The way the street does valuation for this company is a bit different from the others. This company is not valued by its earnings (okay, maybe a little bit), it's the company's fiber optics miles that the street values. The more fiber they install nationwide, the higher the price goes. They have been installing fiber cables which has 470+ fiber strands in a conduit, comparing to average 40 per conduit in the industry. Given the equal construction and right-of-way cost, the densed fiber cable reduce cost 10 times for them. Starting 1999, they will start using 800+ per conduit cables to further havle the cost. The company is backed by very strong money (Metromidia international by Kluge). With the demand coming from ISPs, CLECs, IXCs, cable operators for new fiber routes, from financial institutions that need new fiber routes to fulfill new government data redundancy regulations, they cannot lay fiber fast enough to meet the demands.
Also keep in mind that all the dark fiber contracts sold to their customers are all on a lease basis. At the end of the lease (20 years), they still own the fiber! Because of the demands, they don't do any lease less than 10 years. Most of the leases are 20 years.
With internet exploding the way it is, dark fiber is so precious today and it will be priceless tomorrow. MFNX is in a market there is no competition (Qwest and Globle crossing are in different market segments). Let's say the dark fiber market will be mature when all enterprises are connected by fiber worldwide, then the dark fiber that's installed today doesn't even count for 1% of that capacity. So there will still be a quite bit run. So sit back, buckle up and enjoy the ride. |
