Kinda interesting:
Andy Kessler: Coping at the Communicopia
By Andy Kessler
Special to TheStreet.com
10/13/98 12:29 PM ET
While in New York last week, I spent lots of time at the
Goldman Sachs Communicopia conference.
These guys may not be able to go public, but they do throw
one helluva conference. The underlying assumption? That
the supposedly colliding worlds of media, telecom, cable
and technology can be analyzed in one spot.
Of course, that is about as silly as the name of the
conference. Nonetheless, Goldman draws the best and
maybe even a few of the brightest from these industries.....
Local vs. long distance
MCI WorldCom's (WCOM:Nasdaq) Bernie Ebbers
was the leadoff speaker on day 2, and every bit as
impressive as Ted Turner in style, with perhaps a bit
more substance. Ebbers just closed his MCI deal and
swore off any future deals that would require the
approval of the regulators as too much of a hassle.
He suggested the Bell Atlantic (BEL:NYSE)-GTE
(GTE:NYSE) merger would probably not happen,
because it is likely to be killed by regulators.
But since it would create a competitor to his
local/long-distance/Internet structure, that may be
just a lot of wishful thinking. He did provide some
useful insight on the economics of the telco
business, and the desire of long-distance guys to get
into local service, and how the locals are vying for
long-distance.
Bernie did point out that long-distance margins are
running at about 20% of earnings before interest,
taxes, depreciation and amortization, while local
margins are 40% of EBITDA. The FCC insists that
local players open up their markets to competition
before letting them into long-distance, but according
to Bernie, these guys ain't dumb. They are not going
to sacrifice 40% margins for the sake of new
business yielding a measly 20%. No way. Keep this
in mind as you watch these wars develop.
Chuck Lee of GTE spoke later in the morning,
touting the value of his local and long-distance
business. He was quite proud that his stock was
undervalued, pointing to a Yankee Group study that
showed that the existing copper plant (i.e.
infrastructure) at the telcos would cost $5,000-$7,000
per home to replace.
I was intrigued by this number, until my partner
pointed out that you could say the same thing about
laying kite string under the ground: It's all about value,
not replacement cost. So maybe $5,000-$7,000 is
not the value of the plant.....
Full article at thestreet.com |
