RECENT DEVELOPMENTS IN FIXED WIRELESS INDUSTRY
Deutsche Banc Alex. Brown - US Equities
Bo Fifer,Jeffrey L. Hines
June 14, 1999
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WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY"
TELIGENT INC. [TGNT] "STRONG BUY"
ADVANCED RADIO TELECOM CORP. [ARTT] "STRONG BUY"
Recent Developments In Fixed Wireless Industry
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52-WK Earnings Per Share
FY Price Price 3-5 Yr
Est.
Ticker End 06/11/1999 Range 1998 1999 2000 Growth
Chg?
WCII 12 54.13 60-10 (11.89)A (13.34) (11.17)
N
TGNT 12 51.75 68-18 (5.35)A (9.53) (10.37)
N
ARTT 12 14.69 17-2 (2.06)A (2.61) (2.46)
N
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HIGHLIGHTS:
--Last week was a busy one for Wireless Access Carriers (WACs, better-
known as wireless CLECs).
--FCC TO ADDRESS BUILDING ACCESS RIGHTS: The FCC issued a Notice of
Proposed Rule Making on Thursday (10-Jun) that, among other things,
addresses fixed wireless carriers' ability to quickly and fairly gain
access to the roof space of target buildings. The FCC has indicated
that it will explore at least three potential tools to facilitate
competition in the local loop:
1) The FCC can obligate utilities to open their facilities to CLECs to
the extent that such facilities may be found on a rooftop,
2) The FCC can make available any ILEC unbundled network elements for
CLEC use, also to the extent that they may be on the roof,
3) The FCC may have ancillary jurisdiction under the 1996 Telecom Act to
impose non-discrimination orders on real estate owners who have already
allowed certain telco/utility companies into their buildings (although this
path especially may be susceptible to drawn-out legal challenges).
We believe preliminary FCC body language has been very favorable for the
wireless CLEC group by potentially removing property owners' ability to
"green mail" wireless carriers for roof rights, and should lead to more
rapid growth of broadband wireless networks/footprints.
--TELIGENT FILES SHELF REGISTRATION: On Friday (11-Jun), Teligent filed a
shelf registration in the amount of $1 billion. While the announcement
is not effective, it does cover a wide range of potential instruments
including common and preferred stock, debt, or depository shares. The
$1 billion amount is "in the ballpark" with our expected shortfall of
$755 million in Teligent's funding requirements through the end of 2001
when we anticipate EBITDA-breakeven (cash + available credit - EBITDA
losses - capex - cash interest). We believe the Company is simply
preparing for any windows which may open in the capital markets in its
goal to remain funded 18 months in advance. Of note, a selling
shareholder has registered two million shares for possible sale (of an
estimated 15 million shares held by that shareholder), which would of
course help increase Teligent's relatively thin float position.
--DEUTSCHE BANC ALEX. BROWN 1999 MEDIA & TELECOMMUNICATIONS WRAP-UP: Both
WinStar and Teligent gave presentations to full houses at this year's
conference (please see our notes dated 7-Jun and 9-Jun for more detailed
highlights of Teligent's and WinStar's presentations, respectively).
The common theme we took away from these presentations was that data is
the real growth engine for the fixed wireless carriers. In fact, we
refer to the group as the "wireless access" industry because we believe
the opportunity is all about offering broadband access (on the order of
10s and 100s of Mbps) to customers independent of the services across
the network, more than it is about competing for the diminishing volume
of voice traffic relative to data. As such, we believe the value
proposition (capacity versus cost) offered by wireless networks will
help the carriers attract a disproportionately large share of future
data traffic. The obvious challenge lies in defining just how large
that future demand will be, and for now our models conservatively
estimate very little data contribution relative to voice. |
