SpectraSite Stands Tall
By Gene G. Marcial
As cell phones have spread, so have wireless towers -- used as antennas by carriers such as Nextel (NXTL ) and Sprint PCS (FON ). The No. 3 player is SpectraSite (SSI ), whose stock is up from 33 in March, to 45. It owns and leases about 7,500 towers. "SpectraSite's strong cash flow and revenue growth -- and modest debt -- are propelling the stock," says Kris Tomasovic Nelson of Forstmann-Leff Associates, which owns shares. These factors also fuel takeover rumors, she adds.
A possible buyer, say some pros: No. 2 Crown Castle International (CCI ), with more than 10,600 sites in the U.S. and a market cap of $3.3 billion. SpectraSite's market cap is $2.2 billion. Crown sold its British arm for $2 billion and could well buy SpectraSite and push it ahead of No. 1 American Tower (AMT ), which has 12,440 U.S. sites. Even with no buyout, SpectraSite is worth 60, says Nelson, based on 20 times estimated 2005 free-cash flow (operating profits after capital and net interest expenses) of $2.90 a share. Her 2004 forecast is $2.25.
David Barden of Banc of America Securities (BAC ) says growth in cell usage and subscribers is firing up the business. "SpectraSite is the best-positioned and most attractively valued stock" in the group, says Barden, who sees it earning 65 cents in 2004 and $1.35 in 2005, vs. 5 cents in 2003. Crown and SpectraSite would not comment on buyout rumors.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
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