SunCom stock plunges on financial shortfall

[ComicalMoodyDan]

SunCom stock plunges on financial shortfall
May 3, 2006

BERWYN, Pa.—SunCom Wireless Holdings Inc.’s stock plunged about 20 percent Wednesday on Wall Street, as investors reacted to the company’s widening financial losses during the first quarter.

SunCom’s total revenues dropped about 1 percent compared with the first quarter of 2005, to $201.8 million; roaming revenues were down about $2.4 million from the year-ago quarter. The operator’s loss from operations expanded from about $32.3 million to nearly $110 million. While SunCom’s adjusted earnings before interest, taxes, depreciation and amortization fell from $31 million in the first quarter of 2005 to $7 million this year, adjusted EBITDA was up sequentially from a loss of about $13.5 million in the fourth quarter of 2005.

SunCom’s average revenue per user was down about 7.7 percent from the first quarter of 2005 to $51.55. The regional carrier did manage to cut its churn rate from 2.9 percent a year ago to 2.5 percent in the first quarter, which the company said reflected a stabilization of its customer base. Its gross customer additions were up from about 92,000 in the first quarter of 2005 to about 116,000 last quarter. SunCom gained about 41,000 net customer additions during the first three months of this year.

SunCom, which offers service in the Southeastern U.S., Puerto Rico and the U.S. Virgin Islands, ended the quarter with just over 1 million subscribers.

SunCom also reported that its subsidiary SunCom Wireless Investments Co. L.L.C. contributed $194.4 million to SunCom Wireless Holdings due to a dividend that was improperly paid to the investment company in November 2004.

http://www.rcrnews.com/news.cms?newsId=26280

[MOTOhooligan]

SunCom customers, welcome to Alltel. They'll be buying you Q3 2006, I'm sure.

[guy2]

Lets hope someone else buys them like Tmobile

[MOTOhooligan]

Originally Posted by guy2 Lets hope someone else buys them like T-Mobile

T-Mobile will probably spend a fortune in the advanced spectrum auction and won't have the money to acquire SunCom, but picking up smaller local and regional carriers seems to be Alltel's thing lately, so it makes sense that they, not T-Mobile will try to buy SunCom.

[Andy]

Originally Posted by MOTOhooligan SunCom customers, welcome to Alltel. They'll be buying you Q3 2006, I'm sure.

Why do you think that SunCom will be bought out by ALLTEL? Doesn't ALLTEL already serve the areas Suncom has licenses for and probably even does a much better job?

[Matt]

I read in BusinessWeek magazine that Alltel can't acquire anyone for the rest of 2006 b/c it would threaten the tax-free transaction for shareholders of the upcoming wireleine spinoff. I'll post the whole article in another thread.

[Matt]

Originally Posted by TNDan21 The operator’s loss from operations expanded from about $32.3 million to nearly $110 million.

That is mostly in one line "depreciation and asset disposal" whatever that is....

[roamer1]

Originally Posted by Andy84094 Why do you think that SunCom will be bought out by ALLTEL? Doesn't ALLTEL already serve the areas Suncom has licenses for and probably even does a much better job?

SunCom's coverage (not including PR/USVI) overlaps nearly 100% with Alltel. Now that Alltel has launched service in Asheville, NC, the only market where there is SunCom but not Alltel is Athens, GA...which IMO is a very, very poor fit for SunCom given the very close ties between Athens and Atlanta, where SunCom has no presence and customers have to roam (thus making them a bad choice for UGA students and so on...even Metro PCS covers both Athens and Atlanta.)

Remember the biggest gap in T-Mobile's footprint is also where over half of T-Mobile's off-network roaming happens...and it just happens to correspond with SunCom's footprint. I honestly can't see anyone else taking them out; Alltel could use the customers but doesn't need the network, VZW and Sprint Nextel don't buy GSM carriers, and a deal with Cingular would probably get shot down very quickly because of the monopoly it would give them on GSM in the Carolinas.

-SC

[agentHibby]

I think it is safe to say SunCom has to end wireless operations or face bankruptcy before end of the year.
What are the options?
Verizon won't buy because I think Vodafone would want the GSM network to stay for Vodafone roamers and VZ telco would not want that.

Alltel could buy. I doubt there would be any divestment but maybe a market or 2.

If Cingular buys it will depend on the AWS auction. Cingular in some areas could be up to 80 MHz (that is too much airwaves). Cingular would have no problem in getting customers but may have to divest the airwaves to somebody else (????????). If the AWS auction is complete they may get the thumbs up to keep the airwaves.

If T-Mobile buys Suncom I don't see any problem and would be the best thing

I highly doubt Sprint would want Suncom.

One thing is for sure as Suncom price to buy them out as lesser the more the problems there will be in network quality and transition.

[MOTOhooligan]

I didn't realize Alltel and SunCom's networks overlapped so much. Upon reading this thread and checking out the maps, I think T-Mobile is the only likely candidate to acquire SunCom. Or they'll just go out of business... what happens to the licenses then? Auction? Same for their network infrastructure?

[Matt]

I would guess if they went into bankruptcy their assets would be available for auction via the bankruptcy court.

[Fire14]

Even with the Acution coming up, I think this is the point that T-Mobile should look to pounce and grab them, before they go bankrupt & someone else buys up the license's they have. I think if the investors are unhappy T-Mobile could get a good deal & quickly for Suncom.

[Andy]

Originally Posted by Matt I would guess if they went into bankruptcy their assets would be available for auction via the bankruptcy court.

But I doubt T-Mobile would let it get that far in the game. Does half of T-Mobile's off network roaming seriously happen in the Carolinas???

T-Mobile buying out Suncom and then officially being able to offer service there would be great since they would likely appeal to a lot of customers in the area.

[ComicalMoodyDan]

Originally Posted by Andy84094 Does half of T-Mobile's off network roaming seriously happen in the Carolinas???

I once read that 60% of T-Mobiles off network roaming is in the Carolinas. Although I can't verify that number it wouldn't surprise me if that is correct.

[Andy]

Originally Posted by TNDan21 I once read that 60% of T-Mobiles off network roaming is in the Carolinas. Although I can't verify that number it wouldn't surprise me if that is correct.

That is huge! With this in mind, it does make sense that T-Mobile either build out a network themselves there, or buy Suncom, get their network/spectrum, as well as buy some customers, making them a more close compeitior, number wise.

[jones]

Originally Posted by TNDan21 I once read that 60% of T-Mobiles off network roaming is in the Carolinas. Although I can't verify that number it wouldn't surprise me if that is correct.

T-Mobile sold their Carolinas License to VZW,
so they Not Interested in this Area.

[ComicalMoodyDan]

Originally Posted by jones T-Mobile sold their Carolinas License to VZW, so they Not Interested in this Area.

T-Mobile only sold the Myrtle Beach, SC license to Verizon. They only had 10 Mhz of spectrum for Myrtle Beach which just isn't enough to launch a network. T-Mobile still has licenses in the rest of South Carolina but only 10 Mhz which just isn't enough. As far as North Carolina goes T-Mobile as far as I know only has a license for just a small portion of the state. I believe they are interested in the Carolina's but there is no way they can build out a network in them without buying SunCom.

Some Facts on North Carolina:

North Carolina has the largest state-maintained highway system in the United States. The state's highway system currently has 77,400 miles of roads.

North Carolina is the 11th most populous state in the USA. In 2005 the population is estimated to be 8,683,242.

North Carolina produces 40% of all U.S. tobacco.

Charlotte is one of the fastest-growing cities in the United States and is also the second-largest banking center in America.

Charlotte Douglas International Airport is the 17th busiest airport in the US. It is served by many international and domestic airlines, and is the largest hub of US Airways.


Some Facts on South Carolina:

As of 2004, according to the U.S. Bureau of Economic Analysis, South Carolina’s gross state product was $136 billion.

Myrtle Beach is a major tourist destination along the South Atlantic seaboard of the United States, widely known for its wide beaches, large selection of challenging golf links, excellent seafood restaurants, and outlet-style shopping activities. For this reason, the Myrtle Beach area attracts over 14 million visitors a year. In fact, the area is so popular with tourists from West Virginia, many West Virginians jokingly refer to the area as the state's '56th county' or as the southern-most point of West Virginia.

Myrtle Beach has over 120 golf courses on the "Grand Strand" and hosts over 4,000,000 rounds/year. One popular discussion board for Myrtle Beach golf is Myrtle Beach Golf Talk. Myrtle Beach claims to have more miniature golf courses than anywhere else in the world.

[Matt]

Before TM added all that 850 roaming, the Carolinas were a significant portion of their roaming expense...but I don't recall if it was 40, 50 or 60%....but it was the largest by far.

[music4praise]

Originally Posted by TNDan21 T-Mobile only sold the Myrtle Beach, SC license to Verizon. They only had 10 Mhz of spectrum for Myrtle Beach which just isn't enough to launch a network. T-Mobile still has licenses in the rest of South Carolina but only 10 Mhz which just isn't enough.

This doesn't make sense. Sprint has a number of networks running with just 10 MHz. Some of them even have EVDO.

Some examples:

* Burlington, NC
* Knoxville, TN
* Chattanooga, TN
* Benton Harbor, MI
* Canton, OH
* Youngstown, OH
* Mansfield, OH
* Ocala, FL

Is it a GSM limitation?

[ComicalMoodyDan]

Originally Posted by music4praise This doesn't make sense. Sprint has a number of networks running with just 10 MHz. Some of them even have EVDO. Some examples: * Burlington, NC * Knoxville, TN * Chattanooga, TN * Benton Harbor, MI * Canton, OH * Youngstown, OH * Mansfield, OH * Ocala, FL Is it a GSM limitation?

T-Mobile might be able to launch a market with only 10 Mhz of PCS spectrum but that's pushing it. GSM isn't as spectrum efficient as CDMA. In order to run a proper GSM network you will need more spectrum than what a CDMA carrier will require.

[Matt]

T-Mobile used to run Baltimore and Richmond on 10 MHz, but I believe they have more than that now.

[ComicalMoodyDan]

Originally Posted by Matt T-Mobile used to run Baltimore and Richmond on 10 MHz, but I believe they have more than that now.

Yes, I believe they have at least 20 Mhz now for Baltimore although I'm not sure about Richmond.

[roamer1]

Originally Posted by TNDan21 T-Mobile only sold the Myrtle Beach, SC license to Verizon. They only had 10 Mhz of spectrum for Myrtle Beach which just isn't enough to launch a network. T-Mobile still has licenses in the rest of South Carolina but only 10 Mhz which just isn't enough.

Correct...they only sold Myrtle Beach.

Everything points to SunCom positioning itself for a takeover by T-Mobile anyway: swapping the Virginia markets for the former AT&T Wireless's Charlotte/Triad/Triangle markets (so that SunCom more neatly fits into T-Mobile's footprint), SunCom selling the Hiptop (Sidekick) just as T-Mobile does, the recent roaming agreements that have the two preferring each other over Cingular, etc.

-SC

[bobolito]

Originally Posted by TNDan21 T-Mobile might be able to launch a market with only 10 Mhz of PCS spectrum but that's pushing it. GSM isn't as spectrum efficient as CDMA. In order to run a proper GSM network you will need more spectrum than what a CDMA carrier will require.

It depends on the market size. They are running NYC just fine with just 20Mhz right now and adding panels everywhere they can.

[Andy]

Originally Posted by bobolito It depends on the market size. They are running NYC just fine with just 20Mhz right now and adding panels everywhere they can.

With only 20 Mhz??? Doesn't Verizon and Cingular have something like 60 Mhz each??? How does T-Mobile do that capacity wise?

[bobolito]

Verizon has 65Mhz here. They took all of Northcoast PCS and Nextwave which were 10Mhz and 30Mhz respectively on the PCS band. Then they already had their 25Mhz at 850Mhz.

Cingular got 10Mhz from T-Mobile after their divorce, plus 35Mhz from AT&T Wireless for a total of 45Mhz. They are actually using only 35Mhz for GSM and the other 10Mhz is probably for their initial UMTS deployment. Cingular did not have any spectrum prior to the T-Mobile joint venture here.

As for T-Mobile, I don't know how they do it, but they are doing a fine job with the little they have especially in this market which is the most bandwidth hungry in the US!

[ComicalMoodyDan]

Originally Posted by bobolito It depends on the market size. They are running NYC just fine with just 20Mhz right now and adding panels everywhere they can.

That may be true but remember this is why T-Mobile doesn't have a 3G network yet, as they don't have enough spectrum to run an advanced speed data network. I can't picture T-Mobile trying to pick up any market with only enough spectrum to only run a voice and slower speed data network. Luckily though SunCom on average has around 30 Mhz of Spectrum per market, which should be enough for them to launch a voice and 3G Network.