Airtouch May Get An Important Call

Not many companies can match the $14.6 billion market capitalization of little-known AirTouch Communications (ATI). The stock trades on the Big Board at 29 1/2, an astounding 101 times expected 1995 earnings of 29 cents a share. Why does the market give AirTouch such a munificent valuation?

"It's a play in the fast-growing wireless-phone business, with a lot of global assets going for it--plus an intriguing buyout kicker," says one California investment manager. The stock's runup is far from over, he says.

A major provider of cellular-phone and paging services in the U.S., Europe, and Asia, AirTouch was spun off by Pacific Telesis in April, 1994. Despite the stock's lofty p-e, Christy Phillips, an analyst at Smith Barney, thinks AirTouch is still a buy: "The company's parts are worth substantially more than its current stock price," she says. She calculates the private-market value of the assets at 47 a share this year and 58 next year. These figures reflect the company's operations and rapidly growing customer network: Its "geographic footprint" covers a population of 36 million people in the U.S.--mainly California, Georgia, Michigan, Missouri, and Ohio--and almost 65 million overseas--in Belgium, Germany, Italy, Spain, Japan, and Korea.

Fierce competition and consolidation in the field have made AirTouch "an attractive buyout target," says one investor. Such giants as Britain's Vodafone Group and Cable & Wireless and the big phone companies in France and Italy are scouting for outfits with a hefty share of the U.S. market and a foothold in Europe and Asia, he adds.

AirTouch Chairman and CEO Sam Ginn acknowledges that informal inquiries have been thrown his way. "But there hasn't been any kind of [merger or buyout] situation that has made sense to us," he says.

Phillips expects 1995 operating cash flow to hit $702 million. In 1996, she figures that will grow 46%, to more than $1 billion. And in 1997, she foresees an additional 30%, to $1.3 billion.

The analyst's estimates of 46 cents a share for 1996 and 96 cents for 1997 don't include startup costs of the broadband personal communications services (PCS) licenses the company has obtained. The licenses were won through a joint venture of its U.S. cellular operations with U S West and through its participation in PrimeCo, a consortium formed to market nationwide PCS programs. With these links, AirTouch has the third-largest domestic coverage--after the Sprint-Comcast-Cox Communications joint venture and AT&T-McCaw-Lin group.

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