RPT-IPO VIEW-MetroPCS poised for $1 bln IPO amid telecoms duds

(Repeats column from Thursday)

By Yung Kim

NEW YORK, April 8 (Reuters) - MetroPCS Communications Inc.'s initial public offering this month is likely to fare better than other recent telecoms and technology IPOs based on the cell phone operator's four-year history of growth and profits.

The Dallas-based company's strong balance sheet and its business model differentiate it in a crowded field of larger competitors and in an IPO market that has been flooded with telecoms and tech offerings over the past three months.

The offering is set to be the largest IPO for the year to date when it comes on the market on April 18 with a proposed 50 million shares, or 14 percent, in a forecast range of $19 to $21. At the midpoint, that would fetch $1 billion and value the company overall at about $6.9 billion.

MetroPCS offers flat fees for unlimited minutes without a long-term commitment, which has helped it attract a growing base of about 2.6 million subscribers.

"This is a company with a long history," said Roe Equity Research analyst Kevin Roe. "It's not a start-up. It has lots of customers and lots of revenue."

MetroPCS earned almost $54 million in 2006 on more than $1.5 billion in revenues and has remained in the black since first offering services in 2002.

Analysts do not compare it with other recent IPOs in the sector as much as with Leap Wireless International Inc. (LEAP.O), which employs a similar business strategy and has a similar number of customers.

Leap's shares have climbed 83 percent from a 52-week low of $39.59 on June 13 to close Thursday at $72.34.

NOT LIKE OTHERS

A number of other IPOs related to technology and telecoms this year have met with lukewarm demand, including for Veraz Networks Inc. VRAZ.O, which makes devices for voice over Internet protocol, and for wireless broadband provider Clearwire Corp. (CLWR.O).

Veraz closed down 2.5 percent in its debut on Thursday, a day after pricing its shares below a forecast range.

After a much ballyhooed IPO, Clearwire, which was founded by cell phone service pioneer Craig McCaw, continues to trade below its $25 March offering price, closing on Thursday at $20.16.

The most important difference between MetroPCS and Clearwire, Veraz and some other disappointing new issues is its profitability, analysts said.

Clearwire had a loss of about $284 million in 2006, wider than a loss of almost $140 million the prior year.

Shares in a profitable company that recently came on the market, BigBand Networks Inc. BBND.O, have fared better. Its stock sold in mid-March at $13, rose as much as 33 percent in its debut and closed Thursday at $18.51.

Analysts said MetroPCS also has bright prospects for expansion after buying $1.4 billion in radio-wave spectrum licenses, which cover six of the 25 largest metropolitan areas in the United States, during the federal government's fall auction.

RISKS AS WELL

However, the company's business model presents drawbacks as well as advantages.

MetroPCS focuses on customers in metropolitan areas who can not afford or do not want a long-term commitment.

This strategy allowed the company to dodge direct competition with much larger companies in the U.S. market including Verizon Communications Inc. (VZ.N) and Cingular Wireless, owned by AT&T Inc. (T.N) and BellSouth Corp. BLS.N.

However, the lack of long-term contracts contributes to higher customer turnover, Roe said.

The company would also lose a significant edge if the larger companies were to offer similar deals, with little else separating it from the competition, said Francis Gaskins president of IPO Desktop, an independent research firm based in Los Angeles.

"A successful price policy begets competition," Gaskins said. "It's not like they are offering a new gadget or new product."

Leap and Verizon trade at 11 times and 3.7 times estimated 2007 earnings before interest, taxes, depreciation and amortization, according to Reuters Estimates.

If priced at the midpoint of the forecast range, MetroPCS would trade at 5.7 times 2006 EBITDA, according to Gaskins.