To: IQBAL LATIF who wrote (27865 ) 7/29/1999 4:29:00 AM From: IQBAL LATIF Respond to of 50167
Global internet players// Holding Off the German Invasion By William L. Valentine IV, CFA* Recently overheard at a meeting of Italian Internet Service Providers: "The Germans are coming! The Germans are coming!" By way of a strange twist of events, German companies are connecting nearly as many Italians to the Internet as Italian firms. As part of OLIVETTI's takeover of TELECOM ITALIA, OLIVETTI was forced to sell Infostrada, and the buyer was Germany's MANNESMANN. Then, just two weeks ago, Germany's uber-ISP, Cybernet, bought Flashnet, Italy's second largest ISP behind TELECOM ITALIA's TIN. Additionally, Germany's DEUTSCHE TELEKOM (DT) is part owner of Wind, another leading ISP. But the Italian's aren't out of the ballgame just yet. There are over 1000 ISPs and while dwarfed in customers by the aforementioned companies, most of them are Italian. To date, the acquisition strategy of the leaders consisted of offering free Internet access, a service known as Libero, but there are now signs that this "loss-leader" approach may be changing. Investors seeking access to Italian Net stocks will find the following available in our exchanges. Market Capitalization: $57.2 billion Price/Earnings: 40 Price/Sales: 3.3 1-yr. EPS Growth: 145% 1-yr. Sales Growth: 7% TELECOM ITALIA (TI) TELECOM ITALIA is the privatized remnant of the formerly-state-owned telecom assets of the Italian government. TI didn't stay autonomous for long, however. Earlier this year, a telecom Lilliputian named OLIVETTI became a household name by attempting to fell TI in Europe's biggest, successful hostile takeover. The takeover was accomplished by OLIVETTI's purchase of 52% of TELECOM ITALIA's shares. TI owns and runs Telecom Italia Network (or TIN), the leading ISP in Italy. TIN delivers the Internet to one half of Italy's 1.2 million web surfers. My firm recently parted company with our holdings in this stock after an extended period of appreciation. While TI stock will remain a stand alone from OLIVETTI, the uncertainty tied to the marriage of both companies makes investing in these shares a gamble on the unknown. Market Capitalization: $9.2 billion Price/Earinigs: 61 Price/Sales: 2.1 1-yr. EPS Growth: 221% 1-yr. Sales Growth: -15% OLIVETTI (OLVTY) Since OLIVETTI was forced to sell Infostrada, its only Internet assets are those by way of its interest in TELECOM ITALIA. At the current time, OLIVETTI is using its subsidiary, TECNOST, to structure the buyout of TI shares and the two companies will remain separate entities. Ironically, OLIVETTI is treated like tracking stock of TI as most of its stock value is attributed to the ownership in its new acquisition. None the less, it does own assets outside of TI that can have some impact on share price. For most investors seeking a way to invest in the Internet, however, TI will be a more direct route than owning shares in OLIVETTI.