [NEXTEL-1] Wireless Communications Stocks Analysis

From: [email-masked]
Date: Mon, 22 Sep 2003 13:38:41 -0400

Wall Street Transcript
Wireless Communications Stocks Analysis
Monday September 22, 12:54 pm ET

67 WALL STREET, New York--September 22, 2003-- In an in-depth (8,400 words)
Roundtable Forum, Jonathan Atkin, an Analyst at RBC Capital Markets, Tom
Carpenter, Senior Technology Analyst for J.J.B. Hilliard, W.L. Lyons, Kevin Dede,
Senior Vice President and Equity Research Analyst at Merriman Curhan Ford and Co.,
Thomas Sepenzis, a Senior Research Analyst at ThinkEquity Partners and Ned Zacher,
a Partner and Director at Thomas Wiesel Partners, examine the outlook for the
sector
and share specific stock recommendations. This interview excerpt is part of a
Roundtable Forum from our 58-page Wireless Communications Issue featuring
in-depth interviews from six analysts and top management from nine sector firms
discussing market shift from wireline to wireless, portability concerns, market
for mobile
phones in China and Asia, growth in CDMA technology, delay in 3G WDCMA services,
Japanese camera phones, tower operators, rate plans, new technologies like Wi-Fi,
pricing issues, customer acquisition and retention, small cap stock picks, stocks
to
avoid, stock recommendations and more. This issue is available to subscribers by
telephoning 212-952-7400 x1799 or through The Wall Street Transcript
TWST: Jonathan, what has gone on
in the wireless communications
marketplace so far this year from a
business perspective?

Mr. Atkin: I think you've seen a
firming up of pricing that took place
in the late winter and early spring,
and pricing discipline has
maintained itself remarkably up until
the present. In the meantime, I think
you have a lot of carriers getting
ready for portability and trying to
determine what their offensive and
defensive strategies are going to
be. As far as product
enhancements, the carriers have
been developing the capability to
offer push-to-talk walkie-talkie services. With respect to the tower operators, they have benefited from a robust carrier demand for new cell sites, coupled with positive free cash generation and a steady stream of refinancings to lower their cost of debt.
TWST: In a difficult economic environment such as we've been experiencing, how have the carriers managed to get through pricing increases?
Mr. Atkin: I think they found that there was not any single bad actor among the competitors. Companies that firmed up on pricing found like-minded behavior among their peer group - with nobody choosing to buck the trend. And we found that consumers were still attracted to the category and were still taking rate plans, despite the fact that the entry costs were perhaps a bit higher than they were during the holiday season last year.
TWST: Tom Carpenter, from your perspective, what have you seen so far this year?
Mr. Carpenter: I think there have been three or four big issues this year. One has been China, the world's largest market for mobile phones, and the inventory overhang in the late winter and spring. Due to SARS there was an oversupply of phones in China, and that affected some of the Western manufacturers and also the domestic manufacturers there. Also, it had an effect on QUALCOMM (QCOM) in the form of CDMA growth slowing, at least temporarily there. Another big issue was Texas Instruments (TXN)
announcing it was going to make a big push into CDMA chips and how that could affect QUALCOMM's pricing power long term. Another issue has been the delay in rolling out 3G WDCMA services for this year and early next year.
Also, frankly, there has been concern over the implications - not just in Western
Europe
but also in the US - of some of the Japanese OEMs' products. As NEC, Panasonic and
Sharp, which have had a great deal of success with some of their camera phones in Western Europe, start selling more phones, might carriers like Motorola be pushed out?
TWST: So there are still a lot of unanswered questions.
Mr. Carpenter: The next quarter or two are going to be very interesting. There's jockeying for position because you want to be one of the top three OEMs with a carrier.
You either want to have a hit model that consumers will pay the extra money for or you want to be the phone that they push as the free phone; if you're not one of those two things it's very tough to gain market share.
TWST: Ned, you mentioned Nextel. Is there another name?
Mr. Zachar: Actually, we're recommending the entire Nextel complex, if you will - Nextel and Nextel Partners (NXTP). There's also a name we picked up about a month ago, NII Holdings (NIHD), formerly Nextel International. I think those would be our best ideas.
The product is still differentiated, despite the launch of competitive product on the part of Verizon. They're very well managed companies, all three of them. I think that's where we would continue to focus people from a wireless perspective, at this moment in time.
TWST: What is it about the product that sets it apart?
Mr. Zachar: In addition to a cellphone handset, it also has what is known as "push to talk" - basically a walkie-talkie that enables you to communicate pretty much instantly with individuals or groups on the fly and all for one price. This gives the cellphone a significant added feature that has not been available historically on the part of the other cellphone communication services providers. That's about to change. Verizon launched their product about a month ago, and we expect the others to launch theirs as well. Technically, I think it's going to be difficult for them to offer a product that's exactly comparable to what Nextel offers. So I think, given the way they've set the firm up, their focus on the business customer and their competitive edge, as well as improving balance sheets at all three of those companies, you're going to get the most bang for your buck investing in wireless by investing in the Nextel companies. I do note that we do not yet cover the tower space.
TWST: Tom Carpenter, what are your top picks?
Mr. Carpenter: In July, we upgraded Nokia to buy when it got below $15. We have an
$18-$20 price target on that. It's approaching that. But if you're conservative and you're looking for a big cap name, it still has some upside.
If you're more aggressive, on the small cap side, RF Micro Devices (RFMD) could be
attractive. It's had a nice run-up here. But if the fourth quarter is going to be big - and we think it is - and companies like Nokia are going to benefit, RFMD is one of the bigger component suppliers out there.
Actually, another name, if you're looking for something possibly on the short or to buy a put, we think Qualcomm actually has some downside weakness over the next five or six months. That would be a name that we think has the potential to decline in the coming five or six months.
How would you like the opportunity to meet privately with a key person from Intel,
PalmSource, Fujitsu PC, Sprint, Wayport, IBM, CIBC World Markets, Motorola Ventures and other major companies that are helping to define the Wireless industry?
Register for The Wall Street Transcript's Wireless Industry Conference on October
16th and you can do just that. This one-day conference will focus on the key
sectors,
including WiFi and WiMAX, WLANs, 2.5 and 3G buildup, the financing environment and
the investor outlook.
Plus, in addition to the information portion of the conference, you will have the opportunity to take part in our exclusive One-on-One program.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call
800/246-7673
http://biz.yahoo.com/twst/030922/tam400.html

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