SAN FRANCISCO, May 21 /PRNewswire/ -- BancAmerica Robertson Stephens research analyst Steven R. Yanis has published his sixth annual "Wireless World" report which includes an extensive report on the mobile telephone industry as well as individual company reports on AirTouch Communications, Omnipoint Corporation, Western Wireless Corporation, Nextel Communications, Vanguard Cellular, Telephone and Data Systems, United States Cellular, Aerial Communications, Centennial Cellular and 360 Degrees Communications. In "Wireless World," Yanis, who covers the wireless communications services industry, reports that for the first time in more than two years, wireless service stocks have significantly outperformed the broad equity market. Since mid-1997, Yanis' universe is up 65% versus 24% for the S&P 500. Yanis believes there are several reasons for the recent strength of wireless stocks: * Signs of profitable coexistence: PCS (Personal Communications System) companies have posted impressive subscriber gains (0.8% average penetration gain) and healthy monthly bills ($60 on average). At the same time, cellular subscriber gains have slowed somewhat (Net subscriber additions were down 16% on average with the overall subscriber base growing 19% in 1997), but cash flow margins have increased. All of this activity has resulted in a peaceful coexistence between the PCS and cellular phone companies. * Significant merger, acquisition and buyout activity at healthy valuations * Delay of the C-Band buildout: The 30 MHz C-Band licensing process has been tied up by bankruptcies and rule changes and has kept an additional competitor (potentially a dangerous competitor) at bay * Wireless stocks are interest rate sensitive and most companies have little to no exposure to Asia. Overall, wireless subscriber growth showed a healthy 4% incremental penetration gain for 1997, in line with Yanis' estimates from last year. In general, wireless services equity valuations are closer to Yanis' target valuations than they have been in more than two years. Cellular stocks currently trade on average at 9.7 times and 8.3 times his 1998 and 1999 cash flow estimates and PCS stocks trade at $35 per pop (license value). Although Yanis believes much of his universe offers only modest upside growth today, he continues to favor some key stocks. "We believe there are some stocks that are still attractive and there are some macro industry events that could raise valuations across the board," said Yanis. Yanis is referring two positive industry events on the horizon: calling party pays (CPP) and widespread pre-pay service offerings. Calling party pay systems are prevalent throughout Europe and are widely believed to lead to greater wireless minutes of use and potentially greater penetration levels. "We believe effectively deployed and effectively managed, pre-pay plans could accelerate penetration gains into broader markets such as college students," said Yanis. In the meantime, Yanis believes M&A activity, PCS growth, cellular LBO's and strong international results will continue. Yanis' four favorite companies are Omnipoint (OMPT), AirTouch (ATI), Vanguard Cellular (VCELA) and Western Wireless (WWCA). Yanis likes Omnipoint given his expectations of rapid subscriber growth, potential for a powerful strategic partner from abroad and its unique position to benefit from C-band restructuring. As for AirTouch, although not inexpensive, he is intrigued by the strength of its international operations coupled with the potential for a mega merger. While Vanguard Cellular has had some disappointing operational and financial reporting results, Yanis hopes that the company may continue enhancing its shareholder value theme. Lastly, is Western Wireless. "We are still firm believers in the 'allure of rural cellular' and Western Wireless offers one of the few remaining ways to invest in that attractive segment of the market," said Yanis. Within the industry section of Yanis' "Wireless World", there is an extensive report that covers an Investment Overview, a Review of Industry Fundamentals, Domestic Wireless Industry Projections, Pricing, C-band License Update, Wireless Launches, AT&T and Sprint PCS Update, AT&T Wireless: Condominiums for Sale, Pre-Pay Takes the Wireless Industry by Surprise, Calling Party Pays: Where It Stands Today, Our Model for an Average Cellular Operator, and NPV and Breakeven on a Wireless Subscriber. Steven Yanis, a managing director and head of Telecommunications Services Research, joined BancAmerica Robertson Stephens in 1997. His coverage focuses on the wireless communications services industry. Recently, Yanis was ranked #1 Wireless Services analyst in the 1997 Institutional Investor Poll (All-American Research Team) and the #1 Wireless Services analyst in the 1997 Greenwich Associates Institutional survey. Yanis graduated Magna Cum Laude with a Bachelor of Science degree in economics from the Wharton school of the University of Pennsylvania and holds an MBA degree in finance from New York University. If you are credentialed media or clients of the firm, and would like a copy of Yanis' research "Wireless World" or "The Mobile Telephone Industry," call Amanda Watson at 415-676-2995 or Steve Yanis at 212-319-8900.
SOURCE BancAmerica Robertson Stephens