Stephen Clark, president and CEO of SpectraSite (NYSE: SSI), remains confident the out-of-bankruptcy wireless tower company can succeed, generating revenue and returning value to shareholders.

“It’s hard to envision an industry with a better basic business model than the tower industry,” Clark said. “SpectraSite is regarded with very high-quality assets, proven results, and results themselves that show an industry-leading position.”

Clark made the comments during a presentation about Cary-based SpectraSite and trends in the wireless tower industry at the Smith Barney Citigroup Entertainment, Media and Telecommunications Conference in Phoenix. The firm initiated coverage of SSI, which is currently trading at $39, on Dec. 23 with a “Hold” rating.

Just a few months ago, on Oct. 7, SSI began trading at $30.25 on the NYSE in a $272.3 million secondary offering of 9 million shares. The company had announced a 2-or-1 stock split in August that set the price at $32, down from $61.

The NYSE listing and stock split came more than a half-year after SpectraSite completed a financial restructuring and almost a year after it filed for Chapter 11 protection in November 2002 and was delisted from the Nasdaq. SpectraSite emerged from bankruptcy Feb. 10, 2003, with its stock priced below $25.

Getting back in the game: more tenants per tower

SpectraSite’s strategy has always been to build and acquire towers in the largest metropolitan areas in the country, where most wireless subscribers are and usage occurs. As of Sept. 30, the company owned or operated approximately 7,500 towers in the top 100 markets in the United States.

While SpectraSite already built or acquired most of its towers between 1999 and 2001, Clark says the company will continue to generate revenue as wireless carriers, or tenants, sign leases to put more antennas on existing towers. Known as collocation, this practice accounts for 50-65 percent of new antenna distribution.

SpectraSite’s customers, or tenants, include AT&T Wireless, Cingular, Nextel, Sprint PCS, T-Mobile and Verizon Wireless. The more tenants per tower, the more direct cash flow for SpectraSite.

“As the number of antennas or tenants increase, the top line revenue increase is dramatic,” said Clark. “The operating costs are relatively fixed–. Wireless towers require very little in the way of maintenance.”

These factors make SpectraSite and the wireless tower industry as a whole “very attractive” to investors, Clark says, as does the forecast growth in the industry. He says he’s “very optimistic” when looking at how wireless carriers’ needs compare to SpectraSite’s existing portfolio of tower sites.

“We expect — revenue growth for 2004 and are comforted by this data,” Clark said at the conference, which was broadcast over the Internet. “–SpectraSite has demonstrated the ability to produce an attractive revenue rate.”

Indeed, the company has posted 10 consecutive quarters of consistent revenue increases. Most recently, in November, SpectraSite reported third quarter revenue of $83.9 million, up 5.8 percent from $79.3 million in the same quarter last year. Net income was $3.2 million for the third quarter versus a net loss of $134.6 million during the third quarter of 2002.

Lingering effects: SBC ‘a cloud over 2004’

After SpectraSite filed for Chapter 11 bankruptcy protection in November 2002, the company transferred hundreds of its towers under agreements with Atlanta-based Cingular and SBC Communications of San Antonio to help pay off its debt.

While most of the tower transfers have taken place, some with SBC remain unresolved, creating uncertainty for investors.

Clark said Monday that SBC is required to purchase up to 468 towers, which would be around $140 million. But the final number is uncertain, he said, because of property titles, industry regulations, environmental issues, etc.

“It’s a cloud over 2004,” stated Clark. “The contract expires in August–. Once the end resolution is known in terms of capital, we’ll have the ability to create the free cash flow we’ve already demonstrated, returning value to shareholders…that will fall into the dividend and buyback arena.”

As of Sept. 30, SpectraSite had total cash on hand of $56 million, with net cash provided by operating activities of $34.3 million, compared to net cash provided by operating activities of $17.2 million during the third quarter of 2002, just before it filed for bankruptcy.

SpectraSite: www.spectrasite.com