Bob, please explain your enthusiasm here.
As I saw it, the CC was pretty ho hum, average at best, and certainly not good. There wasn't any positive surprises, and some more knowledgible than I was expecting the company to beat Vogel's estimates rather handily. Didn't happen. I think I could have written the script for the call;
First question, Bill Vogel, NationsBank-Montgomery Securities. Go ahead with your question.
Bill: Thank you, congratulations on a great quarter guys. One question...
I think the only thing that matters right now is getting customers on-net. Until then, as others have accused, WinStar is just a reseller. Look at the numbers;
New York, which probably represents 10% of WinStars customers, has been at 50% on-net for three quarters now, which I don't have a problem with. Take them out of the mix, and their next best four markets, which have been up and running for a year on average, are less than 25% on-net. By contrast, New York after 3 quarters was 33% on net and 50% on-net after a year. But yet they tell us that these other markets are tracking New York. Doesn't look like it to me. If they don't get the customers on net at NY's pace, they're never gonna get to gross margin or EBITDA breakeven anywhere near as fast as they did (or will, EBITDA breakeven this Q in NY) in New York. Chicago, which has been up a year, must be less than the 4 at 25% and is not even called "a mature market". Take these five out of the mix and all of the rest of the markets are probably very near 0% on-net since the company as a whole is only 15% on-net. Heck, New York after two quarters was 18% on-net. WinStar has about 20 markets that's been operating for 2 quarters now. What all this means to me is they're projecting EBITDA breakeven by the end of next year by extrapolating their New York experience, but if they can't get customers on-net, they'll never get there.
Since I questioned the on-net numbers yesterday, I received messages that describe the same situation in at least two of their major markets; thousands of resold lines are sitting waiting to go wireless, but it just ain't happening. Why not??? Doesn't this bother you? I'm sure this is why many consider WinStar just a reseller, and to me explains the huge short interest. I was really hoping they would report at least 50% on-net in their top 5 markets or so and 25% nationwide.
It is very positive that, according to John, Nate is getting involved and saying these lines will get on-net. At the end of next quarter they will have had 8 markets running for a year or better. Hopefully they'll be able to show 50% on-net in these markets. If so, I think the shorters will go running and the stock will soar. If not, IMO you either have to question their execution or the technology. |
