Wireless Access Carriers Expanding Their Networks
Deutsche Banc Alex. Brown - US Equities
Bo Fifer,Jeffrey L. Hines
August 03, 1999
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WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY"
ADVANCED RADIO TELECOM CORP. [ARTT] "STRONG BUY"
TELIGENT INC. [TGNT] "STRONG BUY"
Wireless Access Carriers Expanding Their Networks
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52-WK Earnings Per Share
FY Price Price 3-5 Yr
Est.
Ticker End 08/03/1999 Range 1998 1999 2000 Growth
Chg?
WCII 12 55.88 64-10 (11.89)A (13.18) (10.63)
N
ARTT 12 10.06 17-2 (2.06)A (2.61) (2.46)
N
TGNT 12 62.00 76-18 (5.35)A (9.53) (10.37)
N
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HIGHLIGHTS:
* Recent announcements out of the wireless access carriers highlight the
expansion of local wireless networks both domestically and globally.
* WinStar reported solid 2Q 1999 access line growth of 69,000 line
additions, with 48% of new lines on-net. Both numbers are in-line
with our expectations...
* ..And Advanced Radio Telecom (ART) received licenses in Finland, its
second northern European network.
* WinStar, ART, and Teligent are expected to report results next week:
Company Reporting Date Conf Call Time Number Code
WinStar 10-Aug After Close TBA
ART 11-Aug 16:00 EDT 719-457-2550* 734092
Teligent** 12-Aug 10:00 EDT 800-289-0496 N/A
* Number is a reservation number ONLY. Call for call in number.
** Teligent is scheduled to release earnings 11-Aug after the market's
close.
Source: Companies.
DETAILS:
Recent announcements out of the wireless access carriers highlight the
expansion of local wireless networks both domestically and globally.
WinStar Reports 2Q 1999 Access Lines Growth
WinStar reported solid 2Q 1999 access line growth of 69,000 line additions,
with 48% of new lines on-net. Both numbers are in-line with our
expectations of 70,000 line adds with 50% of new lines being on-net.
We are becoming increasingly confident that WinStar can hit the 40% gross
margin mark by YE99. While we do not yet know what WinStar will report for
gross margins in 2Q, we believe that the company plowed much of the
quarter's "incremental" margin back into the network. As a result, we
believe 2Q 99 gross margin will likely come in around the 25% level, but
that the stage is set for rapid margin expansion in 2H 99 with some network
build behind them and project Millennium II subscribers coming on-line.
Recall that phase II of Project Millennium--targeting high-margin on-net
customers only--was not launched until early June, implying very few, if
any customers were actually provisioned in the quarter. As those customers
come on line, we would expect to see both the percentage of line additions
on-net and the gross margin increasing, and that is likely a 3Q and 4Q 1999
event.
Millennium II offers one year of "free" domestic and international long
distance (with specific caps) for customers signing three year local and LD
contracts. Or 18 months of free web hosting for customers signing a 3 year
Internet access contract. WinStar maintains that both plans are actually
more profitable than the standard "30% off" deals customers typically
receive.
Full reporting details are expected next Tuesday (10-Aug).
Advanced Radio Telecom Receives Licenses In Finland
Advanced Radio Telecom (ART) received licenses in Finland, its second
northern European network, at 26 GHz and 38 GHz frequency bands totalling
nearly 450 MHz. The ART licenses cover the top six markets in Finland,
including the capital, Helsinki.
As is the case for WinStar, ART is rolling out data-only networks which
require significantly lower capital outlays and potentially higher margins.
In April, ART announced it received licenses in Norway, which ranks number
two globally in Internet penetration and number four globally in networked
PCs per capita, according to Computer Industry Almanac. In other words,
these countries are likely to be early adopters of high speed data access.
Both announcements signal the growing footprints of wireless local access
networks, and we would expect to see further network expansion--
domestically and globally--throughout the remainder of 1999.
We expect to get further details from management regarding the new roll out
schedule and international opportunities shortly, as well as an update on
ART's new technology, so called "consecutive point to point (CPP)". CPP
utilizes a ring architecture for improved reliability and equipment from
Triton networks capable of speeds up to 100 Mbps, which the Company
believes will be commercially available ahead of ultra high speed point-to-
multipoint radios. Stay tuned.
Next Week (10-Aug to 12-Aug) Is Wireless Access Week
WinStar, ART, and Teligent are expected to report results next week:
Company Reporting Date Conf Call Time Number Code
WinStar 10-Aug After Close TBA
ART 11-Aug 16:00 EDT 719-457-2550* 734092
Teligent** 12-Aug 10:00 EDT 800-289-0496 N/A
* Number is a reservation number ONLY. Call for call in number.
** Teligent is scheduled to release earnings 11-Aug after the market's
close.
Source: Companies.
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