I have picked three bull and two bear cases in wireless telecommunication services industry based on fundamental and technical analysis.
USA Mobility (NASDAQ:USMO)
USMO was added to S&P SmallCap 600 after the close of trading on Oct. 13, 2009, replacing CASCADE BANCORP, which being removed due to its low market cap ranking. Since then, the stock has gained around $1.55. Among the Wireless Telecommunication Services companies, USMO ranks first with an ROE of 45.1%. Recently, it posted $0.39 vs. $0.43 Q1 EPS on 21% lower revenue. However, maintains its 2010 guidance of $228 million-$238 million revenue, $158 million -$163 million operating expenses (excluding depreciation, amortization and accretion), and $10 million -$12 million capital expenses. The company, over the last two quarters, has shown considerable improvement in several indicators such as quarterly rate of subscriber loss, quarterly rate of revenue erosion, total paging ARPU (average revenue per unit), and EBITDA margin expansion, and that make me convinced about the company's guidance. Based on intrinsic valuation of $25, this stock is a definite buy.
NTELOS Holdings (NASDAQ:NTLS)
I believe NTLS' above-average dividend yield of 6.3%, a rarity for small-caps, has added to its appeal. However, in light of the EPS pressure I expect in 2010 from higher operating costs and only modest customer growth, as larger wireless telcos gain market share, I see limited catalysts for the stock. NTLS now trades at what I view as a fair enterprise value/EBITDA multiple of 6X and P/E of 13.6X. However, I still view the stock favorably as it is likely to be added to S&P SmallCap 600. Once it is added to S&P SmallCap 600 the stock price could hold above $20.
NII Holdings (NASDAQ:NIHD)
In February 2010, NIHD and GRUPO TELEVISA, S.A.B. (NYSE:TV) signed a definitive agreement under which TV will acquire an equity stake in NIHD's operating subsidiary in Mexico, Comunicaciones Nextel de Mexico, S.A. de C.V. Under the agreement, TV will invest $1.44 billion in cash for an initial 30% equity stake in Nextel Mexico, which reflects an implied pre-investment value of Nextel Mexico of $4.3 billion. Currently, NIHD's market cap is at $6.63 billion. I believe, the company's earnings expansion should support a price in excess of $45 by end 2010, compared to yesterday's closing price of $39.65.
Millicom International Cellular (NASDAQ:MICC)
Recently Millicom International Cellular SA (MICC) reported an increase in first quarter profit helped by robust growth in its subscriber base, indicating strong demand for mobile internet and broadband. The company's customer base in Central America, South America and Africa all provided a steady increase. New mobile customers during the quarter rose 1.2 million to a total of 35.1 million. The increase was 15% in Central America, 17% in South America and 31% in Africa. What I like about this company, apart from stabilization in customer base, is that MICC ranks favorably on several stock methodologies that I consistently use. However, I suggest investors should keep away from the stock as the current price is not justifiable on some important valuation methodologies. However, the stock is a good buy if it sets a new 52 week low.
For the first quarter, net income attributable to Syniverse Holdings rose nearly 23.1% to $20.0 million from $16.03 million. On a per share basis, earnings increased 22.6% to $0.29 from $0.23. Total revenue increased 36.8% to $149.0 million from $108.92 million. Gross margin, though, declined to 62.2% from 63.3%.
Strength in the company's roaming and messaging lines of business drove solid first quarter results for Syniverse. Roaming volume growth accelerated across all four regions of the world, and its messaging platforms processed a record number of transactions. As a result of these positive trends, I have increased my guidance for the year. However, the stock price already reflects these assumptions, so I guess there isn't much potential unless there is any significant new development.