re: LD is not going away and never will: True. People will always need to talk to each other over a distance, and in increasing amounts as the world gets richer and more integrated. But is does not follow that any company can make profits providing this, at least as a stand-alone service. LD phone rates have been trending down for a long time, and that trend looks to continue until the rates are effectively zero. LD phone service will be a freebie, thrown in as part of a bundled service.
re: LD is a huge cash cow for WCOM: Not any more. Now, that cash goes to the MCIT dividend.
re: WCOM will absorb business from the smaller telcos that are falling by the wayside: Yes, a lot of telcos will go bankrupt. Stockholders, (and to a lesser extent bondholders) in those companies will see their equity vanish. But the installed capacity won't go away. Someone will own it. That capacity will still compete with WCOM, and the post-bankrupcy companies will (after a name change) be debt-free (what a clever way to deleverage, don't you think?).
The only areas of telecom where there won't be overcapacity (and vigorous price competition), for the forseable future, is last-mile service, and broadband wireless. The RBOCs have successfully defended their last-mile turf so far, and the Feds won't let WCOM buy wireless assets. Checkmate.
Still, all I've said is probably in the stock now. Expectations are nil, and the valuation looks very good. I'd say there isn't much potential downside left in WCOM, at 15. |
