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Technology Stocks : Advanced Radio Telecom (ARTT) -- Ignore unavailable to you. Want to Upgrade?

To: Obewon who wrote (1029)	4/4/2000 11:22:00 AM
From: MangoBoy	Read Replies (1) \| Respond to of 1176

(FIRST CALL) ABSG: ARTT: New Spectrum Aimed Squarely At (Ultra) High-Band ABSG: ARTT: New Spectrum Aimed Squarely At (Ultra) High-Bandwidth Service-Strong Buy 02:07am EDT 3-Apr-00 Deutsche Banc Alex. Brown (B. Fifer/J. Hines/C. Av) ARTT Fifer, Bo 212-469-7240 04/03/2000 Hines, Jeff L 212-469-7250 Avery, Christopher H. 212-469-7274 Deutsche Banc Alex. Brown ------------------------------------------------------------------------------- ADVANCED RADIO TELECOM CORP. (ARTT) "STRONG BUY" New Spectrum Aimed Squarely At (Ultra) High-Bandwidth Services ------------------------------------------------------------------------------- Date: 03/31/2000 EPS: 1999A 2000E 2001E Price: 33.13 1Q (0.63) (0.56) NE 52-Wk Range: 49 - 7 2Q (0.72) (0.62) NE Ann Dividend:0.0 3Q (0.66) (0.77) NE Ann Div Yld: 0.00% 4Q (0.80) (0.54) NE Mkt Cap (mm):2,110 FY(Dec.) (2.81)A (2.50) (2.19) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (2.81) (2.50) (2.19) Est. Changed Yes CY P/EPS NM NM NM ------------------------------------------------------------------------------- Industry: TELECOMMUNICATIONS SERVICES - CLECs Shares Outstanding(Mil.): 63.7 Return On Equity (1999) : 0.0% ------------------------------------------------------------------------------- HIGHLIGHTS: -- Advanced Radio Telecom (ART) announced a series of spectrum acquisitions (29-Mar) that significantly increase ART's available bandwidth in the top 50 markets. We have increased our revenue estimates significantly to reflect the higher bandwidth per user we expect ART to sell going forward. Our new 12-month price objective is $34/share (up from $21) based on our DCF. Maintain STRONG BUY rating. -- In the first transaction, ART acquired 14 100-MHz licenses from privately-held Bachow Communications for 2.2M shares of ARTT valued at approximately $76M on the date the transaction was announced. The licenses include 4 of the top 10 markets and 14 of the top 40. -- The second transaction, with privately-held Broadstream Communications, covers 366 100-MHz licenses with a slight twist: 104 of the licenses to be acquired are subject to FCC minimum build requirements with a deadline of Feb-01. ART will provide a $30M credit line to Broadstream for the buildout of these markets, and pending FCC renewal of the licenses, acquire the assets in 1H01. The $30M facility would be incorporated in the final purchase price. ART holds an option to put the markets back to Broadstream if the licenses are not renewed. ART will issue $365M in ARTT shares (approximately 10.5M shares as of the day the deal was announced) assuming no license transfer issues. -- In aggregate, ART will issue stock valued at approximately $441M for 380 licenses and nearly DOUBLES ART's average spectrum position in its top markets to over 300 MHz per market. -- The question is, did ART need more spectrum? One of the advantages to ART's consecutive-point-to-point (CPP) architecture is that a single channel can be used to construct multiple "rings" in a given market. These rings are currently limited to 100 Mbps of aggregate throughput. However, with the new spectrum, ART will be able to increase the size of its rings to OC-3 (155 Mbps) in 2000 and OC-12 and gigabit speeds moving forward. Therefore, we believe ART will be able to sell significantly higher bandwidth services to its customers, resulting in an increase in revenue moving forward (hence our price objective adjustment). -- Separately, ART commenced commercial operations in its Los Angeles area market, one quarter ahead of schedule, and we believe other markets will go "live" sooner than expected as well. ART is now running 2 CPP markets in addition to its original 3 point-to-multipoint markets, and is well on its way to achieving our target of 10 markets by YE00. -- NET-NET: We have made one adjustment to our price objective with this announcement, and we expect to make another adjustment post a discussion with management relating to near-term expectations for 2000 and 2001. Potential catalysts would include further distribution announcements as ART seeks to load its networks via wholesale agreements with carriers such as Qwest seeking broadband local access capabilities (of which we believe there are many!).