Advanced Radio Telecom (ARTT) Message Board

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Technology Stocks : Advanced Radio Telecom (ARTT)

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To: SteveG who wrote (555)	3/31/1999 4:25:00 PM
From: SteveG	Read Replies (1) of 1176

Bo Fifer from BTAB last night: ARTT: Likely To Miss Short-Term Expectations For Financing Announcement--Long-Term Outlook Remains Favorable HIGHLIGHTS: -- After speaking with management and with only 1 day left in the quarter, we believe Advanced Radio Telecom (ART) is unlikely to meet expectations for announcing a new round of financing by 1Q 1999. While long term expectations remain unchanged, we believe ARTT shares are likely to suffer through the "punishment" of mis-managing expectations as investors held out hope for a last minute deal. -- POSITIVE NEW NEWS: None. -- NEGATIVE NEW NEWS: Management had been sticking with the 1Q 99 guidance as recently as the 4Q 1998 earnings conference call in early March. While the exact timing of any new financing is of little importance to the long term outlook for the Company (as long as it comes before mid-June), we believe management will have to deal with the consequences of having mis-managed expectations this early in the game after missing several opportunities to adjust expectations. -- NET-NET: ARTT shares are likely to fall in response to this news. The severity of the drop will depend on how much faith investors have that a deal is coming soon, and we continue to believe that wireless as an access medium will become an increasingly important (and scarce) strategic asset. As such, we would view any pullback in ARTT shares as an excellent buying opportunity. -- VALUATION: Based on the recent transaction comps (i.e., Nextlink's purchase of WNP's spectrum for $695M), we believe ART's spectrum would be valued at $7/share after taking into account the fact that WNP owned almost twice as much spectrum on an aggregate basis ($695M/2 - $130M estimated LT debt at Dec-98 / 32 million diluted shares out). While direct comparisons of the spectrum are not clean, we believe this does point to the strategic value of wireless spectrum in the local market. At that level, the market would also be fully discounting management's credibility, which we believe is certainly an extreme measure. Based on our 10-year DCF, using a 10x terminating multiple and 25% equity discount rate to reflect the imminent need for financing, our 12-month price objective is $14/share. Maintain our "buy (2)" investment rating on the shares.

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