First, the MFS and the QWST builds are completely different. MFS is what is referred to as a CAP (or CLEC) - a company who competes with the Bell companies in metropolitan areas providing local fiber loops and dial-tone. QWST is an IXC (inter-exchange carrier) who's network is designed to carry traffic across the country (and ultimately around the world). The reason the QWST network is as valuable as it is is that there is a huge shortage of national fiber capacity at this time, and the rights-of-way that allow new fiber to be laid are very difficult to come by. QWST has its roots in the railroad business, and has procured rights for more then 90% of their build. The fiber they are laying is of very high quality, and thus a far greater degree of capacity can be obtained on a single strand (presently oc192, or 192 DS3's, or aproxomately 129,024 simultanious phone calls on a single strand), with a nearly infinite amount of capacity available as switch technology improves. And to boot, a good portion of this build has been paid for with advance orders by Frontier and GTE. The remaining fiber belongs to QWST. Their netowork is complete along the California coast from Sacramento to LA, and will stretch to San Diego my Q1 1998. The national portion is built as far as Kansas City now, and the leg to NYC will likely be complete early next year. By the end of '98 they will cover Texas, the Midwest, and the middle south (via Atlanta). Compare that to the network builds of companies like IIXC and you will see that this plan is truly bearing fruit. The key here is to understand that because of the great shortage of capacity, they will continue to finance this build with advance orders, and extend their network even further through fiber swaps.
Finally, QWST management is fantastic. They have outlined a plan to create a next-generation data network on an ATM platform. I am confidant that all IXC's will ultimately be moving their voice across cell-switched networks, but most of them lack the foresight and the organization to migrate existing infrastucture at a pace equal to demand. QWST is in the uniqe position to do this from the beginning, and thus capture a substantial head-start on the compitition.
Yes the PE is high, but QWST is the only IXC out there with the capibilities of meeting the huge demand for capacity. Revenues will come from the wholesale sale of this capacity and as the network nears completion, these revenues will come in very, very quickly.
Finally, 1993 and 1998 are lightyears apart in terms of Wall Streets love for telcom, and hence the valuation. I am adding to my postion on pullbacks, and will continue to do so. This is a great company and a great stock to own. |
