UPDATE: Tower Cos. Seen As WiMax Winners, But Not Until '09

(Updates with analyst comments beginning in ninth paragraph.)

By Steven Russolillo

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Companies that provide infrastructure to the wireless industry, such as those that operate cellular towers or provide needed microwave power, are seen benefiting from the $12 billion wireless joint venture announced Wednesday - but probably not until 2009.

Ceragon Networks Ltd. (NASDAQ-NMS:CRNT) (CRNT), an Israeli backhaul company that helps connect cellular towers wirelessly to the carrier's main switch, may be the biggest winner because of its involvement with Sprint Nextel Corp. (NYSE:S) (S) in the design of the network's microwave backhaul portion. Shares of Ceragon soared 15% to $ 10.61.

Other likely winners include tower operators such as SBA Communications Corp. (NASDAQ-NMS:SBAC) (SBAC), American Tower Corp. (NYSE:AMT) (AMT) and Crown Castle International Corp. (NYSE:CCI) (CCI), with SBA seen as the biggest beneficiary as 30% of its revenue last year came from Sprint.

"We believe the substantial funding for the WiMax joint venture offers incremental upside for the tower companies at high margins," said Phil Cusick, an analyst at Bear Stearns.

Cell tower companies have strings of nationwide radios and antennas that pick up and transport the signals used for voice calls, text messages or mobile Web surfing. As volume increases, wireless carriers spend more to upgrade their equipment.

The tower stocks - each of which have bounced more than 22% from their January lows - are active Wednesday, but only Crown Castle (NYSE:CCI) is seeing any notable gains, up 2.9% to $40.48.

Clayton Moran, a media and communications analyst with Stanford Group, said the widely anticipated announcement of a WiMax deal has already been built into the tower stocks, which is muting any potential gains in Wednesday's trading session.

Moran said the fact that Clearwire will be aggressively building its WiMax network represents a new growth driver to the tower industry that is used to network deployments from AT&T Inc. (NYSE:T) (T), Sprint, Verizon Communications Inc. (NYSE:VZ) (VZ) and Deutsche Telekom AG's (NYSE:DT) (DT) T-Mobile.

"It's new and exciting, but it's not that big when you look at to what the big four are doing with their network deployments," Moran said.

Moran said he expects WiMax to add $100 million to $150 million to tower industry revenues, representing a 1% to 1.5% increase over the next several years to the 10% annual growth rate.

The WiMax venture, an alliance of cable, Internet and chip giants, will deliver Web access for cellphones and laptops at speeds much faster than what is available today. Analysts say the venture, valued at more than $12 billion, will have a two year head-start on rivals Verizon Wireless and AT&T (NYSE:T) which are just beginning to sketch out plans for their next-generation wireless networks.

The venture includes Sprint and Clearwire as well as other big-name backers such as cable-TV giants Comcast Corp. (NASDAQ-NMS:CMCSA) (CMCSA) and Time Warner Cable Inc. (NYSE:TWC) (TWC), Internet giant Google Inc. (NASDAQ-NMS:GOOG) (GOOG) and chip maker Intel Corp. (NASDAQ-NMS:INTC) (INTC).

Clearwire Chief Executive Benjamin Wolff said on a conference call that the WiMax network could cover 120 million to 140 million people by 2010 and potentially reach up to 200 million people.

- Steven Russolillo, Dow Jones Newswires; 201-938-2205; steven.russolillo@ dowjones.com

    (END) Dow Jones Newswires   05-07-08 1436   Copyright (c) 2008 Dow Jones & Company, Inc.