"WNP (I'm trying to find out who they are - this info IS at the FCC if you go there physically) is the largest opening bidder at $100MM"
To: James Fink (1096 )
From: Teddy Greene Tuesday, Feb 10 1998 7:53PM EST
Reply # of 1098
According to a story on Bloomberg yesterday, WNP is a partnership headed by Royce Holland (I think I got his name right), the ex-president of MFS Communications. So the two largest upfront payments are headed by people who know how to make $$$ in the telecom arena: MFS and McCaw.
To: Teddy Greene (1097 )
From: Larry Cheng Tuesday, Feb 10 1998 10:27PM EST
Reply # of 1098
Article on Royce Holland. Extremely established.
C-LEC veteran starts anew in Lone Star State
It's hard to identify legends of industry when you're talking about an industry as
young as the C-LEC business. Still, Royce Holland would have to be near the top
of the list.
Holland, who helped found pioneering C-LEC firm MFS Communications Co.,
has seen the industry grow from a fledgling and highly speculative concept to a
multi-billion-dollar-a-year force that continues to gain ground on incumbent
local-service providers nationwide. By the time he stepped down as MFS
president shortly after the C-LEC's merger with LD giant WorldCom Inc. late last
year, MFS boasted annual revenues of nearly $1 billion and a market value of $13
billion.
Yet Holland, who's not yet 50 years old, was not ready to fade into C-LEC lore
upon leaving MFS. On the contrary, he is now busy creating a new C-LEC venture
in his native Texas called Allegiance Telecom Inc., and he already has secured
$100 million in backing from a number of investors confident he can get the firm off
the ground.
"Our approach is a little bit different," Holland said. "We want to offer one-stop
shopping to businesses as quickly as possible. This is pure play on the Telecom Act
of 1996."
Holland, who during his time at MFS was active in helping craft competitive
provisions of the act, said he started Allegiance specifically to take advantage of the
newly deregulated local-service marketplace.
"That's what we are trying to do," Holland said. "It's like we are suddenly allowed
into this giant hunting preserve that's been off limits for 90 years."
"(Holland) was the key guy in terms of getting the competitive components of that
legislation through," said Rick Frisbie, managing partner of Massachusetts-based
telecom investment firm Battery Ventures, a firm backing Allegiance to the tune of
several million dollars. "He probably knows more people in this industry than
anybody else. He knows how to get things done, yet he is also very easy going."
Unlike MFS, which began by building its own networks from the get go -- a "build
now, sell later approach" as Holland calls it -- Allegiance plans to install its own
switching platforms, but use transport facilities leased from other carriers, at least
for the time being. The strategy should cut down on up-front expenses and
eliminate the need to negotiate right-of-way agreements, Holland said.
"It's what I call a smart build," he said.
Last month Allegiance annouced it would locate its headquarters at Dallas'
INFOMART technology center and is now working on a switch installation there.
And just last week the new C-LEC secured a pair of additional switches, one in
Atlanta and one in New York City, from bankrupt competitive local-service
provider US ONE Communications. The additional switches should help speed
Allegiance's East Coast debut, company officials said.
"Royce is very much a visionary, but at the same time, he's very much a doer," said
Allegiance vice president and GM Tony Parella, who also hails from MFS. "I think
he demonstrated that during his time at MFS."
Once Allegiance has its systems up and running in each of its initial five target
markets -- Dallas, Atlanta, New York, Chicago and Los Angeles -- sometime next
year, the next step will likely be an IPO and/or a private placement. So far things
are ahead of schedule, Holland said.
Yet in the months since his departure from MFS, Holland has faced some
obstacles. Specifically, WorldCom this summer filed suit against Allegiance alleging
the upstart C-LEC has unfairly recruited employees away from WolrdCom's
roster. In response, Allegiance filed a counter suit accusing WorldCom of engaging
in anti-competitive behavior. Holland maintains there is plenty of room in the
competitive local-service arena for both firms, and others, to operate.
Competitive disputes aside, the biggest remaining barrier Allegiance and other
C-LECs face is negotiating and implementing effective OSS arrangements with
incumbents, Holland said. Many incumbents still are unable to effectively process
competitors' provisioning requests, he said.
"I think the opening of the (local-service) market came more quickly than perhaps
we thought it would," Holland said. "If you keep pushing, the barrier will fall more
quickly. There is still work to be done, but it's more in terms of execution, not
regulation, I would say."
"Achieving success in this business hinges on two important factors, having access
to capital and having the ability to develop back-office solutions that allow you to
compete," he said.
In recent quarters C-LECs big and small have reported a sharp increases in
revenues and in numbers of lines installed. Yet as a whole, the C-LEC industry
continues to experience huge EBITDA losses each quarter, with few individual
exceptions to that trend. Still, Holland said such losses alone shouldn't scare
investors away. After all, it's no secret the facilities-based C-LEC business is very
capital-intensive and it will be some time before profits begin to roll in, he said.
"That's the nature of this business," Holland said. "C-LECs are valued on growth
potential, not earnings."
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