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Verizon stalls other IPOs?
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October 17, 2000: 1:33 p.m. ET
Delay of Verizon wireless deal could affect IPOs from Nextel Int'l and Propel
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NEW YORK (CNNfn) - Verizon Communications' decision to delay the initial public offering of Verizon Wireless has caused many to question the future of pending IPOs from Nextel International and Propel, analysts said Tuesday.
Verizon's delay adds to an already shaky wireless sector that is weighed down by falling shares and increased competition, analysts said. In the past few months, shares for Sprint PCS, Nextel Communications, AT&T Wireless Group and WorldCom have fallen significantly from their highs.
Sprint PCS (PCS: Research, Estimates), the No.3 wireless concern, is trading at less than half of its 52-week high of $66.93. Nextel Communications (NXTL: Research, Estimates) is also well below its year high of $82.93, while AT&T Wireless (AWE: Research, Estimates), which went public in April, has yet to close above its IPO price of $29.50 since May.
On Monday, Verizon Wireless, the Bedminster, N.J.-based subsidiary of Verizon Communications Inc. (VZ: Research, Estimates) said it was postponing, not withdrawing, its planned $5 billion new issue because of recent market volatility. Verizon Wireless was formed through the merger of paging and PCS assets of Bell Atlantic Corp., GTE Corp., and Vodafone AirTouch wireless earlier this year.
 IWO Holdings, an affiliate of Sprint PCS, also withdrew its planned IPO Monday. The company, in a letter to the Securities and Exchange Commission, cited unfavorable market conditions for pulling the issue.
Albany, N.Y.-based IWO provides wireless services in the Northeast. The company had planned to raise $172.5 million via underwriters led by Donaldson, Lufkin & Jenrette and Chase H&Q.
Verizon is considered a leader in the wireless sector, and its decision to delay means the future of other new issues, from Nextel International and Propel, are unsure. However, analysts do not blame Verizon for everything.
"The wireless telecom sector is facing a difficult transition right now," said analyst Fred Moran, of Jeffries & Co. "The competitive advantages of a year ago have become less meaningful."
Broad market volatility is weighing in on the wireless sector, as the choppiness in the Nasdaq and earnings announcements cause investors to flee.
Sprint PCS fell $1.13 cents to $30.63, AT&T Wireless lost $1.63 to $18.88, Nextel slipped $3.50 to $31, and WorldCom dropped $1.75 to $21.25 in afternoon trading Tuesday.
Competition adds to risk
The sector is also facing increased competition with rivals partnering up. Cingular Wireless, a joint venture between the wireless units of SBC Communications Inc. and BellSouth Corp., was launched earlier this month.
Atlanta-based Cingular will be the second-largest U.S. wireless carrier, serving more than 19 million customers in 38 states, the District of Columbia and two U.S. territories.
Verizon, formerly Bell Atlantic Corp., and Vodafone AirTouch PLC have also merged their U.S. wireless operations to create Cellco Partnership. Through Cellco, the two companies form a domestic, nationwide wireless business that will combine their cellular, PCS, paging, and other wireless properties in the United States.
"We're seeing an influx of competition on national level with various players partnering together," Moran said. "Now we have a number of fully national partnerships competing head to head."
Consolidation speculation helped sector shares trade up in 1997 and 1998 but now all the parties appear to have paired up, analysts said. Deutsche Telekom is buying Voicestream Wireless Corp. (VSTR: Research, Estimates) while WorldCom failed in its $117 billion bid to acquire Sprint Corp.
However, analyst Sean Butson, of Legg Mason, said it is still possible for a European firm to swoop in and buy someone. "There is lots of uncertainty in the sector right now," Butson said. "Competition is heating up with Verizon and Cingular."
The effect of AT&T Wireless
Many analysts blame the IPO from AT&T Wireless, which floated a $10.6 billion issue in April, for pushing down sector shares. AT&T Wireless gained 8 percent in its first day but the company has since failed to close above its IPO price of $29.50 since May.
"AT&T Wireless poisoned the well," said David Menlow, president of IPOfinancial.com.
 Before the AT&T Wireless IPO, wireless was one of the strongest sectors in the IPO market and companies consistently produced strong first day gains. But the huge offering from AT&T Wireless spoiled prospects for many, Menlow said.
Most analysts still believe the Verizon IPO, expected this spring, will still come to market. However, the future of other new issues is not as sure.
"I believe we will see a Verizon IPO but other IPOs are questionable at this point," Menlow said.
Nextel International, which is expected to begin trading in early November, is better positioned in some ways than Verizon Wireless. Verizon focuses primarily on the U.S. market, while Nextel targets Latin America and other undeveloped markets.
Reston, Va.-based Nextel International, a unit of wireless provider Nextel Communications, has wireless operations and investments in Canada, Japan, Brazil, Mexico, Argentina, Peru, Chile and the Philippines. Nextel Communications (NXTL: Research, Estimates) operates an all-digital wireless network that serves more than 5 million subscribers in the United States and abroad.
"Nextel is focused on the emerging market where wireless penetration is minute and growth potential is still ahead," Moran said.
Some analysts question whether the deal will still come to market. "It is still possible that they will do it this fall but the likelihood of it getting pushed off has increased," one analyst said, who declined to speak for the record.
Though Nextel International wireless operations are focused outside of the United States, investors from the United States will still be affected the gloom surrounding the wireless sector, the analyst said.
The future of Propel is even riskier, some analysts said. Propel, a subsidiary of Motorola, provides wireless services in more than 14 countries, including Mexico, Israel, Hong Kong, Chile, Jordan and Uruguay.
In September, Propel filed to sell 23.5 million shares at $17-to-$19 each via lead underwriters Goldman Sachs and Morgan Stanley Dean Witter.
Paul Sagawa, of Sanford Bernstein, believes all services providers, not just Propel, will face a hard road to an IPO from now on.
"The market situations is very poor," he said. "There is not that much capital available and we are not getting the valuations we are used to." 
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