Great day today for NTRO. Hope we can get a few in a row! Anyone know if they are ever going to come out w/ some news? I don't know if this article is good or bad news for NTRO.
redherring.com
Microsoft and others put $500 million in Teligent
By Phil Harvey
Redherring.com
November 9, 1999
Teligent's (Nasdaq: TGNT) pitch to small businesses is that it provides high bandwidth at a lower cost than its wire-line competitors. But in order to do that, it must first build out broadband wireless networks across the world -- a costly undertaking.
Though up to its knickers in red ink, Teligent won't have to worry about where the money will come from to keep its build-out going. It raised $500 million in new capital from an investment group led by Microsoft (Nasdaq: MSFT) and Hicks, Muse, Tate & Furst.
Analysts say Teligent is getting a lot more than cash from Microsoft. Given that Microsoft's interests are in providing businesses the software and services they need to exploit the Internet, "you can bet Microsoft is bringing more to the table than money," says Carl Garland, an analyst with market intelligence firm Current Analysis.
Teligent seized LMDS spectrum early on -- and didn't pay a cent for it.
Formus's recent $115.8 million funding round is turning heads in the U.S. and abroad.
Broadband wireless services are driving the development of a single network.
The new investment is expected to keep Teligent funded until 2001, around the same time the company is expected to be cash flow positive. As part of the deal, Microsoft and Hicks, Muse, Tate & Furst will each chip in $200 million for Teligent convertible preferred stock at a conversion price of $57.50 -- a 28 percent premium to Teligent's average closing price for the past five days.
The company's second-quarter earnings give us some idea how costly it is to build a high-speed network. In August, citing expenses from building out its network, Teligent reported $4 million in revenue and a net loss of $123 million for the second quarter. The company's next quarterly earnings call is scheduled for this week.
Other investors in Teligent's $500 million deal include DB Capital Partners (a Deutsche Bank affiliate), Olympus Partners, and Chase Capital Partners, which is also an investor in Formus Communications, a Denver-based competitor. Since it was founded in 1997, Teligent has raised about $2 billion to build out its network. Previously it raised $100 million from NTT Communications (NYSE: NTT) of Japan. When AT&T (NYSE: T) subsidiary Liberty Media completes its acquisition of The Associated Group (Nasdaq: AGRPA), it will become Teligent's largest shareholder.
GOING GLOBAL
Teligent offers bundled wireless services -- including high-speed Internet access and local and long-distance phone service -- to small businesses. Instead of using cables or copper wiring, Teligent delivers its services from base station antennas to antennas mounted on its customers' buildings. According to Wireless Data Forum, a large local multipoint distribution service (LMDS) antenna at a customer's building can get data throughputs equivalent to T-1 speed. Also, a single LMDS cell can support the equivalent of 3,800 telephone lines.
Teligent currently serves small-business customers in 34 U.S. markets. By the end of this year, says Senior Vice President of Corporate Communications Robert Stewart, Teligent will serve 40 U.S. markets -- increasing its customer count to 10,000 (from the 3,500 it had as of June 30). Mr. Stewart says Teligent will also use the newly raised funds as seed money for its business in international markets. He says the company has applied for spectrum licenses in Germany and will apply in Hong Kong.
While analysts have said the market for providing broadband services internationally may be less competitive than in the U.S., Teligent certainly isn't alone in its desire to expand abroad. Formus Communications, which raised over $200 million to compete in selected European markets, filed for a $150 million IPO last month. Another competitor, Winstar (Nasdaq: WCII), plans to launch broadband wireless services in 50 international cities by the end of 2004.
MEANWHILE, BACK IN THE STATES
There's no lack of competition for Teligent in the U.S., either. Teligent faces competition from other wireless broadband providers, and from the incumbent telephone companies whose phone lines it bypasses to get to customers. Indeed, while $500 million in fresh capital is nothing to sniff at, SBC Communications (NYSE: SBC) recently said it would spend $6 billion to build out its DSL broadband services in the U.S. over the next three years.
Trying to sell a service that hasn't been commercially proven on a large scale is a challenge for Teligent. Part of the reason for that, Mr. Garland says, is that the advantages of a service like Teligent's can diminish once you get into crowded metropolitan areas where buildings are "awash with fiber." Another downside is that a building, a tree, or a billboard can literally get in the way of transmissions.
Still, analysts agree that it's far cheaper to expand wireless networks and add customers than it is to expand wire-line networks to areas that aren't already covered. Even Lucent Technologies (NYSE: LU) CEO Rich McGinn, speaking at Red Herring's NDA 99 conference last week, remarked, "It still takes money to dig up the rose bushes."
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