KeyOn's broadband stimulus apps rejected, stock tanks

Rural wireless broadband operator KeyOn Communications announced that all 11 of its applications for broadband stimulus funds were rejected by the Department of Agriculture's Rural Utilities Service (RUS). Following the announcement, publicly traded KeyOn lost 46 percent of its value.

The company had requested $152 million in funds to build a WiMAX network in the 3.65 GHz band to expand its current rural coverage area from 2.5 million people to 6.5 million across 16 states. For several months in 2006, KeyOn's stock surged on the idea that it would be a big winner of broadband stimulus funding. From May 1 to Nov. 1, the per share value of KeyOn rose from 4 cents to $2.10, representing an increase of more than 5,000 percent.

But it's been clear in the first round that RUS and NTIA are favoring middle-mile fiber projects. Few wireless projects have been granted funds. KeyOn's applications are expected to be forwarded onto the second round.

Emerging Growth Research analyst Joe Noel said the firm "made a substantial investment in restricted shares of KeyOn last year, so we were clearly disappointed to see the rejections. The Company's applications will now be forwarded to the second round of broadband stimulus funds, which is actually slightly larger than the first round. We hope that wireless vendors will be treated a bit better in the second round of the stimulus awards ... Our position remains the same on KeyOn--if they receive federal stimulus funds the stock will boom, but betting on it at this point with new money is probably not a great idea for most investors." 

KeyOn has scheduled a conference call today at 4:15 ET.

For more:
- see this StimulatingBroadband.com article
- see this Emerging Growth Research post
- read this KeyOn release

Related articles:
KeyOn looks to consolidate rural wireless broadband market
Broadband stimulus applications stretch from 700 MHz to 3.65 GHz

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