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Technology Stocks : Winstar Comm. (WCII)

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To: SteveG who wrote (7991)	8/29/1998 12:44:00 AM
From: SteveG	of 12468

more complete Vogel report: WinStar has added Columbus, Kansas City and Minneapolis, bringing its on-net reach to 27 switched cities. WinStar now provides live communications over its own switching facilities in 27 markets. We are highly confident that WinStar should reach its goal of 30 switched cities by year-end 1998. The three remaining cities slated for WinStar's switched services in 1998 are Miami, St. Louis and Cleveland. The reason why switched facility deployment is important centers around the migration of customers from the three categories of (1) off-switch to (2) on-switch to (3) on-net. The migration is important because of the expansion in margin obtained from customers from 15% in category (1) to 70% in category (3). WinStar's goal of 40 switched cities by year-end 1999 reflects management's plan, which we believe is well within reach, for a national network deployment across the top-50 markets in the U.S. Today's announcement of the continuing successful on-schedule deployment of switches reinforces our confidence in our revenue forecast for WinStar. The following chart highlights the valuation opportunity, which lies at the core of our investment thesis for WinStar. In short, an investor can capture this rapidly deployed national franchise at a fraction of the value of "established" players. CLEC Rank # of Switched DMAs Market Cap #Years in Operation in the Top 30 Markets ($ billions) ==================================================================== TCGI 1 29 10.5 15 WCOM 2 28 52.7 15 WCII 3 26 1.4 2 ICIX 4 23 1.3 10 ICGX 5 10 0.9 10 NXLK 6 6 1.6 2 RCNC 6 6 1.0 2 GSTX 7 5 0.4 4 HYPT 8 3 0.4 6 ITCD 9 2 0.8 15 MCLD 10 1 2.2 4 TGNT 11 0 1.3 2 ==================================================================== We reiterate our BUY rating on WinStar shares and our price target of $97 per share. WinStar's execution of its business plan through the second quarter combined with its leading national asset profile confirm our confidence in the firm's following revenue progression: ========================================== 1996 1997A 1998E 1999E ------------------------------------------ Revenue $48.6 $79.6 $276.6 $751.4 Growth 64% 247% 172% ========================================== WinStar continues to qualify as our single best idea in the Telecommunications Services Industry. We urge investors to exploit current market conditions in order to capture these assets at today's compelling valuation levels.

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