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Will sale of AT&T Wireless shares AWE investors?

The initial public offering of AT&T Wireless Group is expected to debut this week, but the recent stock market places a cloud of uncertainty over the largest IPO ever by a U.S. company.

The long-awaited initial public offering of AT&T Wireless Group is expected to debut this week, but the recent stock market places a cloud of uncertainty over the largest IPO ever by a U.S. company.

AT&T Wireless, which will trade under the ticker "AWE," is expected to raise upward of $11.5 billion, based on the high end of its $26 to $32 pricing range and the 360 million shares it plans to sell. Last year's $5.5 billion IPO by United Parcel Service is the current U.S. record holder.

 IPO on tap
AT&T Wireless Group
Ticker: AWE
Business: Wireless services
Web site: AT&T wireless
Lead underwriter:
  Goldman Sachs
Pricing range: $26-$32
Recent wireless news

For more IPO information, see CNET Investor
*price information may change
Analysts note that lingering jitters from the recent market collapse and the huge number of shares being sold could dampen investor enthusiasm for the offering, which is being underwritten by Goldman Sachs.

"They're going to attract the long-term investor rather than the momentum investor or hot money," said Randall Roth, an analyst with IPO Plus Aftermarket Fund. "And with so many shares being floated, any momentum investors will represent a small portion and not enough to move the shares up dramatically."

The tech-heavy Nasdaq was down last week about 25 percent from its record high of mid-March.

As a result of the turmoil, five of six IPOs that managed to debut last week priced below their initial ranges--a situation that hasn't been seen since early October, said Richard Peterson, an IPO analyst with Thomson Financial/Securities Data. In addition, 10 deals were pulled last week and seven were postponed, including the IPO for Web portal AltaVista.

Nonetheless, the AT&T offering will be closely watched and could set the tone for future IPOs, analysts said.

"In a bad market, when nothing is doing well, AT&T may be a catalyst to get things moving again," Roth said. "In a good market, it might have cast a shadow on the other offerings."

AT&T Wireless, which will serve as a tracking stock for telecom giant AT&T, is not likely to see the same rise as competitor Sprint PCS, Peterson said. Sprint's tracking stock, which has risen more than 250 percent since its debut early last year, received another pop last week after the company posted strong quarterly results. Sprint PCS' shares also may have been helped by the pending merger of its parent company with MCI WorldCom, Peterson said.

Although IPO analysts do not expect a huge first-day gain from AT&T Wireless, the wireless sector is red-hot.

In the next decade, some analysts expect 70 percent of U.S. homes to have a wireless phone, more see related story: Companies fight over wireless users than double the current penetration rate of 31 percent. Among wireless companies, AT&T ranks third in the $45 billion industry.

AT&T Wireless generated revenues of $2.1 billion in the fourth quarter, up 42 percent from a year ago. The industry, meanwhile, is growing at a 20 percent annual rate.

Peter Friedland, an analyst with WR Hambrecht, said a key metric in the wireless industry is "EBITDA" (earnings before interest, taxes, depreciation and amortization). EBITDA represents a clear look at a company's cash flow from its operations. AT&T's fourth-quarter EBITDA was $234 million, up 28 percent over a year ago.

But the company's EBITDA is below the industry average, depressed by the added cost of having to pay other carriers when its customers roam on their networks and by its new PCS business weighing down the margins of its older cellular business.

With the proceeds from the IPO, however, Friedland said he expects AT&T will be able to enlarge its see story: Creating wireless giants network and reduce the expense paid to other carriers. The company covers two-thirds of the United States through its own network and affiliates.

Besides AT&T Wireless, 16 IPOs are scheduled for this week, including business services company and ON Semiconductor.

DigitalWork hopes to raise up to $81.9 million based on the high end of its $11 to $13 pricing range and 6.3 million shares it will sell. The company, which has received an investment from Dell Computer, will trade under the ticker "DWRK." Lehman Brothers is the lead underwriter.

ON Semiconductor, meanwhile, hopes to raise $510 million, based on the high end of its $15 to $17 price range and 30 million shares it will sell. The semiconductor components maker, which is being underwritten by Morgan Stanley, will trade under the ticker "ONNN."