All,
Steve is at the H&Q conference so I am passing this along for him. Jack Reagan just put out comments on WCII:
-Winstar agree's to acquire 14.9% stake in ARTT
-The structure = one WCII share for every 2.2 ARTT shares
-Total transaction value is 55.9 million
-We expect a large transaction or broader relationship to follow
ARTT is the second-largest holder of 38 GHz broadband wireless spectrum next to WinStar. The company controls 358 100 MHz licenses in 210 domestic markets, including 90 of the top 100 markets. Additionally, ARTT has 38 GHz licenses in Norway, Sweden, Denmark, and the UK. After an aborted effort to pursue a wholesale broadband communications strategy, ARTT hired new senior management and unveiled a new strategy to provide broadband data services to businesses not served by fiber.
As a stand-alone financial investment, the transaction represents a statement by WinStar that it believes ARTT's spectrum is undervalued and will likely lead to a broader relationship further down the road. First, investors should note that the 14.9% investment stops just short of the 15% trigger for the ARTT shareholder rights plan. This suggests that any discussions regarding a potential merger have either not yet cleared the important valuation hurdle. Next, we believe WinStar's motivations are more strategic than financial. It is difficult to argue that WCII needs the spectrum. By our calculations, the company is not capacity constrained and has more than enough spectrum to satisfy demand for the foreseeable future. (The recent LMDS auctions also show that the marginal utility of spectrum declines as more is amassed.) However, a merger with ARTT has two potential benefits: 1. it would eliminate a competitor, and 2. it may make WCII a more attractive partner to AT&T who's soon-to-be-acquired Teleport division is the next largest holder of 38 GHz spectrum and the most logical partner to ARTT.
Regards- |
