With its stock now trading at penny stock levels, fixed wireless provider Starry is likely looking for a strategic partner/buyer, according to a new research note from financial analysts at MoffettNathanson. The company needs cash but is unlikely to be able to borrow the money and may be forced to put itself up for sale, the analysts said.

Starry announced its third quarter results today and although revenues were up 36% over last year, the company lost $60.3 million in the quarter – a substantial increase over the $39.8 million lost in the third quarter of 2021. Starry CEO Chet Kanojia told investors that the company has retained PJT Partners to advise the company on potential mergers and acquisitions, capital raising, and balance sheet solutions

According to MoffettNathanson, the company also has laid off half of its workforce and has canceled plans to open new markets.

The news comes just a few weeks after the company told the FCC it would not accept the $269 million that it won in the Rural Digital Opportunity Fund (RDOF) auction to cover some of the costs of deploying broadband in unserved and underserved areas. As a result, the company incurred $4 million in penalties during the third quarter, the MoffettNathanson analysts note.

Despite all the bad news, though, the analysts are quite positive about Starry’s business.

“The technology works, [the company] was on a reasonable path to scaling, and it is (still) served by a competent management team,” the analysts wrote.

Theoretically, it should be possible for the company to find a buyer, MoffettNathanson observes.

Verizon and T-Mobile offer fixed wireless using the same spectrum that they use for their more profitable mobile offerings and might view a Starry acquisition as a means of boosting fixed wireless capacity, the analysts note. Meanwhile, AT&T has largely avoided the fixed wireless market and may want to get into it.

The analysts speculate, though, that Starry likely has already been in discussions with obvious potential buyers and the fact that nothing has happened yet “is presumably a sign of at least an initial lack of interest from any of them.”

The good news for Starry, though, is that “there remains an enormous amount of capital accumulated by infrastructure funds that is yet to be deployed” the analysts wrote.

Starry for Sale?

It’s worth noting that Starry’s approach to fixed wireless is considerably different from that of T-Mobile and Verizon, or just about any other fixed wireless provider. While most fixed wireless providers have targeted rural and fringe areas lacking wired high-speed broadband, Starry has focused on large apartment buildings in urban areas, where its focus has been to displace cable companies.

This could explain why the big wireless providers have not taken advantage of the opportunity to buy Starry at what would seem to be a bargain price.

But even if other carriers indeed have no interest in pursuing Starry’s business model, it’s also worth noting that the company has considerable spectrum holdings. The company was a big winner in the 2019 auction of millimeter wave spectrum in the 24 GHz band – which, in combination with previous holdings, put the company in a position to cover 25% of the U.S. population.

And even though millimeter wave has range limitations, it also supports the highest-speed service, which would seem to have value to someone, if not today, then in the future.

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