From BoA (nee NBMO) Securities Mike Renegar:
Fixed Wireless Stocks Up Significantly After Strategic Investments;
Reiterate Buy
Shares of Teligent (TGNT, $55 1/4) and Advanced Radio Telecom (ARTT,
$12 7/16) are up approximately 15% today as strategic investments were
announced.
Liberty Media announced the intended purchase of The Associated Group
(AGRPA, $62 1/16), which owns approximately 40% of Teligent.
Qwest (QWST, $40 3/8) in conjunction with a group of private equity
investors signed a definitive agreement for a $251 million investment
that will expedite the deployment of ART's high-speed wireless
network.
We believe these actions this morning are another solid backing from
key industry players about the viability of wireless broadband.
We would be buying WinStar on today's news as we continue to believe
they are the furthest along in deploying advanced wireless networks
and would ultimately be a very attractive acquisition candidate.
Today's news in a nutshell, emphasizes once again that investors are
willing to put strategic money in the fixed wireless sector. In our
opinion, both investors got a significant ownership piece at
attractive prices with today's transactions. In the case of Advanced
Radio Telecom, the company had been looking for cash for some time now
and was not in the position to negotiate favored pricing. Qwest
invested $90 million for a 19% interest in ARTT. Other investors
include Oak Investment Partners, $40mm; MeriTech Capital Partners,
$25mm; Advent Int'l, $20mm; Columbia Capital, $20mm; Accel Partners,
$15mm; Brentwood Venture Capital, $15mm; Worldview Technology
Partners, $15mm; Bessemer Venture Partners, $8mm; and Adams Capital
Mgt, $3mm.
In the case of Teligent, Liberty Media (LMG.A, $65 7/8) took the
back-door method by acquiring The Associated Group, which owns
approximately 40% of Teligent. AT&T (T, $55 1/8) is ultimately behind
Liberty and we believe they view this as another strategic equity
investment that could ultimately help in connecting business
customers, whereas the cable play is a residential solution.
WinStar is furthest along in the deployment of buildings roof rights
at 5,500, markets in service at 30, hub sites in service 85, with
nearly 50 additional in the near future. We feel WinStar's dominant
position is only beginning to be appreciated as they continue to
report record results quarter after quarter. We feel these actions
today solidify our thoughts that broadband wireless will be a true
alternative to the Bell Company networks and will be valued highly.
AT&T, Sprint (FON, $111 13/16), Qwest, and Level3 (LVLT, $74 1/2) are
all in need of alternative ways of reaching the customer. We reiterate
our BUY recommendation on shares of WCII and believe the shares will
trade closer to our $67 private equity value.
Quick Company Comparisons
Teligent - Teligent is in our view the closest competitor to WinStar
today as far as network deployment and breadth. In our opinion they
are about 12+ months behind WinStar in network deployment (switches,
hub sites, etc.) but are building very quickly. We believe WinStar is
further ahead in customer acquisition maturity. We estimate they have
approximately 1/2 the amount of spectrum capacity as WinStar and
operate in major markets going after small and medium size customers.
We believe Teligent will be an attractive acquisition candidate
similar to WinStar as they continue to build value.
Advanced Radio Telecom - Advanced Radio Telecom has been struggling
over the last few years with funding and rolling out their business
plan. With today's announced equity investment from Qwest and others
for $251 million we believe they may finally be off to a real start.
As of now, ARTT focuses on data applications only and is somewhat
limited in that their bandwidth per market is only 100-300MHz compared
to an average of 800MHz for WCII. Advanced Radio may become part of
other wireless players as their national license would offer
additional complementary markets in addition to depth in key markets.
Although diluted now, WinStar still owns approximately 8-10% of ARTT.
Some key metrics compared:
Advanced Radio Teligent WinStar
1Q'99 Revenues ($000s) $226 $1,523 $88,093
Lines In Service 1,500* 17,600 384,000
Hub Sites Installed 1Q 15* 60 79
Building Rood Rights 216 3,100 5,500
Markets in Service 3 27 30+
Total Spectrum in top
50 Mkts. (MHz) 7,700 12,640 31,050
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also Message 9900058 |
