For Subscribers

Get the complete article now!

Four analysts and top management from thirty-one sector firms examine the Technology sector in this special 120-page Kaufman Bros., L.P. Emerging Communications Conference issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info431.htm.

TWST: What is your general sense and group expectations for the wireless services area?

Mr. Makin: The specific vertical is wireless services with coverage of the wireless carriers — AT&T Wireless (NYSE:AWE), Nextel (Nasdaq:NXTL), Sprint PCS (NYSE:PCS), Western Wireless (Nasdaq:WWCA), Nextel Partners (Nasdaq:NXTP), Triton PCS (NYSE:TPC), and Leap Wireless International (Nasdaq:LWIN). This group has been demonstrating some defensive characteristics in light of the current economic conditions. This is an industry still in the growth phase, and investors look to this group as one that can deliver, obviously, a strong, recurring revenue stream supported by a solid and growing customer base. We've seen average revenues per users effectively increasing over the past 18 to 24 months. All the while, wireless usage continues to rise. Average usage has grown dramatically in that time frame as well, more than offsetting, obviously, any price declines that have been experienced on a permanent pricing basis. Getting under way in the early 1980s, the wireless industry has just started to catch on. In 2000, we really hit an inflection point of penetration in the US and we're rapidly seeing broader and broader adoption of wireless service across a broader demographic segment. So it's not just the early adopters now; it's the teenage market segment and it's the soccer mom market segment. It's essentially pushed into being more of a consumer-accepted utility application as opposed to a niche, high-end user market segmentation. Obviously, pricing has come down dramatically, which is allowing broader segments of the greater population to afford wireless service.

TWST: At this point, with valuations as they are, what role might consolidation play? What attrition factors are you looking at? Will the strong get stronger?

Mr. Makin: Over the past two years, we've seen a considerable amount of consolidation already in the wireless arena with, effectively, the formation of six national carriers. Along those lines, we're seeing a push to gain scale economies to provide broader network coverage, lower pricing points, preferable handset pricing, etc. So that's a phenomenon that we've seen to date, and I expect there to be another wave of consolidation whereby potentially the six national operators consolidate down into four. That will be primarily driven by some regulatory relief from the FCC, which is expected to rule by year-end to alleviate the current spectrum caps that are in place. That would effectively enable further consolidation to take place in the US market.

TWST: Where is Triton PCS on your assessment scale?

Mr. Makin: Triton is an affiliate of AT&T Wireless, which essentially fills in a strategically important footprint for AT&T's national coverage. They're located in the Southeast. They gain considerable operating leverage from their relationship with AT&T, whereby they can allow their customers access to AT&T's network, and in return they receive high-value roaming revenue from AT&T's customers when they migrate into Triton's network. The result of the relationship has Triton demonstrating industry-leading financial metrics such as high returns on investment, low churn, and a faster point of EBITDA breakeven, which they've already hit, putting them in a faster EBITDA growth trajectory relative to their peers.

This special conference issue includes:

1) Outlook for Emerging Communications - In an in-depth (2,400 words) Analyst Interview, Craig D. Kaufman, Chairman and CEO of Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

2) Emerging Communications: An Overview - In an in-depth (4,800 words) Analyst Interview, Vik Grover, Managing Director of Equity Research at Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

3) Wireless Services & Carriers - In an in-depth (1,300 words) Analyst Interview, Douglas Makin, Investment Analyst for Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

4) Network Infrastructure Services - In an in-depth (2,800 words) Analyst Interview, Erik Warren, Vice President of Equity Research at Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

5) CEO interviews (average 2,500 words). Top management of thirty-one sector firms examine the outlook for their firm and the sector.