And... [More Barrons quotes.]
Q: Who are the other heavyweights in this contest?
Grubman: In one corner are the old guard, the AT&Ts, the Nippon Telegraph & Telephones, the Deutsche Telekoms, the British Telecoms, the U.S. Baby Bells. In the other corner are the new guys, the Global Crossings, the Qwests, the Level 3s, with turbocharged currencies, meaning stocks, that can be used in acquisitions, and aggressive managements that are willing to try to buy older companies. Ten years ago, even five years ago, this industry was segregated and myopically focused, country by country. Today it's becoming more global and certainly bandwidthcentric, to the point where ownership of end-to-end bandwidth will be the main factor driving equity values.
And,
Q: Continue.
Grubman: As I said earlier, bandwidth is the enabler for the next great leg of telecom growth worldwide. For the long haul, Qwest Communications, Global Crossing and Level 3 Communications all are building high bandwidth assets that will allow them and others to see the dream of multimedia video applications become reality. All three are discounted-cash-flow stories.
And,
Q: We hesitate to ask this, but are Global Crossing and Qwest today in anything like the position that WorldCom was a few years ago?
Grubman: Let me put it this way: Both are hoping to become WorldComs. It remains to be seen whether they do, but they're in the same vector.
Now I want to say something about competitive local-exchange carriers. CLECs are volatile stocks, but they have been excellent performers year-to-date, up about 90%. Over the past 52 weeks, they are up about double the market. Their lows were seen last October, amid fears of a global liquidity crisis. CLECs represent two things that we like. First, they're taking market share. Second, they're strategic fill-in assets that bigger players wil want. We have three favorites. McLeodUSA will dominate the upper Midwest as an integrated communications provider. From 54 recently, our target is 95. Nextlink Communications owns fiber-optic networks in 30 markets and fixed-wireless networks in 65 markets. Fixed wireless operates in a high frequency spectrum. It provides broad-band to buildings where you can't run fiber. Nextlink also owns about 33% of Level 3's network as it's being built. From about 82, our target is 120. |
