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6 pts

Opinion on  METROPCS COMMUNICATIONS INC. (PCS)     Sector: Services  >  Industry: Communications Services
MetroPCS Communications Inc. rallied 19% in its stock-market debut Thursday as the first initial public offering of 2007 to raise more than $1 billion

Apr 23, 2007 09:52 PM UTC
Return Risk
-34.21% LOW
Associate


Winning fans on Wall Street for its business model of flat-rate wireless-communication services with no signed contract, MetroPCS opened at $25.10 a share, above its $23 IPO price. The shares climbed to end their first session at $27.40.
With 32 million shares changing hands by the end of the day, the IPO was among the volume leaders on the New York Stock Exchange.
Brian Hamilton of research and software firm Sageworks said the IPO is rallying because of the company's track record of profitability in a sector that's not always profitable.
"The valuation is a little pricey/high but I would rather invest more money in a company that is overvalued than any money in a company without a good operating history," he said.
MetroPCS currently offers shoppers unlimited voice, text, email and Web services from its line of MetroPCS phones for $50 a month.
Signs of strong demand for the stock came as it priced richer than its estimated range of $19 to $21 a share.
MetroPCS ( PCS :
metropcs communications inc com
PCS 28.75 , +0.20 , +0.7% ) raised $1.15 billion by offering 50 million shares via underwriters Bear Stearns, Banc of America Securities, Merrill Lynch and Morgan Stanley.
With 346.2 million shares outstanding after the IPO, MetroPCS carried a hefty market cap of nearly $8 billion at the $23 IPO price. At its IPO price, the company easily achieves the minimum market cap cutoff of $4 billion for inclusion in the S&P 500 index.
Demand for the profitable wireless-phone-service company ran strong after a rival, Leap Wireless, ( LEAP :
leap wireless intl inc com new
Last: 79.35 -0.58 -0.73%

MetroPCS, a Dallas provider of wireless broadband personal communication services with 2.9 million subscribers as of Dec. 31, reported 2006 net income of $29 million on revenue of $1.55 billion.
The company plans to use the net proceeds of the IPO to build out its network and launch its services in new markets acquired in a frequency auction. It expects to launch service in Los Angeles this year and add Boston, New York, Philadelphia and Las Vegas in 2008/2009.
Pre-IPO shareholders include Accel Partners, First Plaza Group Trust, M/C Venture Partners, Madison Dearborn Capital Partners and TA Associates.
MetroPCS owns or has access to licenses covering a population of 140 million in 14 of the top 25 largest metropolitan areas in the U.S., including Atlanta, Boston, Dallas, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando, Philadelphia, San Francisco, Sacramento, Sarasota, and Tampa.


PCS:  This call was made on 04/23/07 @ $28.51
Rating:   Positive   $28.51 (04/23/07)
Gain/Loss:   -51.07% in 589 days
Target:   $35.00 (+22.76%) in Three months


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