GTSG--Lehman brothers comments from Friday
<<Global TeleSystems Group: Great Story Unfolding, Reiterate buy
We met yesterday with GTS's new CFO, Rob Schriesheim. We came away with
increased confidence in our view that that integration and pricing fears are
very overdone. GTS has key assets/first mover presence in all the areas that
provide competitive advantage, addressing the European opportunity.
* Integration largely complete in terms of network, products, brand, and
salesforce. Internet/data product initiatives gaining momentum, potentially
some product announcements at Global Telecom conference next week in Geneva.
Supports strong operating fundamentals, which should be a solid catalyst. We
believe our rev ests of $218M for Q3 and $245M for Q4 (+12%)are conservative.
* GTS recently expanded its CLEC buildout to 14 from 12, and the capacity of
its transtatlantic cable (50% owned) from 1.28 to 2.4 Tbps. Potentially more
details on the specifics over the next 2-4 wks. Continued (end to end)
network buildout should allow GTS to maintain its cost leadership position.
* GTS has the largest pan European long haul network, significant IP traffic,
the largest pan European salesforce (700), 50% of a new transatlantic cable,
CLEC assets in 14 cities by '01, and a strong management team, providing
significant leverage to IP/data market growth. The only comps to this
presence and scale in Europe are MCI WorldCom and COLT.
* It is likely only a matter of time before the consolidation wave in the US
hits Europe. First movers with scale and asset bases, such as GTS, are
typically the first to go. At 5.5X '00 revenues, GTS trades at 49% of its
comps and 53% of its 52 week high.>> |
