IPO of MetroPCS Ends Run Of Poor Telecom Debuts
First-Day Surge of 19% Shows Hunger for Firms In Niche Phone Markets
By AMOL SHARMA and YVONNE BALL
April 20, 2007; Page C3
Link
Cellphone carrier Inc.'s shares surged 19% in their first day of trading, ending a streak of poor debuts by telecommunications companies and highlighting investor appetite for fast-growing carriers targeting niche markets.
The Dallas company's initial public offering rose to $27.40, as of 4 p.m. in New York Stock Exchange composite trading, from an offer price of $23.
Strong demand from individual retail and institutional investors pushed that offer price, set by underwriter Bear Stearns Cos., well beyond the expected range of $19 to $21 a share.
The $1 billion-plus IPO was one of the largest by amount raised since 2004.
MetroPCS targets low-income and youth customers with cheap flat rates for unlimited calls without requiring users to sign annual contracts. The company's 3.4 million subscribers are mostly in its core markets of Miami; Atlanta; Sacramento, Calif; and San Francisco. It plans expansion on the East Coast after acquiring $1.4 billion of wireless licenses in a Federal Communications Commission spectrum auction last year.
MetroPCS and Leap Wireless International Inc., another public company with an almost identical business model, offer an attractive alternative for investors from the large U.S. wireless carriers such as Sprint Nextel Corp., whose growth is slowing as cellphone penetration in the U.S. increases and fewer high-paying subscribers are left to sign up.
The smaller carriers are going after relatively untapped markets and have plenty of room for growth as they spread into new markets. Leap's share price has surged on that potential, rising 57% last year.
Some analysts said Metro may eventually try to acquire Leap, creating an even more formidable competitor to the top-tier cellphone giants.
Scott Sweet, managing director of IPO Boutique.com, an IPO-research service near Tampa, Fla., said the debut performance of the stock suggests it could become the first successful high-profile telecom IPO since the disappointing debuts of Vonage Holdings Corp. in May last year and Clearwire Corp. last month. Unlike those companies, MetroPCS is already profitable, booking net income of $53.8 million last year on revenue of $1.5 billion.
