Subject: Capital Research Initiates "Strong Buy" on Southland Financial Inc.
(OTCBB: SINC)
Bcc:
Southland Financial Inc.
Shares Outstanding: 6.1 million
Public Float: 850,000
52 Week Range: .25 - 7.00
Rating: Strong Buy
Target: 15.00
OVERVIEW: The economic progress and prosperity of Hong Kong has long been underpinned by an efficient and cost-effective telecommunications sector. With an economic crisis in the region, the need of continuing micro-economic reform and telecom liberalisation will prove to be essential for Hong Kong to maintain its future role as a financial services centre.
While the mobile telecom market in Hong Kong is highly competitive, the three local fixed lines carriers, (Hutchison, New T&T and New World) have only made slight inroads into Hong Kong Telecom's local business. After three years in business, the three carriers have managed only 50,000 local access lines off Hong Kong Telecom's 3 million line base. The Hong Kong government has recently released its proposed broadcasting and telecommunications liberalisation policies which are presented as a micro-economic reform designed to reduce prices and increase innovation, and as an industry development policy aimed at attracting regional hubbing business.
BUSINESS STRATEGY: The strategic objective of Southland Financial, Inc., (SFI) and its subsidiary, United Telecom Inc., (UTI) is to become a Carrier's carriers in the provision of Customer Access Network, (CAN) services.
The business strategy is based on the following worldwide developments:
* The continuing viability and growth of telecom carriers will increasingly be dependent on having direct access and thus relationship with consumers.
* This direct access will enable carriers to provide integrated telecom services to customers and these services include telephony, Pay TV, fast Internet access and other interactive services.
* The demand for high quality transmission capacity that is required to handle complex voice, data and video telecommunications, will continue to increase and will require higher bandwidth digital optical fibre networks.
The principle elements of the company's business strategy include the following:
* The company intends to invest and build a highly reliable and versatile telecommunications network in Hong Kong that will provide local access to the homes and offices of customers.
* Carriers in Hong Kong will lease transmission capacity and lines from the company as the demand is required on a "pay as you use" principle.
* The company will build the infrastructure in partnership with the carriers who are the direct customers to the company, adopting a "just in time" format.
* Carriers themselves do not have to invest in building infrastructures thus saving on capital investments. The carriers can focus on what they do best to develop new products and services to meet market demand. There is therefore little duplication of infrastructures and waste of scarce resources.
STRATEGIC PARTNERSHIPS To ensure the viability of the project, SFI/UTI has undertaken a significant amount of work in Hong Kong to establish strategic relationships with the carriers and the government regulator, OFTA. Furthermore, SFI/UTI has recently entered into a Memorandum of Intent, (MOI), with a Hong Kong partner to acquire existing and develop new fiber optic network infrastructure.
THE NETWORK The company plans to construct and operate state of the art, competitive local telecommunications networks employing the latest SDH transmission technology with dual ring architectures and centralised network management and maintenance. Please refer to Attachment "A."
The company's advanced networks will, through other carriers, offer cost effective access to residential subscribers and provide uniform, high reliable quality services to large corporate customers.
The company's network configuration is shown in the attachment and consists of the following key elements:
* Interface to the carriers. The electronics that interface to the carriers' exchange equipment.
* Ducting and optical fibres. The optical fibre rings, along with the cables in ducts, running between exchanges, providing for robust and self-healing networks.
* Electronic equipment. The transmission equipment and the necessary electronics required to terminate the traffic at the buildings.
* Block-wiring. These are the horizontal and vertical cablings within buildings leading to the subscribers' terminating blocks. Network management.
* The computer systems that provide centralised monitoring of the network. The aim is to minimise network down-time thereby providing a highly reliable and competitive service.
MANAGEMENT Commensurate of a project of this magnitude, SFI/UTI will shortly be announcing a world class Board of Directors and Senior Management Team, that have the appropriate experience to fully exploit the opportunity. The Board and Senior Management members are seasoned, experienced professionals who have all gained distinction in their chosen fields of investment banking, law, marketing, corporate governance and of course, telecommunications.
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All material herein was prepared by Capital Research Group Inc (CRG), for the companies discussed herein, based upon information supplied by the company or other sources believed to be reliable. Any exceptions to this are listed further down in this paragraph. The information contained herein is not guaranteed by CRG to be accurate, and should not be considered to be all-inclusive. The foregoing discussions and pages contain forward-looking statements that involve risks and uncertainties. The company's actual results could differ materially from those described in any forward-looking statements or announcements discussed within. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell the securities. CRG is not a licensed broker, broker dealer, market maker, investment banker or underwriter. Please consult a broker before purchasing or selling any securities viewed on www.thesubway.com. CRG, its affiliates, and/or its officers, directors and employees may from time to time have a position in these securities. Capital Research Group Inc was compensated with 10,000 shares of stock for preperation of this report |
