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The Wall Street Journal Interactive Edition -- June 3, 1999 Tech Center
'Fixed Wireless' Is Attracting Investments From Big Firms
By LESLIE CAULEY and NICOLE HARRIS Staff Reporters of THE WALL STREET JOURNAL
It's called "fixed wireless," and it has fast become a fixation for many big communications companies.
In recent weeks companies including MCI WorldCom Inc., Sprint Corp. and the Liberty Media unit of AT&T Corp. have spent billions of dollars to establish beachheads in this "broadband" technology. The service is attracting attention because it allows companies angling to sell interactive video, Internet connections and phone services to reach potential customers directly -- rather than having to pay tolls to go through the regional Bells, or to build their own expensive wired networks.
As the name implies, fixed wireless is a stationary wireless service. Networks typically include a series of "base stations" armed with wireless antennas that are connected to other gear. Customers usually need a rooftop antenna. The services offered, which can include high-speed Internet access and traditional local phone service, are often offered at deep discounts from the rates charged by traditional providers.
Nobody is making any money on this yet -- in fact, most purveyors of the technology are bleeding a lot of red ink. But some of the country's savviest high-tech investors see great potential.
Sprint, one of the more bullish spenders, recently announced $1 billion of deals to gobble up People's Choice TV Corp., American Telecasting Inc. and Videotron USA, a subsidiary of Canadian cable giant Le Groupe Videotron Ltd. Meanwhile, MCI WorldCom is paying $350 million to buy CAI Wireless Inc., based in Albany, N.Y., and recently announced plans to buy two more wireless companies for a total fixed-wireless investment of about $1 billion. These acquisition targets all provide wireless cable services, which are considered part of the fixed-wireless family.
Another new convert is cable magnate John Malone, chairman of Liberty Media Group. Earlier this week, Liberty announced plans to buy Associated Group Inc., the largest shareholder of fixed-wireless company Teligent Inc. The all-stock deal valued at around $2.8 billion, plus the assumption of $187 million in debt. The transaction would give Liberty a 41% stake in Teligent, considered a highflier in the fixed-wireless world, and a seat on the company's board. Teligent, based in Vienna, Va., provides businesses with high-capacity telephone and Internet services via rooftop antennas in more than two dozen markets across the U.S.
Given Liberty's reputation for making smart technology bets, the deal caught the attention of Wall Street. Investors sent Teligent shares soaring by more than $5 on the day the Associated agreement was announced.
Demanding Customer Base
Liberty said the move was a slam-dunk, considering the growing needs of the broadband audience and a demanding customer base that needs to move information quickly and seamlessly. "As we continue to move into broadband networks, there will be more information flowing and a greater need to move information quickly," said Gary Howard, Liberty's chief operating officer.
Still the technology isn't flawless. Some early fixed-wireless systems proved temperamental. Rainy weather faded the service, and the line-of-sight technology was difficult to install in dense areas.
But analysts agree most of these issues have been solved through technological advancements, and better planning and construction of systems. "Over time, these companies have demonstrated that the system works," says Ken Hoexter, an analyst with Goldman, Sachs & Co.
While big-foots such as Mr. Malone's Liberty capture headlines with wireless purchases, smaller carriers are quietly pushing for their piece of the action, too. Qwest Communications International Inc., a tiny telecommunications company with big ambitions, agreed earlier this week to invest $90 million for a 19% stake in Advanced Radio Telecom Corp. And a raft of other buyers are sniffing around for deals.
The wireless race, by all indications, is just getting started, adds Mr. Hoexter. "Since the market dynamics are changing so quickly, if you blink you might miss the boat." |