As the well-known players in the mobile communications business are plunking down billions of dollars in the new wireless spectrum auction, a small Winnipeg company is struggling to develop its own distinctive wireless communications business.
Craig Wireless Systems Inc. is the latest commercial undertaking of Drew and Boyd Craig that holds specialized wireless spectrum licences in Manitoba and B.C. as well as places like Greece, Norway and Cambodia.
Craig Wireless has been in business in one form or another since about 1996 -- the family's television and radio assets were sold earlier this decade for close to $300 million -- when it started offering wireless television service in rural Manitoba. It has changed its corporate strategy a few times as the scope of wireless technology has expanded dramatically.
Its current and future business is based around WiMAX technology, a next-generation wireless standard designed to meet the growing demand for mobile, high-speed broadband access.
The company went public in a reverse takeover in September 2007. While it is still nominally based in Winnipeg and has several thousand rural Manitoba customers for its wireless television and high speed Internet service, the company's senior management, including Drew Craig, are based in Toronto.
In the last month, the company announced a series of stops and starts that characterizes the challenging business climate and the exciting potential of its market.
In early June, the company tried to raise about $20 million and later that month was forced to withdraw the offering because of poor market conditions. In early July, it disclosed that its main partner and customer in Greece had lost its debt financing and a significant revenue generating opportunity was in question. It subsequently modified its arrangement with the Greek partner and hopes to continue to roll out an operating service in that Mediterranean country.
On Monday, it released its third quarter results showing that its sales were down about 20 per cent to $461,000 for the quarter ending May 31, and losses had more than doubled to $2.6 million compared with the same quarter the year before.
In an effort to find another source of capital, the Craigs will lend the company $6.6 million to take care of other debt obligations. Because of the tight capital markets, the company has decided not to go ahead with the purchase of rights to spectrum in Cambodia, and instead Boyd Craig made the $1.3 million purchase and gave Craig Wireless (the company) right of first refusal.
Company officials were unavailable for comment.
Greg MacDonald, an analyst with National Bank Financial in Toronto, downgraded his target price on the company's stock from to $3 from $7 because of the disruption in the Greek market, but still maintains that there is plenty of value in the spectrum licences that Craig Wireless holds and the future potential demand for the technology it could deliver.
Craig Wireless shares were down 11 per cent Tuesday to 89 cents, a new 52-week low. Its 52-week high was $4.75 last fall.
"At the minimum, Craig Wireless has a spectrum portfolio whose break-up value is worth at least $3 per share," MacDonald said. "An upside from that could be garnered from actually executing on an operating model. But the risk on that looks high right now because it does not seem like it is feasible right now to raise money."
The attraction of the spectrum and the technology being developed is that it can deliver wireless data downloads at speeds similar to land line high speed.
A multi-billion company called Clearwire was launched in May in the United States with big name technology partners and investors including Sprint, Intel, Google and Comcast.
"Will WiMAX take off ? Sure it will," said Iain Grant of The Seaboard Group, telecomunications consultants out of Montreal.
He said the significant investment from the U.S. technology heavyweights in the Clearwire venture may mean that 2009 could be WiMAX's year.
"Wireless data is only a fraction of what it will be in the near future," said MacDonald. "Wireless data growth will be phenomenal and much higher than people think."
martin.cash@freepress.mb.ca
Craig Wireless Systems Ltd.
$46.4 million -- total assets
$13.3 million -- price paid for spectrum rights in Norway in the fall of 2007, including expenses.
$1 million -- price paid in February 2008 for wireless spectrum rights in New Zealand.
$900,000 -- price paid for equipment that the company expects to roll out WiMAX-enabled service in the Coachella Valley region of California.
$1.3 million -- price paid by Boyd Craig for rights to wireless spectrum in Cambodia (Craig Wireless has the right of first refusal on that)
7.5 years -- time left on the wireless spectrum licence the company holds in Greece.
$1.4 million -- revenue generated from wireless television and Internet services in rural Manitoba and B.C. for the nine months ending May 31.
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