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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..]
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To: SteveG who wrote (96)4/23/1999 4:07:00 PM
From: SteveG  Read Replies (1) of 1860
 
more on T from ML:

from Michael E. Ching

Positive Development for Cable Telephony
Investment Highlights:

· We believe that AT&T's offer last night to purchase MediaOne Group
further supports our thesis that coaxial cable is an attractive physical media to transmit both telephony and Internet services.

· We estimate that it costs between $100-300 million to upgrade a typical city's coaxial cable plant to support telephony and Internet services. This represents a significant opportunity for several of our companies.

· ADC Telecommunications's (ADCT, C-2-1-9, $45 ¾) Homeworx access
platform currently supports telephony over coaxial cable. ADCT is working with Cisco to include an IP capability in the product. Homeworx is being used by MediaOne in Atlanta and Los Angeles for commercial service to several tens of thousands of customers. ADCT's contract with MediaOne was originally valued at $100 million over three years.

· Tellabs' (TLAB, B-2-1-9, $111 ¾) CableSpan telephony distribution system is being used by MediaOne in Florida. Tellabs' contract with MediaOne was also originally valued at up to $100 million over three years.

· TCI, which recently merged with AT&T, is considering using their coaxial cable for telephony and Internet applications. AT&T/TCI is currently evaluating Homeworx and CableSpan, with quality of service the primary criteria. Given MediaOne's experience with both products, a successful acquisition of MediaOne by AT&T could help in accelerating a positive evaluation for both ADC Telecommunications and Tellabs.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ML from Jessica Reif Cohen
Investment Highlights:

· AT&T's offer to buy Media One provides
continued confirmation of the inherent value
and appeal of cable's broadband plant.

· We view either of the announced offers for
Media One (Comcast or AT&T) as positive for
Time Warner in terms of providing for a
smoother and more effective relationship with
Media One in terms of the TWE partnership.

· However, we believe a Comcast/Media One
combination would be more beneficial for
Time Warner in terms of the jointly controlled
and managed TWE assets.

· We would view a roughly 20% stake in TWE
in the hands of AT&T as increasing the
uncertainty surrounding the eventual
restructuring of the TWE partnership.

· Maintain our Buy rating on Time Warner and
$85 price objective.

We view AT&T's counter-bid to acquire Media One,
approximately one month after Comcast and Media
One agreed to merge, as continued confirmation of the
inherent value of the cable plant in terms of delivering
the most effective and efficient broadband pipe into the
home. The cable industry's rampant consolidation
together with successful unfolding of new service offerings
should help to justify their historically high valuations as
well as provide a strong platform for continued multiple
expansion and price appreciation.
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