The Reinvention Of Local Carriers
John T. Mulqueen
The former alternative local carrier business is maturing-rapidly and in more ways than one.
Teleport Communications Group Inc., Intermedia Communications Inc. and Winstar Communications Inc. all reported double- or triple-digit revenue growth. A new company, Metromedia Fiber Network Inc., signed a $92 million deal with another newcomer, Nextlink Communications Inc., and American Communications Services Inc. said it may sell some more stock to finance its growth.
Teleport said that revenue rose 72 percent to $150.4 million for the fourth quarter ended Dec. 31, 1997, and 74 percent to $494.3 million for the year. Teleport has agreed to be purchased by AT&T for $11 billion, and also is buying ACC Corp., a long distance carrier for $1 billion.
Teleport said that recurring operating income jumped 183 percent to $18.3 million for the quarter. Operating expenses were cut to 55 percent of revenue from 59 percent a year ago, the company said.
When charges for interest, depreciation and amortization-as well as acquisition expenses-are deducted, Teleport reported a $72.5 million loss for the quarter, compared with a $43.5 million loss in 1996's final quarter. There were $22 million in expenses during the fourth quarter connected with the acquisition of CERFnet Services Inc., an Internet service provider.
For the year, the company reported recurring operating income of $44.9 million, up 256 percent from 1996. The net loss for the year was $222.7 million, up from $126.6 million.
Teleport said that it added 2,730 route miles of fiber to its network in the year, bringing the total to 9,474 million. The number of voice grade circuits on its network increased 66 percent to 7.35 million. Buildings served rose 74 percent to 13,514, and 10 digital voice switches were added to the 25 already on the network.
Intermedia said revenue in its fourth quarter was 111 percent greater than last year: $82.6 million vs. $39 million. The company had an operating loss of $9.9 million and a net loss of $56.5 million due to acquisitions and other expenses.
For the year, revenue rose 140 percent to $247.9 million, the operating loss was $49.8 million and the net loss $284.9 million. In 1996, Intermedia lost $57.2 million. Annual expenses included $60 million related to acquisitions and $53.6 million in depreciation and amortization.
Intermedia has expanded into the long distance and Internet service provider businesses, both of which are much larger than its original local network service operations, now only 20 percent of its business. The company bought Digex Inc., an ISP, in July 1997 and plans to complete three other acquisitions by June 30.
Intermedia said it has 136 data switches installed, provides frame relay service to 4,104 cities and hosts 20,209 nodes.
Profiting From CLECs
As for Winstar, the operator of fixed wireless local networks said that fourth-quarter revenue rose 128 percent to $30 million, primarily because of demand from competitive local access carriers and information services. Revenue from CLEC business was $10.2 million in the quarter while information services produced $15.7 million. Residential long distance, a business Winstar is exiting, had revenue of $1.8 million.
The company's operating loss in the quarter was $49.5 million and its net loss was $85.4 million.
For the year, Winstar reported $79.6 million in revenue, up from $48.6 million in 1996. CLEC revenue was $29.8 million, up from $4.5 million; information services rose to $41.3 million from $14.6 million; and residential long distance fell to $8.5 million from $29.6 million. The net loss for the year was $245.5 million, almost three times the $82.7 million deficit reported in 1996.
Down the street from Winstar, Metromedia Fiber Network is building a network in and around New York City, down to Washington, D.C., and in Chicago.
The $92 million contract it signed with Nextlink is for the use of 650 miles of fiber on Metromedia's network in the New York area, Philadelphia and Washington, D.C., and a link between New York and Washington. In June 1997, Metromedia Fiber sold Nextlink exclusive rights on other parts of its New York network for $11 million.
The links in the New York area reach out to White Plains, N.Y., and to Greenwich and Stamford, Conn. Craig McCaw founded Nextlink in 1994 after selling McCaw Communications, the cellular phone company, to AT&T for $12 billion.
Nextlink said it plans to raise $300 million by selling debt. |
