Value Line's full comments:
Construction continues on Qwest Communications International's advanced fiber-optic network. The 18,500 mile coast-to-coast network, containing the most-advanced telecommunications equipment, should be completed by mid-1999. Currently, the company has secured 99.5% of its rights of way, and has installed 12,900 miles of fiber in the ground. When fully operational, the network's low-cost structure and phenomenal speed should allow Qwest to become a formidable competitor in the expanding telecommunications industry.
Qwest will focus its sales efforts on the growing data services market. With the growth of the Internet, demand for high-speed data and multimedia offerings has surged. Qwest's network, which does not suffer from some of the technological limitations shown by many of the larger telecommunication companies, should allow Qwest to gain a significant market share in these new services. In order to strengthen its Internet capabilities, Qwest will likely pursue acquisitions, such as the recently proposed purchase of Icon CMT, an Internet solutions provider, for $185 million in stock.
Meanwhile, the integration of LCI International is proceeding smoothly. Earlier this year, Qwest acquired LCI for over $4 billion and became the fourth largest U.S. long-distance provider. The purchase should aid Qwest in its penetration of the telecommunications marketplace, as LCI provides Qwest with an extensive customer base and an experienced sales force. Additionally, when Qwest's own network is fully functional, the migration of LCI's existing customers on to the lower-cost facility should provide extensive cost-savings.
At their current price, unranked Qwest shares do not offer attractive appreciation potential out to 2001-2003. The sharp runup in the share price over the last year seems to have already discounted much of the earnings growth we project over the next 3 to 5 years. However, speculation that Qwest, given its attractive network asset, may be an attractive acquisition target for a larger telecommunications company is probably helping to support the stock's price.
Yehuda Fruchter November 6, 1998
It's probably worth noting that QWST will probably maintain it's volatile pattern and trade within a pretty wide range of $27-48 give or take a few bucks. It'll be a good trading stock, IMO. |
