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Technology Stocks : Qwest Communications (Q) (formerly QWST) -- Ignore unavailable to you. Want to Upgrade?

To: Pat Hughes who wrote (4410)	6/24/1999 10:07:00 PM
From: Rashe W. Stephens III	Read Replies (1) \| Respond to of 6846

BLS possibly looking at Mindspring. This may be another part of the grand plan. QWST + USW + BLS + MSPG. MSPG delivering Internet services to all those customers, plus the synergies of the QWST network. Noticed that MSPG signed an agreement this week with COVAD, who's providing DSL to QWST. Maybe Nacchio is about to reveal one the aces he has up his sleeve with a BLS-MSPG relationship. Adding a profitable ISP to that mix is one way to jack up earnings. By the way, both are based in Atlanta. Where will the headquarters for BellSouthQwest be located?

To: Pat Hughes who wrote (4410)	6/25/1999 1:42:00 AM
From: Bindusagar Reddy	Respond to of 6846

Wasserstein(DETAILS):QWST- Initiating Coverage with a BUY rating. Initiating Coverage Initiating Coverage with a Buy rating and a twelve- month price target of $48. COMPANY: Qwest Communications International, Inc. RATING : Initiating Coverage(BUY) ANALYST: William B. Klein PRICE: $32.56 Event: We are initiating coverage on Qwest Communications with a Buy rating. Recommend: We believe that the shares have been oversold based on its recent bids for both USWest and Frontier, and we see significant upside to the shares regardless of the outcome of the bids. Analysis: Qwest is one of the premier NSPs (Network Service Providers) that we monitor, with an excellent international network and a growing suite of value- added services. The company has been very aggressive in partnering to enhance its value-added service portfolio, as well as expanding its network footprint in both the long haul and local access markets. Valuation: We utilize our Discounted Cash Flow model on the company on both a stand-alone and pro forma basis, as well as to compare Qwest with SuperCarriers AT&T and MCI WorldCom. On a blended basis we arrive at a twelve- month price target of $48 per share. Upcoming Events: None scheduled. Call Details We are initiating coverage on the shares of Qwest Communications with a twelve- month price target of $48 per share. Shares sold off sharply as the company made a bid for both USWest and Frontier. Investors concerned about the long-term growth potential should Qwest succeed. The possibility of a bidding war, network integration clouds future outlook considerably. While we acknowledge the market's concerns we believe the company has outstanding long-term prospects, as management strives to be one of the few truly end-to-end providers. Should management fail in its attempt to acquire USWest and/or Frontier, the valuation of the shares should return to its former levels. We have always been admirers of Qwest Communications, however until now investors had to pay a premium in order to own the shares. After the company followed Global Crossing's bid for USWest and Frontier with bids of its own, investors sold off the shares roughly 25% from the previous day's closing price. We understand perfectly what the market was thinking, however we do not share its sentiment. The long-term prospects are excellent for Qwest should they succeed in acquiring USWest and/or Frontier, as it would give the company local access to end-users. We have always been of the opinion that the RBOC's local loop is the most valuable property in all of data communications, as it is ubiquitous and it is the most difficult to replicate. Trading Qwest's stellar secular revenue growth rate for local access is a trade-off is a position with which we cannot argue. We also share investor's concerns that Qwest and Global Crossing may become entangled in a bidding war for USWest and Frontier. There are also many other questions surrounding the transactions that have yet to be clarified, perhaps the most glaring is the network integration hurdles Qwest will uncover should the two bids succeed. Remember that Qwest prides itself on the modernity of its network, while USWest in particular is rife with older, legacy equipment and systems. Management also has to address the issue of combining a local RBOC with a long distance provider, something no doubt that the regulators at both the state and federal level will fully scrutinize. No one yet can fully anticipate how a combined Qwest/USWest/Frontier will look should the authorities actually clear the acquisitions. That said, we believe that an investment in Qwest today represents an outstanding value that has great potential. Should Qwest acquire USWest and/ or Frontier, Qwest's management will have created an outstanding local and long distance provider, which when combined with BellSouth (who owns 10% of Qwest) has the potential of becoming one of the SuperCarriers in the class of AT&T and MCI WorldCom. While this eventuality may be some time away, we believe that this will likely cross the minds of some forward-thinking investors and analysts. Therefore we would prefer to take advantage of any short-term weakness in the share price today for great returns tomorrow. Besides, should Qwest not acquire USWest and/or Frontier investors would return as the issues listed above would quickly disappear, and the shares would likely return to former levels. In our opinion, Qwest is a pioneer among the network service providers we monitor. Qwest has an outstanding management team that has continuously made great strategic moves ahead of its peers. The company enjoys a significant time-to-market advantage and a low cost position. A robust next-generation data network is about to be completed by year-end. The company is continuously expanding its international and local loop footprints. Transforming from a bandwidth wholesaler, Qwest today offers a comprehensive suite of telecommunications products, which includes a broad range of Internet-based, value-added services. Led by a visionary management team, Qwest has been at the forefront of today's fast-changing telecommunications paradigm. The company plans a timely completion of its cutting-edge transcontinental network by the end of 1999. Compared to both the existing and upcoming long-haul providers, Qwest enjoys a significant cost advantage as it has essentially financed its network by selling dark fiber to its competitors. In overseas markets, the company invested aggressively in transatlantic and transpacific fiber-optic capacities as well as terrestrial capacities in Europe and Mexico. Well before the USWest /Frontier bid, Qwest had already moved into local loops by building BMANs ( Broadband Metropolitan Area Networks) and partnering with BellSouth, Covad, Rhythms and Advanced Radio Telecom. Having successfully made the transition from a bandwidth wholesaler to a high value-added network service provider, Qwest now offers integrated voice and data communications services with a broad range of value-added products including web-hosting and VPNs (Virtual Private Networks). Qwest is currently taking aim at the fast growing application hosting market by partnering with Microsoft, Hewlett Packard, Siebel, Oracle, SAP, and most recently, KPMG. We view the current share price an excellent buying opportunity regardless of the outcome of the bids. Our twelve-month price target is $48 per share. We evaluated Qwest in various scenarios assuming different outcomes of the bids. On a stand-alone basis, our valuation was based on ten-year Discounted Cash Flow methodology. As a combined company, we compared Qwest to what investors are paying for AT&T and MCI WorldCom as well as modeling a pro forma ten-year DCF. ** We arrived at a 12-month price target of $48 on a blended basis. We are initiating coverage with a Buy rating and a 12-month price target of $ 48 per share. We have evaluated the company on a stand-alone basis as well as on a pro forma basis, assuming the acquisition of USWest and Frontier is completed under Qwest's current bids. According to our DCF models, Qwest is valued at $48 per share on a stand-alone basis and $45 per share on a combined pro forma basis. In fact, at the current price level the pro forma combined Qwest/Frontier/USWest is trading at a significant discount to AT&T and MCI WorldCom based on EV/Net PPE multiples.