The bonds of Dobson Communications and American Cellular, which is fully owned by Dobson, dropped around seven points last week after the parent revised earnings guidance for the second time this year. Dobson's 8 7/8% notes of '13 were trading in the high 60s and American Cellular's 10% of '11s were in the high 70s/low 80s late last week.
Anthony Klarman, analyst at Deutsche Bank in New York, said the revised guidance is a red flag for the industry in general. "The rural wireless sector is struggling to foster growth. Most companies are challenged to generate significant subscriber growth and are hurt by declines in roaming, both in yield and the number of minutes picked up from other carriers," Klarman said. One fixed-income investor went even further and said he now questions whether rural wireless companies have sustainable business models.
