days as an independent company are running out, say four telecom analysts.
They point to
as the most likely acquirer. This deal would help VoiceStream fill holes in its network, while elevating Powertel to a national level, says John Bensche, a
analyst. (Lehman hasn't performed underwriting for either company.)
Powertel representatives declined to comment, citing the quiet period before its April 27 earnings release. VoiceStream didn't return calls.
Powertel's stock has been hurt by market volatility, but analysts say it still trades with a takeout premium. It hit a high this year of 103 5/8, before dropping with other wireless stocks in the past two weeks. It was trading Thursday just under 65.
If wireless analyst Perry Walter of
is right, the stock could rise even more on a takeover offer. Walter puts a price tag on Powertel of about $105 a share, or $6.6 billion. (Robinson-Humphrey hasn't performed underwriting for Powertel.)
"That's why I own Powertel," says one money manager who asked to remain anonymous. Analysts expect a deal within three months.
VoiceStream needs to fill out its nationwide mobile telecommunications network to compete with the likes of
, a joint venture of
, as well as
, which are merging their wireless operations.
In fact, the BellSouth and SBC deal makes a Powertel acquisition more likely, says Richard Prentiss, head of telecom research at
. (Raymond James hasn't performed underwriting for either company; it rates Powertel a strong buy and VoiceStream a buy.)
VoiceStream was keeping open the option of being acquired by BellSouth, which operates in VoiceStream's coverage holes, before BellSouth chose SBC, Prentiss and Bensche say.
Investors often value wireless providers on a per-pop basis, which refers to the total population within the company's operating areas. The number and value of a company's pops help determine its rank among competitors and, therefore, its worth as a possible acquisition target.
Powertel has an enterprise value of about $254 per total pops, or $388 per covered pops, which counts the number of people the company's network currently covers, according to Art Poole, wireless analyst at Raymond James. The company has licenses covering about 26 million pops and, at the end of the fourth quarter, an operating network covering 16.9 million pops.
A VoiceStream/Powertel deal would likely be accretive on a per-pop basis, meaning that VoiceStream would be buying Powertel's pops at a cheaper price than what its own pops are worth. So investors would likely favor the deal.
VoiceStream operates the only nationwide network using a technology called "global system for mobile communications." This standard GSM, which Powertel also employs, is customary elsewhere in the world. VoiceStream acquired previously independent U.S. GSM operators
last year for $4.5 billion and $3.5 billion, respectively. BellSouth and SBC use GSM in a few territories, but mostly rely on time division multiple access (TDMA) technology.
Even if VoiceStream buys Powertel, it's still likely to end up an acquisition target in a consolidating market, analysts say.
One telecom banker suggests that BellSouth and SBC may still seek to acquire VoiceStream in an effort to expand their coverage. But the three companies would own more spectrum than they're allowed in overlapping areas. That would force them to divest properties, making a deal potentially more cumbersome than it's worth.
However, what's now known as Verizon Wireless swapped $3 billion worth of overlapping properties in February with
to avoid exceeding spectrum caps.
Robinson-Humphrey's Walter suggests the company would be a good fit for Hong Kong investment powerhouse
, which already owns 23% of VoiceStream, or Finnish telecom operator
, which owns 8% of VoiceStream and 9% of Powertel. (Robinson-Humphrey hasn't performed underwriting for the companies.) Officials from Hutchinson and Sonera couldn't be reached to comment, but one mergers and acquisitions telecom banker says it's unlikely that Sonera would be able to afford VoiceStream.
But that's one deal away. First comes Powertel.