Hi Jason:
Your message contains a certain number of different
points, some regarding the validity of a WCII
investment at all, some regarding the timing for such
an investment.
Most of your reservations have to do with debt issues.
I want to reiterate that this situation is the norm
for new telecom companies -- look at QWST, LVLT for
example. Even my biggest holding, LOR, fits this
paradigm, except for the fact that it has a relatively
low-margin satellite construction business, and a few
profitable operations such as Skynet, which in effect
subsidize all the red-ink generating communications
ventures. Borrowing money is not a measure of how
this company is performing. There are only 2 valid
and highly correlated metrics for evaluating how
WCII is performing: a) rate of new line installation
and acquisition of roof rights, b) rate of customer
recruitment. For both of these metrics, WCII's performance
is spectacular. Vogel's report contains a curve
comparing the rate of line installation for WCII
with Teleport's rate. The difference between
Winstar and Teleport is mind-boggling. This will be
accelerated when point to multipoint technology is
deployed. As I indicated, P-MP will decrease the
cost of installation of T1-line equivalent to $200
per line. By comparison standard T1 lines are very
expensive to install (require repeaters and a lot of labor)
and installation costs a few $Ks per line. HDSL and
the upcoming HDSL2 are cheaper but still have an installation
cost of several times $200. The bottom line here is
that wireless has an intrinsic cost and deployment
advantage over its wired (fiber or copper) competition.
Fiber presents only an advantage if you really need
a huge data pipe, since P-MP will ''only'' be able
to offer approximately 40Mb/sec (a T3 equivalent)
to each customer.
Concerning WCII's customer base, it is expanding rapidly
and includes big names such as Lotus in Boston (per
Brian Coakley). Paul Ferguson and others may be able to
complete this picture by identifying other existing customers.
As for the timing for getting in WCII, there is obviously
no guarantee that now is the optimum time. I was waiting
and jumped in when I saw the reversal at $35, but
obviously if the market falls over a cliff, we could
easily see the $30-$32 range. However, at its upcoming
CC, WCII will go over its line deployment progress.
When the data starts sinking in, and analysts make their
comparisons with Teleport, etc... I expect that WCII
will resume its upward march. We are now in a consolidation/
trading range phase which could last a while, but
lomg term, I have no doubt WCII is going up, and I
hope that WCII is not for sale.
As for the compensation of WCII's executives, it does
not bother me too much, as long as they keep executing.
As a reference point, Bernie Schwartz, LOR's CEO, is
extremely well compensated.
Finally, I would like to indicate that WCII is clearly
in the high risk/high payoff part of the investment
spectrum, and if you or others feel more comfortable
with companies which always earn money, but are
strategically well positioned, such as WIND, I do not
have a problem with that.
Best regards,
Bernard Levy |
