The Update on NBT’s VelaTel Global Communications, Inc. (VELA) Update
With the ZTE technology breakthrough bringing 4G TD-LTE to 3.5 GHz unpaired spectrum now FINALLY disclosed...NBT can NOW get out a new report valuing VELA assets assuming what we knew all along...that their share of their 3.5 GHz spectrum ALONE is worth HUNDREDS of $millions MORE now that potential co-investors in the VelaTel subsidiaries know for sure 4G-LTE will run on VELA's 3.5 GHz spectrum assets.
The VelaTel business model is now 100% in place except for ONE final missing piece: which major wireless network investor(s) will they eventually sell up to a 24% interest in their subsidiary wireless networks in order to finance the major expansion plans of these networks BEYOND initial deployments.
Those of us under NDA with VELA can't share the investor they have identified as most likely but what you should know is the VELA business model NOW WORKS and is in full deployment mode across ALL their network assets in China, Peru and Eastern Europe. There are literally tens of $billions of capital aimed at investing in 4G wireless networks in emerging markets...we continue to be highly confident that additional equity capital investment AT THE SUBSIDIARY level (i.e., non-dilutive to a the VELA holding company level) will be achieved when the initial carrier deployments are completed and operating (dual band Wi-Max/TD-LTE base stations 100% upgradable via firmware/software upgrades to full 4G TD-LTE advanced networks).
VELA's insurgent low cost 4G TD-LTE carrier development strategy and business model is now fully disclosed and really quite simple:
#1 Gain control of orphaned/undervalued 2.5 GHz and 3.5 GHz spectrum in emerging growth low penetration/high cost wireless broadband countries/regions in Asia, South America, and East Europe.
#2 ARBITRAGE the increase in value from orphaned 3.5 GHz unpaired spectrum as their technology partner ZTE Corporation rolls out 4G TD-LTE base station equipment for unpaired TD-LTE 3.5 GHz spectrum.
#3 Leverage their global technology development and financing partnership with 4G-LTE networking giant ZTE Corporation and their membership in the 4G TD-LTE carriers group GTI Forum (sponsored by China Mobile its parent CMCC) to rapidly deploy LOWEST COST/Highest efficiency 4G TD-LTE networks in their chosen markets.
#4 USE Isaac Capital Group equity capital to make the down payments on ZTE Corp. equipment in initial 50-100 base station deployments to get the acquired greenfield 4G networks up to dual band Wi-Max/TD-LTE capability.
#5 USE VELA's 25 year $20 billion wireless network building experience and ZTE's superior performing equipment AND 85% equipment financing to build THE LOW COST 4G LTE network vs. the competing legacy carriers and UPGRADE to 4G LTE after initial deployments via no/low cost firmware and antennae upgrades.
#6 RAISE additional but NON-dilutive (at the holding company level) expansion capital by selling up to 24% minority equity tranches in their 75%+ owned global wireless carriers (Peru, Balkans, NGSN/CASC b2b networks in China) while still maintaining control and 100% consolidating control of their national lowest cost basis 4G-LTE carriers.
#7 Expand the networks subscriber numbers with 30-50% LOWER COST 4G-LTE data plans included in multiple OEM digital devices with an eye to an IPO the individual carriers on the major regional exchanges where their networks are located.
#8 Build commercial B2B networks in China with major $billion state-owned enterprises EACH of which are registered to conduct IPOs on Hong Kong exchange ala China Mobile/China Telecom/China Unicom.
#9 FINALLY conduct a REAL honest-to-God SECONDARY underwritten stock offering with up listing to NASDAQ or NYSE (raise $25-$30MM in a PIPE transaction with a Telco specialty broker dealer) to pay off ZTE vendor financing along with running off rest of financing with EBITDA.
#10 REPEAT #1, #4 and #5 again, again, and again with new equity capital and POSITIVE EBITDA cash flows.
THIS is the VelaTel Strategy and Business Model. All but one of the missing parts is now fully disclosed and in place. The ONE key part missing was 2012 equity financing...that was secured earlier this month. VELA HAD to expand authorized shares to do the convertible financing...but in NO way will they actually ISSUE another one billion shares. This convertible financing caused a panic sell-off in shares.
The NEXT part missing WAS the ZTE 3.5 GHz 4G-LTE base-station equipment announcement...because without that new technology the 3.5 GHz spectrum was orphaned in a 4G world. THAT part was answered this week with ZTE's announcement on beginning delivery of 4G-TD-LTE base stations for 3.5 GHz spectrum.
The NEXT part is EXECUTING in 2012 on their 7 different carrier/network projects. Vela now has 220 plus employees/contractors and EVERYONE is dead focused on EXECUTING the game plan. So far they are on schedule in March.
The FINAL missing part of their business plan/model will be securing ADDITIONAL NON-DILUTIVE equity financing into the operating carrier units. This part will happen when they have improved the value of the national carriers enough to get GREAT value for the 24% equity tranches they will sell in the subsidiaries.
WE do not expect to see those second round equity tranche raises until 2013...but we 100% DO expect those investments to happen. There is literally $10 of billions in strategic and private equity capital around the world aimed at getting pieces of rapidly expanding 4G-LTE networks in emerging growth countries. There IS no growth in the developed world carriers....their markets are SATURATED with wireless customers 125% of the population base.
For wireless investment groups emerging growth is the ONLY place they can hope to get decades of secular growth, and this secular growth in wireless broadband demand has just exploded as iPads/iPhones and Android devices reach the emerging markets and SUCK enormous amounts of data out of the HIGH COST legacy carrier networks.
YES—this week's announcement from ZTE was a REAL key strategic achievement in VELA's hard fought insurgent battle to build the low cost 4G-LTE emerging growth carrier network in their markets. ZTE's technology breakthrough is a BIG part of proving the VELA model....NOW they have to start MAKING money and get ready to RAISE $50-100MM to expand those networks by selling pieces of their rapidly growing 4G networks to strategic or private capital investors.
George Alvarez and his team have an AUDACIOUS goal with long odds against them...2012 is the get 'r done year to prove the model. At NBT we can NOW go ahead and update our valuations of their network assets in light of the ZTE announcements and completion of the 2012 equity financing with Isaac Capital.
VELA spectrum assets must now be valued at vastly higher valuations...and private market valuations means our shareholder dilution forecast will be VASTLY lower than most estimates.
NBT will proceed as fast as possible with a new private market valuation report on VELA assets and pro-forma forecasts and will distribute this report when complete to the entire NBT Equities Research network (over 20,000 investors at this point).
The one thing that is obvious at this point? VELA's market cap vs. its network's PRIVATE market value is COMPLETELY out of whack. Their 2.5GHz and 3.5GHz spectrum assets ALONE are worth 20 cents a share...and really more like 30-40 cents as new 2.5 and 3.5 spectrum asset auctions are conducted around the world this year.
P.S. I personally bought shares today and will eventually add another 10MM shares to get my cost under 10 cents...yes I am STILL that confident in the ultimate outcome of the VELA opportunity.
Disclaimer: NBT and affiliates own @ 10 million shares of VELA
About the Author
Founder and Editor-in-Chief NBTEquitiesResearch.com. Contributor and Anchor Fox News Channel and Fox Business Network. Chairman & CEO NBT Group,Inc., a boutique private capital investment bank and investor relations organization.
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