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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] -- Ignore unavailable to you. Want to Upgrade?

To: transmission who wrote (926)	12/3/1999 12:59:00 AM
From: SteveG	Read Replies (2) \| Respond to of 1860

PW: John Hodulik NEXTLINK: Affiliate to Get Canadian Wireless Licenses December 3, 1999 KEY POINTS * Wispra Networks, Inc, a 33%-owned affiliate of NEXTLINK Communications, is expected to be awarded broadband wireless licenses by Industry Canada in 6 of the top Canadian markets. * The company was the provisional winner of the 400 MHz licenses at 24GHz in Canada's spectrum auctions. Industry Canada has 10 business days to approve the winners, putting the deadline at early next week. * Although NEXTLINK will not have control of the licenses, it does give them a strong foothold into Canadian markets where the company's INTERNEXT fiber runs while continuing Dan Akerson's strategy of focussing the company's efforts on North America. * The stock has been under pressure lately due to uncertainty surrounding recent management changes at the company. However, we continue to believe NEXTLINK is the best-positioned CLEC in the space with an excellent management team and a rare collection of assets that are enhanced by access to additional spectrum in Canada. * We are reiterating our Buy rating on NEXTLINK shares with a 12-month price target of $68 per share. We continue to believe it to be the best long-term investment in the sector. NEXTLINK AFFILIATE TO ADD SPECTRUM IN MAJOR CANADIAN MARKETS On November 19th, Canada concluded its broadband wireless auction of six licenses in each market. One license of 400MHz was auctioned off at 24GHz, while 4 licenses of 100MHz and 1 license of 400MHz were auctioned off at 38GHz. Wispra Networks won the 400MHz licenses at 24GHz in Toronto, Montreal, Vancouver, Ottawa, Calgary and Edmonton - all the markets in which it actively bid. Wispra Networks is wholly owned by Wispra Holdings, a longtime participant in Canada's wireless marketplace. Wispra Holdings is 33 1/3% owned by NEXTLINK. Canadian law prevents non-Canadian firms from owning more than one-third of license winners. We believe Teligent (TGNT-$55.50)[2] and WinStar (WCII-$53.50)[2] did not bid aggressively in these auctions largely due to these ownership restrictions. This structure allows NEXTLINK to gain a toehold in potentially large Canadian markets, many of which sit on the long haul capacity the company purchased from Level 3 in the INTERNEXT transaction. It also fits with the new CEO's strategy to focus more tightly on opportunities in North American markets before expanding oversees. This outcome follows on the heels of a recent deal to acquire spectrum in Denver to fill in holes in the company's spectrum platform. Based on these moves, we believe it is likely to acquire spectrum in Salt Lake City, Phoenix, and Las Vegas in the near future to achieve complete coverage of all major markets. Wispra bid US $50.3 million for the Canadian licenses (or about $3.53 per POP). This amount needs to be paid by the company upon confirmation of the license win next week. NEXTLINK is for responsible for one-third of this amount. Markets won by Wispra Networks Market POPs (mm) Amt ($CN) Amt ($US) Toronto 5.15 $35.8 $24.4 Montreal 3.68 22.3 15.2 Vancouver 2.14 9.1 6.2 Ottawa 1.19 4.0 2.7 Calgary 0.94 1.4 0.9 Edmonton 1.15 1.4 0.9 Total 14.25 $74.0 50.3 Source: PaineWebber. WEAKNESS CREATES BUYING OPPORTUNITY IN NXLK SHARES We believe the recent weakness in NEXTLINK shares has been caused by uncertainty surrounding recent management changes at the company. Dan Akerson was appointed CEO of NEXTLINK on September 22, replacing Steve Hooper, who had been in that role for less than a year. A week later, George Tronsrue, the company's President and COO, left the company, in what management called an unrelated event. Most recently, Kathy Iskra was replaced as CFO by Mark Gunning, formerly of PrimeCo. This change was related to the relocation of the company's headquarters from Bellevue, Washington, to Northern Virginia. In the end, we believe these changes are likely to cause only minor disruptions at the company in the near term and remain confident the company will hit our near-term estimates. The company recently completed concurrent high yield debt offerings of $855 million, giving it a pro forma cash balance of just under $2 billion and eliminating the need for additional capital until late 2000. Meanwhile the management team at the company remains very strong. Dan Akerson has established a proven track record, most recently making moves at Nextel that added more than $12.5 billion in market capitalization to that company over the course of his 3 1/2 year tenure. Combine this leadership with the unparalleled set of assets under NEXTLINK's control and its becomes clear why we remain so confident in the company's prospects. This pullback has given investors another shot at buying the stock at an appealing price. We are therefore reiterating our Buy rating on NEXTLINK shares, with 12-month price target of $68 per share based on our discounted cash flow analysis. RISKS Risks include technological change, potentially adverse regulatory rulings, mounting losses, continued reliance on the capital markets, high degree of operating and financial leverage and increasing competition from larger, better established carriers.