Thanks Bernard.
Why are you more disposed in the short term to the bandwidth names like GX and LVLT than you are to the top tier CLECs? It seems the "bandwidth glut" fear, a theory I disagree with, is still pervasive in the press and amongst those institutional investors who prefer to follow the herd rather than do original thinking. GX,LVLT,WCG, etc. seem to be painted with the consumer LD brush, even though that is wrong! BTW, I am significantly long GX. It has fully funded bus plan, network buildout will be complete in a couple months (then only the fiber needs be lit as demand warrants), and they are significantly EBITDA positive.
I guess the equivalent of "bandwidth glut" for the CLECs is "too many CLECs" or "too much competition" in the local market. Once again, I come back to my belief that WCII and XOXO have,with their BBFW spectrum and technology, the ability to develop a market that the other CLECs and RBOCs can't, due to the cost of installing fiber in many buildings where it is uneconomical to do so. This unique technology and market opportunity, in my mind separate WCII and XOXO from the other CLECs. Yes, they may be more risky due to their more leveraged balance sheets and exposure to the possibility that a better alternative to BBFW comes along and supplants it. However, I believe they are of more strategic value to a larger telecom player than any other CLEC. And in Winstar's case, a very inexpensive strategic value.
Bill Rouhana was quoted a few days ago "We are engaged in strategic discussions with potential partners which include vendors, cable companies, long-haul network providers, international carriers and content players". I believe Winstar, before too much longer, will secure additional equity capital to speed up their growth. Current price targets for Winstar (150% to 233%)offer greater upside potential than for XOXO (70% to 112%), and significantly greater than for MCLD (44% to 88%). I believe any dilution due to additional equity will be more than offset by enhanced growth assumptions and reduced cost of debt and discount rate assumptions , thereby allowing for higher target prices for WCII and an even greater upside potential disparity between them and XOXO and MCLD.
What do you think? |
