To all whiners on this board...
Why Qwest needs USW:
GBLX may have forced Qwest's hand here, but there is something important that you all, who are slamming the proposed deal, are missing. Qwest NEEDS cash, bigtime. I know that mixing high and low growth companies is a no no these days, but the fact remains that Qwest will most likely have to go back to the cap markets to expand its network if it can't get its hands on a cash generator like USW (which also expands their customer base and sets them up to be a major player in the industry for years to come).
The reason, IMO, why Qwest may be in a more precarious situtation here than GBLX is that Qwest sold the rights to the dark fiber in its network in order to finance the initial build. So it would seem that in order to expand capacity, Qwest will have to lay more cable, which is extremely expesive, whereas competitors, who payed for their cables with debt, have the option for a much cheaper upgrade to existing cable.
What really bothers me is that people blame management, and the MM's and daytraders, and momo's for their own lack of foresight. QWST needs to get its hands on cash... (cash flow, ie USW) which will enable them to spend, and borrow to expand their networks... I don't think they want to tap the cap markets directly again... seeing as we'd be talking serious dilution ... or risky, high-yield debt (I'm not sure how much debt Qwest's cash flow would support anyhow).
Investors like the people on this board are the same people who bid the price up prematurely without proper DD and financial analysis. The recent drop has added a much needed dose of reality. This is NOT an Internet company that can go on burning cash ad infinitum... the capex requirements are simply too large... Hence fundamentals actually DO make a difference.
It's understandable that people are upset when the stock price goes down. It's just too bad that today's ethereal investors (and valuations) are so quick to shun the "dirty work" (heaven forbid that a fast growing telco/internet play should sully its hands by dealing in the real world!) that benefits companies over the long-term.
If you liked QWST before, you shouldn't like it any less now... So suck it up and view it as a buying opportunity.
-enam |
