Denis, this looks like an article based on the report you heard.
Projections of future pricing, availibility and demand of bandwith vary greatly. I'll try to put post some related links this weekend.
Yes, IRU's are sold for up to 25 years at a fixed price.
Dow Jones Newswires -- March 18, 1999
CNBC's FABER REPORT: Call It The Bandwidth Party
The following report was aired Thursday on CNBC-TV by CNBC reporter David Faber.
"Call it the bandwidth party. Yesterday's deal between Global Crossing and Frontier highlights what
has been the incredible creation of value in three companies all pursuing very similar strategies.
Global Crossing, with its acquisition of Frontier pending, will likely have a market value exceeding
$30 billion when that deal is completed. With the addition of Frontier and its revenues, the
combination will have reported revenues of about $4 billion for the year.
Level Three, a company led by former MFS (Communications Corp.) Chief Executive Jim Crowe, is
in the same business. Namely it's building a fiber optic network with 25 U.S. and five foreign intracity
fiber loops with that key acronym IP, or Internet protocol, being deployed end to end.
Level Three has a market value of over $23 billion. Its last reported quarterly revenue number was
$106 million.
Finally, there is Qwest, also building fiber optic networks for its own use and use by other telecom
companies. It is going to be transmitting voice, data, video and anything else that someone might be
able to cram over one of those fiber optics.
Qwest has a market value of more than $25 billion. It went public the end of June 1997 and roughly
half the company is still controlled by Anschutz Co. It was the rail beds controlled by Anschutz into
which Qwest's fiber was able to be installed.
The performance of stocks such as Qwest and Global Crossing and Level Three has made their
shareholders rich well before any of the companies has earned a dime.
As I reported yesterday, Global Crossing has made the rich, such as Larry Tisch, richer and since its
public offering last August Global Crossing has provided plenty of performance for money managers
who have held on to the shares since the initial public offering about nine months ago.
But what of the future for these companies? To be sure, despite their large market values, they are
still well below that of the top tier in telecom companies. And they will be competing with the likes of
Worldcom and AT&T as well as each other as they gather customers for their networks.
As the transfer of data overtakes that of voice, and the prospect of video, with its increased
bandwidth demands, outstrips them all, investors clearly believe all these companies will prosper.
Analysts do applaud the management teams at all three companies and many support the values being
afforded Level Three, Qwest and Global Crossing. One thing is certain, with the continuing decrease
in the cost of transmitting communications and competition between networks, prices are sure to fall.
With each 1% fall in prices, traffic has increased by 3%. If that keeps up, perhaps these values will be
justified. But we shall see." |
