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The Little $1bn+ IPO That Could, MetroPCS

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Second time's the charm for once bankrupt local wireless provider MetroPCS (PCS), which had to cancel its initial IPO plans in 2004 because of pesky accounting issues. The $1bn+ MetroPCS IPO today, however, stands as the largest US telco IPO of the 21st century. Let's wish it a better fate than Vonage.
Despite a slightly down day in the market, the MetroPCS IPO priced at $23, well above its target range of $19-$21. The stock is currently up over 15% to around the mid $26 range. The 50 million shares in the IPO are poised to raise well over the targeted $1.15bn in proceeds for the company. Shares of MetroPCS’ primary comparable, Leap Wireless (LEAP) are down slightly at $75 a share.
The big names on the S-1 are Bear Stearns, Banc of America Securities, Merrill Lynch and Morgan Stanley while the tiny names are UBS, Thomas Weisel, Wachovia and Raymond James. Goldman and JPMorgan are written in invisible ink.
The risk factors section of the S-1 is nearly 20 pages long, and always contains that jarring first risk, usually along the lines of “A meteor may hit the earth and our company will inevitably fail because everything we do is questionable.” In this case, it’s the rather direct, “Our business strategy may not succeed in the long term.” Fair enough, but some “risky” highlights:
-Along with current wireless, VoIP and MVNO (mobile virtual network operators (the Boosts and Virgin Mobiles of the world) providers, MetroPCS faces emerging competition from WiMax and 700MHz band next-gen networks in development from the Googles of the world.
-Spectrum, spectrum, spectrum. As more companies want it and bid on it, spectrum is increasingly expensive, and MetroPCS can be outbid by the big boys in the future. The company had to raise $1.6bn last time it acquired significant spectrum rights, to gain access to the NY, Las Vegas, Phili and Boston metro areas, which was an insta-leverage pop of over 4x. Although Adj. EBITDA has grown an average of 40% over the past two years, future acquisitions of spectrum, and fully developing the areas within the current domain the company paid for, may require raising money that places significant leverage on the company (although the $1.15bn+ raised in the IPO won’t hurt). Some good news for margins – the % increase in ARPU (Avg. Revenue Per User) is outpacing the % increase in CPU (cost per user). Since 2006, ARPU increased by 4.5%, while CPU increased by 3.6%.
One of the things that jumped out while looking through the S-1 is that MetroPCS is still waiting to fully realize growth from its “expansion markets,” which created a near $100mm negative hit to EBITDA in 2006. Penetration of MetroPCS expansion markets, which include Tampa/Sarasota, Dallas/Ft. Worth, Detroit, Los Angeles, Orlando and portions of northern Florida has been met with assorted legal stroppiness from Leap, as well as other local players.
MetroPCS marks first IPO of '07 to top $1 bln – [MarketWatch]
Metro PCS S-1 [SEC]
Telecom: Up From The IPO Ashes – [BusinessWeek]


Facebook CFO Could Use A Little Help Here

Anyone know anything about drumming up interest in a stock that's down over 45 percent since going public? Wanna help him out after this lockup period ends? No? He could use a little assistance here. Needs a little help. Flew all the way to New York to just come flat out and say "help me." Facebook Chief Financial Officer David Ebersman is meeting with investors in New York today, a person familiar with the matter said, days before the lifting of a ban on stock sales by some of the company’s biggest shareholders. The person asked not to be identified because the meetings are private. Through yesterday, Facebook had tumbled 45 percent since the company sold shares at $38 in a May 17 initial public offering. The lockup on the first block of shares held by insiders expires on Aug. 16. Facebook, which hasn’t closed above the IPO price since its first trading day, needs to reassure investors that it can increase revenue from advertising as more of its almost 1 billion users access the social-networking service on mobile phones, said Victor Anthony, an analyst at Topeka Capital Markets in New York, in an interview. “Investors who bought into the IPO have lost billions of dollars,” Anthony said. “He needs to get out there and tell the story of how he’ll drive revenue growth.” Facebook CFO Said To Meet With Investors Before Lockup Expiration [Bloomberg]