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Technology Stocks : PRIMUS TELECOMM(PRTL) Global Communications Infrastructure -- Ignore unavailable to you. Want to Upgrade?

To: Kive I. Strickoff who wrote (51)	8/24/1999 4:27:00 PM
From: Bruce Cullen	Respond to of 106

Tuesday August 24, 2:05 pm Eastern Time S&P revises Primus ratings outlook to positive (Press release provided by Standard & Poor's) NEW YORK, Aug 24 - Standard & Poor's today revised its rating outlook on Primus to positive from stable. The outstanding single-'B'-minus corporate credit and senior unsecured debt ratings for the company were affirmed. The senior unsecured debt rating on the public debt issues incorporates the expectation that there will not be a material amount of secured debt in the capital structure. The outlook change reflects this international long-distance telecommunications carrier's improving profitability given the high degree of operating leverage and substantially expanding business volumes over the last 18 months, which resulted in a gross profit margin of 23% for the three months ended June 30, 1999, versus 16% for calendar 1998. Moreover, the company generated positive operating cash flows exceeding $1 million for the first time in the second quarter of 1999. The outlook also incorporates the expectations that Primus will be able to raise substantial additional funds through a balanced mix of debt and equity to support its market expansion plan over the next few years and that the company's financing plans will enable it to achieve earnings before interest, taxes, depreciation, and amortization interest coverage exceeding 1.0 times by the year 2001. The ratings for Primus reflect the substantial challenges that this provider of international and domestic long-distance service faces in developing a business of sufficient size to service its rated debt. The company's ability to continue to generate positive cash flows depends largely on its achieving very strong volume growth over the next few years in its targeted European, Asian Pacific, and North American markets. The company has expanded its revenue base significantly over the past few years through a series of acquisitions, and its 1999 and 2000 revenue levels will benefit from 1999 acquisitions that include the 350,000 retail customer base and assets of international telecommunications provider Telegroup Inc. and the residential long-distance customer base and residential Internet customers of AT&T Canada and ACC Telenterprises. These businesses also will assist Primus in reducing its dependence on the carrier business, which accounted for about 33% of the company's revenue base for the three months ended June 30, 1999. Primus focuses on the international long-distance market and is investing in the acquisition of facilities to switch and carry traffic. To this end, it has entered a reciprocal capacity purchase agreement with Global Crossing Holdings Ltd. that will enable Primus to purchase fiber capacity from Global Crossing and allow Global Crossing to purchase Primus' satellite services. Greater facilities ownership and higher traffic levels have already begun to improve operating efficiencies and profitability. The company has also increased its focus on the data services sector through formation of a separate subsidiary to target business and residential customers for data and Internet services. Primus faces formidable competition from much larger, entrenched telecommunications companies in a dynamic pricing environment. The current sharply declining trend in prices for international telephone calls is likely to continue, and competition is increasing. OUTLOOK: POSITIVE Successful implementation of the company's growth plans in the current market and regulatory environment should continue to enhance Primus' business position. The ongoing ramp up of Primus' revenue base, coupled with greater on-network traffic and higher operating cash flows from the more profitable data services segment over the next few years, should enable the company to achieve an improved financial profile, Standard & Poor's said.