LMDS Pioneer Defaults on Two Loans

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CellularVision USA Inc., which pioneered a
wireless-communications system known as local multipoint distribution service, has
defaulted on two loans that could end up costing the firm nearly $10 million.

According to documents filed with the U.S. Securities and
Exchange Commission, Brooklyn, N.Y.-based CellularVision said it failed to make a $271,200
bond-interest payment due Sept. 30 to Morgan Guaranty Trust Co. of New York, as well as a
$366,457 promissory-note payment to Metromedia Fiber Network.

Failing to pay the interest on the Morgan Guaranty bonds
gives the investment bank the option to demand full payment of the outstanding principal
of $6.03 million, the $271,200 in overdue interest and penalty interest of 8 percent above
the prime rate.

Officials at Morgan Guaranty declined to comment on the
status of the bonds.

Shant Hovnanian, CellularVision's chairman and CEO,
did not return phone calls seeking comment.

As a result of the failure to pay the MFN loan,
CellularVision is also in default of the terms of a $3.5 million loan made to the company
by WinStar Communications Inc. That default gives WinStar the right to demand payment in
full.

WinStar has not informed CellularVision of any intention to
call on the loan. And the company also dodged another bullet when it received a 10-day
reprieve from WinStar concerning the spectrum sale.

CellularVision said in the SEC filing that it would not be
able to meet an Oct. 10 deadline regarding shareholder approval of the WinStar spectrum
sale. As a result, WinStar could have terminated the deal.

However, Gary Holmes, a spokesman for WinStar, said the
company has granted CellularVision a 10-day extension to obtain shareholder approval,
until Oct. 20.

"Our expectation is that they will get approval in
that time," Holmes said.

The extension of that deadline also allows CellularVision
to take advantage of another $2 million loan from WinStar, which was to take effect after
shareholder approval was received.

Although CellularVision appears to have a little breathing
room at the moment, some analysts believe that the SEC filing is an indication of its
inevitable decline.

Larry Swasey, senior wireless analyst for Allied Business
Intelligence, an Oyster Bay, N.Y.-based market-research company, said the handwriting was
on the wall for CellularVision back in July, when it agreed to sell the bulk of its
wireless spectrum to WinStar for $32.5 million.

"Now, they have defaulted on their loans, and
they've indicated that they won't go forward with their satellite-delivery
system," Swasey said. "Those are all indications that the company most likely
will not be a player in delivery technologies."

Although Swasey is a believer in LMDS -- the high-frequency
radio-based technology has been touted as an excellent delivery system for high-speed-data
and telephony services -- he added that CellularVision's saga was a perfect example
of a company being a little bit ahead of its time.

"CellularVision had a great vision," Swasey said.
"But they were a little nearsighted as to when that vision would come true. It
appears that anyone looking to use LMDS as their ticket this year probably won't do
well."

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