Dialing Into The Telecoms Of Tomorrow

In this unsteady market, investors in technology stocks may feel like they're doing a high-wire act. But this may in fact be a good time to go wireless. Companies specializing in cellular-phone systems, pagers, and other wireless technologies are battered down, but as they make new inroads with consumers, they promise healthy returns in the near future.

Wireless stocks have gotten hit by the same double whammy as other technology stocks: rising interest rates and a dropping Dow. But the sector's fundamentals are still powerful. Companies report that subscriptions are up 50% this year, with robust earnings and cash-flow growth ahead. Market penetration for cellular phones alone is only 7% in the U.S., leaving ample room for expansion.

For the risk-averse, a "safe" way to enter this sector is by investing in Southwestern Bell or BellSouth. Together, they control 23% of the cellular-phone business, yet this represents only 9% of their revenues. Unlike many wireless startups, they have solid earnings and cash flow, says Morgan Stanley analyst Stephanie Comfort.

Many analysts are eager to catch Motorola while it's down. It got clobbered when its first-quarter earnings were 1 cents less than expected, but it still has an excellent position in the wireless world. Its stock, which split on Apr. 18, is 18% off its 52-week high. Many analysts recommend Air- Touch, recently spun out of Pacific Telesis, California's Baby Bell. It has excellent domestic and global exposure, including licenses to operate cellular systems in Germany, Italy, Japan, and South Korea. It's also trading at 11 to 12 times cash flow compared with 18-20 times for most cellular companies.

HEAVY BACKERS. Another popular pick is Nextel, which has a digital technology based on frequencies used by dispatchers. It should be more efficient, clearer, and cheaper than cellular. Nextel has some heavy backers including MCI and Motorola. They are betting the vast growth potential of the cellular market will leave room for another major player--even though it hasn't set up any systems yet.

Although less exciting than cellular, paging is growing 20%-50% annually. At $10 a month, the devices have become popular with families. Prudential analyst John Bauer likes Paging Network because it's developing new beepers that allow callers to leave short voice messages. It will function like a pocket-sized answering machine yet costs a lot less than a cellular phone. $by

Pam Black

                           Price   trading
      Stock          Apr. 18, 1994    range
      AIRTOUCH          $23       $19 7/8-27 1/4
      MOTOROLA           45 1/8   311 1/32-55 1/8
      NEXTEL             33 3/4   22 1/8-54 7/8
      PAGING NETWORK     22 1/2   182 7/32-34 1/2
      SOUTHWESTERN BELL  42 1/2   31 3/4-47
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