Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] Message Board

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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..]

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To: TheSlowLane who wrote (1272)	8/9/2000 7:00:26 PM
From: Bernard Levy	Read Replies (3) of 1860

I have got to concur with Paul here. The current malaise is all about the effect of higher interest rates on telecom stocks and almost nothing about BBFW. Bellweather stocks such as T, WCOM and VZ are all at rock bottom. Fiber companies such as GBLX, WCG in the US or CONE, GTS, VYTL in Europe are all close to 52 week lows. CLECs have been similarly bombed out. What is happening is that an increase in interest rates affects the discount factor in cash flow analyses of these companies. Since the value has to cover both debt and equity, a 25% hit on discounted cash flow value can easily lead to a 50% hit on stock price. In other words, because of their need for debt, telecom companies are extremely sensitive to interest rates. BBFW companies have still a huge cost advantage vis a vis fiber companies for medium size buildings. The cost of gear has little to do with the frequencies being not harmonized (the cost of adjustments is trivial), but everything to do with the fact that the frequencies they use are very high, so Gallium arsenide chips are needed. Still, I have got to admit that ARTT's low revenue numbers are inexcusable after so many years of operation. However, WCII, NXLK and perhaps even TGNT are entirely different stories. The bottom line here is that instead of moaning and groaning, we will have a hell of an opportunity when the sector bottoms out (within 9 months unless we have a recession). To me this almost looks like the oil services sector when oil was at $10 and The Economist was predicting it was going to $5. Come to think of it, if we ever see a magazine cover predicting the bankruptcy of AT&T, the bottom will have been reached. We can already hear investors clamoring for the heads of Mike Armstrong and Bernie Ebbers, so we are not too far away.

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