Twins. Sometimes their differences are more fascinating than their similarities. Especially when, for no good reason, one is fawned over and the other neglected.
are fraternal twins, the offspring of mobile phone operator
. Alamosa is larger and stronger, having been born first (by two quarters). But AirGate may catch up. Its growth prospects will become clearer Thursday when it releases first-quarter earnings.
For now, Alamosa is enjoying a valuation that, by the standard industry yardstick, is 77% higher than its brethren. Typically, a mobile-phone operator gets valued based largely on the number of people it can potentially serve. In technology-financing parlance, it's called an "enterprise value per POP (population per individual)."
Using this measure, Alamosa has a value of $233 and AirGate has an enterprise value per POP of $132, according to a recent report from
, which has not done underwriting for either company. Alamosa can potentially cover 22% more customers than AirGate -- 8.3 million vs. 6.8 million, a difference that doesn't support the valuation gap. Also, Alamosa, in operation since June, had nearly 32,000 subscribers in the fourth quarter, while AirGate had none since it launched its service in January. Alamosa just reported a 58% increase in subscribers for the first quarter, bringing its customer base to 50,512.
"Alamosa's growth results were very impressive and I applaud them for that," AirGate CFO Alan Catherall says about Alamosa's first-quarter numbers. "
But we have a critical advantage in capacity for roaming traffic." AirGate is headquartered in Atlanta and operates in the Southeast, where the population is almost three times denser than Alamosa's region, with the opportunity to serve about 111 people per square mile while Alamosa has a region with fewer than 40 people per square mile, he notes.
Catherall says he expects AirGate to have its network built out to cover 4.8 million people by the second quarter. The company can already reach 3 million people, more than Alamosa can reach today, Catherall says. Alamosa, which operates in the Southwest and Wisconsin, did not return calls seeking comment.
"It doesn't make sense that one company is valued so much higher than the other," says one telecom analyst, who requested anonymity and does not hold a position in either stock. "They're relatively the same size, they run identical businesses and they have the exact same economics." For example, the companies pay the same price for handsets and have the same deals on roaming rates with Sprint PCS, the analyst notes. "I'm not saying Alamosa doesn't deserve a higher valuation at this point, but a difference this large just doesn't make sense to me."
Part of the valuation disparity could be that Alamosa generally has more spectrum in its markets than AirGate, the analyst points out. The more spectrum a company has, the higher volume of traffic it can handle in any one area, in much the same way a thick pipe is able to transport more water than a thin one. But both companies lease, rather than own, their spectrum, which simply means that AirGate will need to spend more than Alamosa on capital expenditures in the long term. In the meantime, neither company is close to utilizing all the spectrum it already has in place.
Alamosa's stock is trading around 29 and the company has a market capitalization of $1.7 billion, while AirGate's stock, up sharply in recent days, is trading around 84 and the company has a market cap just shy of $1 billion. AirGate announced Friday that it had launched service in Charleston, S.C., allowing it to potentially reach an additional 579,000 people.
Two more Sprint PCS affliates are scheduled to go public,
will begin its roadshow this week and
. The only other publicly traded affiliate is
Shenandoah Personal Communications
, a company that has been publicly traded since 1995.