GTSG
don't know if you're following it any more but there's this today:
Thumbs Down: Global Telesystems Group
Global TeleSystems Group (NASDAQ:GTSG - news) (George Soros owns about 12% of the stock) is another
player with a retail strategy. The company's five divisions provide wholesale and retail telecommunications services
in Europe.
In December 1998, the company acquired U.K.-based Esprit Telecom Group (NASDAQ:ESPRY - news) . Not only
did Global TeleSystems manage to get rid of one of its closest rivals, but it also acquired a company that boasts retail
revenue that is nearly double that of Global TeleSystems', according to Simon Carrington of Merrill Lynch, who was
recently cited by Bloomberg. Combined companies will provide services to about 35,000 commercial customers in
Western Europe.
At this time, however, we recommend investors to avoid the stock due to several factors. The company is least
attractive of the three in terms of financial fundamentals. Global TeleSystems generates the lowest revenue per
employee in the industry. Although it enjoys the highest gross margin, SG&A expenditures are the largest in the
industry.
In addition, the company carries substantial balance of goodwill on its books. This line has been expanding on
average at a 58% clip during the last three quarters. Heavy SG&A and goodwill amortization expenses are main
contributors to Global TeleSystems' operating losses, which amounted to $24.5 million in the fourth quarter of fiscal
1998.
Bottom Line:
Recent heavy insider selling does not help as well, at least in the short-term. In early January, Global TeleSystems
officers and directors unloaded nearly 300,000 shares of the company.
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