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Technology Stocks : GST Telecom (GSTX) 4th quarter earning -- Ignore unavailable to you. Want to Upgrade?

To: MangoBoy who wrote (265)	12/17/1999 5:55:00 PM
From: MangoBoy	Read Replies (1) \| Respond to of 369

[DJ: Dynamic CLEC Mkt Could Put Squeeze On Small Players] NEW YORK -- Rapid growth and eventual consolidation in telecommunications is great for the sector but could eventually mean trouble for smaller competitive local exchange carriers and the investors that own their bonds. Top tier competitive local exchange carriers - start-up companies trying to wrest market share from established local phone service providers - are expected to become a force in the industry over the next decade as they grow through massive borrowing, investment and mergers and acquisitions. CLECs make a name for themselves on Wall Street by assembling management teams that are able to execute business plans, adapt in a dynamic market and cultivate all sectors of the capital markets to raise funds, according to Doug Bontemps, analyst in Moody's Investors Service speculative grade telecommunications group. McCleodUSA Inc, NEXTLINK Communications Inc. (NXLK) (MCLD), and RCN Corp. (RCNC) are considered leaders among so-called CLECs, and they have funded themselves with bank debt, high-yield bonds, and private equity investments. Private equity investments, in particular, have been concentrated in higher quality names. Just this month, NEXTLINK received an $850 million infusion of convertible preferred stock from Forstmann Little & Co. In March, RCN got an investment from Hicks, Muse, Tate & Furst Inc. Since March, financial sponsor investments in CLECs have totaled approximately $4.6 billion this year, according to Chase Research. Analysts think these companies have enough available capital to fund their ambitious business plans for the next few years. However, investors are concerned that less esteemed CLECs - names like e.spire Communications Inc. (ESPI) and GST Telecommunications Inc. (GSTX) - might be denied access to new capital, especially from private equity firms. "I'm not really bullish right now on their ability to do that," said Dean Kartsonas, portfolio manager at Federated Investors, who is among the doubters. The pessimists also include many bond traders, who note that the debt of some weaker CLECS is already trading at distressed or near distressed levels. E-spire and GSN junk bonds pay yields of about 25% and GSN bonds yield about 18%, respectively, according to investors. However, GST director of investor relations Lisa Miles said the company is working with lead bank Salomon Smith Barney to procure a private equity investment and expects to receive one totaling about $100 million by early next year. She declined to comment on which firms are considering an investment in GST. Officials at e.spire couldn't be reached for comment. Potential High-Yield Orphans Weaker companies that can't raise more money or attract buyers might not be able to compete with market leaders, according to analysts. "It's eventually going to be all about consolidation, and the process could leave some high-yield orphans," said Les Levi, managing director, high yield finance at Chase Securities. Some companies could start to hit obstacles as early as next year, analysts said. "Small companies still operating with EBITDA deficits and cash interest payments coming up next year are a concern," said Aryeh Bourkoff, an executive director at CIBC World Markets with coverage of the telecommunications and cable television industries. EBITDA refers to earnings before interest, taxes depreciation and amortization. -By John Dooley; Dow Jones Newswires; 201 938-2078; john.dooley@dowjones.com