Wireless Ops Sharing Pain with Bondholders

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People's Choice TV Corp. last week joined the parade
of wireless cable companies looking to pass along some of their pain to bondholders.

Shelton, Conn.-based PCTV said it has offered to
bondholders $58 million in new senior notes, $42.5 million in cash and 4.9 million shares
in common stock (currently trading at below $1 per share) -- with a total value of about
$105 million -- for $260.2 million in outstanding 13 percent notes. PCTV's current
senior notes have a principal value of $332 million at maturity.

PCTV also offered $10.2 million in new notes, plus 2.6
million shares of stock, for preferred stock with a book value of $67.7 million.

The problems plaguing the multichannel multipoint
distribution service industry had already cratered those companies' publicly traded
stocks. PCTV, for example, was a $30 stock two years ago.

Now, bondholders face a squeeze.

Earlier this month, Heartland Wireless Communications Inc.
-- the biggest wireless cable operator, with about 179,000 subscribers -- announced that
it wouldn't make its April 15 interest payment on its 13 percent notes. It also said
it had hired Wasserstein Perella & Co. to help negotiate new terms with debt-holders
of its $115 million in 13 percent notes and $125 million in 14 percent notes.

Heartland's move prompted credit-rating agency
Standard & Poor's Corp. to slash the ratings that it assigned to five wireless
cable operators to levels that are "no longer meaningful." Another operator, CAI
Wireless Systems Inc., was already at that rating level.

On April 9, American Telecasting Inc. said it had begun a
tender offer to buy back a portion of its outstanding senior notes for $255 per $1,000
principal amount at maturity. It said it would offer to spend up to $17.5 million in that
effort. The 14.5 percent notes have a current value of about $300 million.

John Mansell, who follows MMDS firms for Paul Kagan
Associates Inc., said the credit crunch has been looming for months.

"It's possible that there could be three or four
bankruptcies or restructurings over the next 18 months," he said.

Many MMDS companies are hanging their hats on data delivery
and, Mansell said, "there really is a huge potential market for high-speed access to
the Internet for small businesses." But wireless cable operators don't have much
experience in managing two-way systems, and they lack both the capital and the time to
prove that the potential will translate into real business, he added.

PCTV, like other wireless operators, has been holding back
on marketing its analog service to conserve cash for Internet-service launches. The
company also said it intends to launch digital TV. Analysts believe that the digital-TV
launch is set for Phoenix -- one of two markets where PCTV currently offers wireless-data
service.

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