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Technology Stocks : MindSpring Enterprises (MSPG) Another ISP.

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To: Bryan Miott who wrote ()	4/28/1999 11:16:00 PM
From: Mr Bones	Read Replies (1) of 1434

Here are my notes from the MSPG Q1 1999 conference call. The call is about an hour long and is available at 402.280.9272. My editorial comments are in brackets like [these]. Quotes from Charles Brewer are followed by (CB). * Miscellany * - avg. dialup revenue up to $20.33/customer/month; this is up due to Netcom customers - avg. Web hosting revenue down to $51/customer/month; this is down due to Netcom customers, also low cost hosting options are proving popular - currently have 47k total Web hosting customers - Very strong Q for organic growth, referrals and WOM very powerful - acquisition cost of $47/customer, down from $49 last Q. - CB says "stay the course" for 99EPS estimates - GM down from 69% to 65% due to increased use of 3rd party POPs - Tech support wait time is down - Goals for the year are growth, finalizing the Netcom acquisition and continuing high level of customer service - No immediate plans for that big pile of cash they've got - Netcom acquisition is progressing "well" (CB) - No plans for expansion of dedicated access customers until they learn the business better at which time they will evaluate whether or not they want to expand. - Focussing more on building a national brand - MSPG doesn't see any large, well-priced acquisitions at the moment, but someone other than CB (possibly Mike McQuary?) said he thinks that some of the newer Net IPOs need to "take the car around the track a little". Believes some are overpriced now and will become cheaper in the future once their IPO enthusiasm runs out. [Prodigy could certainly fall into this category.] * POPs * Distribution: 43% MSPG 34% ICG/PST 22% WCOM 01% GTE 01% PSIX MSPG POPs are best for margins; ICG/PST POPs run a close second. * Churn * - Higher this Q than historical average due to -- Sprynet and Netcom acquisitions -- Increase of one month free trial offerings -- Access problems late last quarter & early this quarter (busy signals) - Dialup churn is 5.8% (4.8 voluntary). - Web hosting churn is 3.9% (3.3 voluntary) - Churn of Sprynet customers has been about 7% but has been decreasing every month - Repeatedly refused to estimate Netcom churn but said it is better than expected and better than the Sprynet numbers * MSPG as a Portal * - CB brought this topic up. He says that their increased customer base gives MSPG more leverage for turning their home page into a revenue-generating portal. [By "portal" I feel pretty clear that he means a home page for MSPG customers with more advertising and ecommerce tie-ins. He has no intention to turn MSPG into a Yahoo or Excite.] - Currently only $466k (.8%) of revenue from advertising - Moving carefully - Might DIY or partner - MSPG & MSPG owner sites have "the 19th highest unduplicated reach on the Net" (CB). [I'm not sure how to interpret this statistic.] * Cable * - CB believes battle for open cable is progressing "very well" - KNOLOGY partnership rollout progressing cautiously to make sure "everything is straight" (CB) - Not a significant part of revenue yet (Montgomery AL only) - Have sent "lots of letters" out to small cable providers (like KNOLOGY) and are evaluating those responses - In response to a question about cable access, CB got religious about open net for about 5 minutes. He certainly doesn't lack conviction! - CB thinks that if they get FCC action on opening the cable networks before the end of next year they'll be doing well. * DSL * - Three ways to progress: 1) MSPG could install the DSLAMs themselves 2) Buy directly from the RBOC 3) Buy from a DSL aggregator like Covad or Northpoint Of these, number 2 seems the most likely option. - There were a couple of conversations between MSPG and analysts about DSL access. The thrust of these was that the RBOCs seem to be a lot more interested in keeping the data on their lines and are less and less inclined to be fussy about whether the ISP is the RBOC or MSPG. CB said they've seen "huge progress recently" in negotiations on DSL. He said, "We feel like actual customers" meaning that the DSL providers are actually giving them the time of day and seem to care. CB also said that DSL prices have been "cut in half in the last several months". Clearly, CB is very bullish on DSL possibilities. A few analysts implied or directly stated that the RBOCs are reacting out of fear of cable eating their lunch; MSPG did not confirm or deny this suspicion (but you could hardly expect them to do so). - CB says hs is "very excited about the way DSL is developing...[you] should see announcements from MSPG on these DSL fronts fairly shortly". This quote is guaranteed accurate, I listened to it a number of times to make sure I had it right. Peace, Mr Bones

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