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Technology Stocks : Qwest Communications (Q) (formerly QWST)

Q 83.15

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3:59 PM EST

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To: Phil Jacobson who wrote (1609)	6/24/1998 4:29:00 PM
From: SJS	Read Replies (1) of 6846

The slams have started: ____________________________ AT&T (T) 60 5/8 -4 3/4: Desperate companies take desperate measures. When asked why T acted now to acquire Telecommunnications Inc (TCOMA), C. Michael Armstrong noted that "time is against us." With growth expected to slow in its long-distance business (due to increased competition from RBOCs), T was desperately seeking a way to break into the local phone market. In acquiring TCI it did just that. But in Briefing's opinion, T paid a steep price ($48 bln) for such access. Desperation/fear can do that. Synergies aside (every deal is filled with promises of future synergies which will save the combined entity huge sums), the bottom line is AT&T paid more than 6x revenues for TCI and its 22 million cable users. Earlier this year, SBC paid 4.2x revenues for Ameritech and its 21 mln phone lines. A little less than a year ago, Bell Atlantic bought NYNEX and its 19 mln lines for nearly 2x revenues. While TCI's projected long-term growth rate exceeds those accorded NYNEX and Ameritech at the time those deals closed, is it really worth 3x NYNEX or 1.4x Ameritech? In our view, T overpaid out of fear that if it didn't strike now there wouldn't be any quality companies left to buy. When was the last time you made a good decision acting out of fear? Other concerns: the combined entity will create a bureaucratic behemoth of nearly 160,000 employees; T has little experience in the cable industry; and T will have to spend a bundle over the next few years upgrading the cable infrastructure before it realizes its goal of being a "one-stop shop" for telephone, cable TV and Internet access.

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