December 12, 2000
--------------------------------------------------------------------------------
AT&T LatAm Lines Up Funding, Waits For Mkts To Improve
By RICHARD HUBBARD
. Of DOW JONES NEWSWIRES .
CORAL GABLES, Fla.-- AT&T Latin America Corp. (ATTL) is watching the markets for an "appropriate" time to launch a delayed secondary offering and fund its aggressive growth plans, the company's top executive said Monday.
In the meantime the company is involved in talks with equipment vendors and its parent company for loans, chief executive Patricio Northland told Dow Jones.
"As soon as the markets are 'open' again, the company will go to the capital markets" with an equity offering "in an amount appropriate to the marketplace," Northland said Monday at the telecom company's headquarters in trendy Coral Gables.
Equity markets are his first choice for further funding, but until market conditions perk up, AT&T Latin America has cobbled together a capital package from parent AT&T Corp. (T) and his company's vendors.
AT&T Latin America "will announce soon a vendor financing as a credit facility. That will allow us to fund the majority of the telecom equipment the company requires" to fulfill its growth needs, Northland said.
The company has "a very specific plan for next year. AT&T Corp. has demonstrated a clear commitment" to fund AT&T Latin America, Northland said.
AT&T Corp. has already lent the company $477 million, said Northland - including an initial $177 million in the form of preferred shares and a $100 million credit facility on Aug. 28. An additional $200 million line of credit came in mid-September.
"We still have available about $250 million, which I'm going to use for this coming year," Northland, 45 years old, said of the $477 million package.
Fully Funded For Next Two Quarters
"When we combine the two (vendor and parent company funding) we will be fully funded for the next two quarters," Northland said. The company's 2001 needs are expected to be about $500 million, and "will be funded by those two sources" until the market climate is more hospitable for the company's secondary offering.
Repeatedly, Northland stressed that he'd rather be tapping the equity markets than going to vendors - or AT&T Corp. - for credit. "We are open to go back when the markets are open," he said, aiming for independence from the parent company.
Meanwhile the company "will look for other instruments," Northland said. For example, the company has explored debentures in local markets.
AT&T Latin America plans to boost the number of cities covered in its broadband service network to 22 by the end of 2001, up from 11 cities at the end of September. That would mean an additional 2,000 kilometers being added to the company's 4,685-kilometer fiber-optic network.
The business communications services niche - the sector AT&T Latin America is courting - is said to be a $16 billion market, projected to grow at a 20% rate over the next two to three years. The niche doesn't include wireless, yet another booming market in Latin America.
Amid this growth, capital remains a concern. AT&T Latin America plans to spend $2.5 billion over the next five years in the region, with $500 million of that earmarked for 2001, Northland said.
AT&T Corp. gave its 58%-owned Latin American unit a $200 million credit line in mid-September after unfavorable markets led AT&T Latin America to scrap a secondary stock offering. The parent company's credit line allowed AT&T Latin America to scuttle plans to issue up to 35 million common shares, which could have raised up to $366 million in better times.
Shares Fall On Competition, Tech Fallout
AT&T Latin America shares have tumbled this year over concerns of growing telecom competition in the region. A 30% drop in the Nasdaq Composite Index also cut the company's valuation.
Northland said AT&T Latin America expects to receive additional financing of more than $200 million from a group of companies that sell its telecommunications gear. The company's suppliers include Nortel Networks Corp. (NT), Lucent Technologies Inc. (LU) and Cisco Systems Inc. (CSCO).
Meanwhile competition in the region is stiffening. In December 360networks Inc. (TSIX), already building a fiber-optic network in Latin America, said it will develop metropolitan rings in more than 35 major cities worldwide by the middle of 2001. Other competitors in Latin America include Global Crossing Ltd. (GX) and Spain's Telefonica S.A. (TEF).
Northland says he isn't worried. "They are all trying to get a particular niche," he said. "We expect a lot of consolidation" in the Latin American market.
AT&T Latin America "has been able to sign more than 170 multinationals in the region" as customers - more than one-third of the multinationals in the region, Northland said. "That is a very competitive advantage." The parent company's reputation for "integrity and reliability" is helping AT&T Latin America win customers, Northland said.
AT&T Latin America sells broadband communications services over high-speed systems to business customers in Latin America and the Caribbean, including Argentina, Brazil, Chile, Colombia and Peru. Its broadband services integrate data, Internet, local and long distance voice and video services. Targeted customers are multinational businesses, financial services corporations, government, Internet service providers and small-to-medium-sized businesses.
On Nov. 1 the company reported pro-forma revenue of $24.1 million for the third quarter ended Sept. 30 - growth of 151% from $9.6 million in pro forma revenue for the comparable 1999 period. Northland said he expects revenue to increase between 15% in the fourth quarter and to "more than double" in 2001.
AT&T Latin America began trading on the Nasdaq National Market Aug. 29 - going public through its merger with FirstCom Corp. The merger was said to be a key move in AT&T Corp.'s strategic plan for Latin America, which began with AT&T's acquisition of two Latin American communications companies - Netstream in Brazil and Keytech in Argentina - during the past year.
AT&T Latin America shares closed at $3.75 Monday on Nasdaq volume of 245,800 shares. Average daily volume is 459,000 shares. The company's stock saw a high of $17.69 when trading began on Aug. 29, and low of $3.38 on Dec. 4.
The company should show positive cash flow by 2003, Northland said. In the third quarter the company's earnings before interest, taxes, depreciation and amortization, or EBITDA, were $24.9 million on a pro forma basis, compared with losses of $4.8 million in the third quarter of 1999.
Losses for the third quarter were $44.4 million on a pro forma basis, compared with losses of $19.2 million in the third quarter of 1999.
-By Richard Hubbard, Dow Jones Newswires, 305-379-3744
richard.hubbard@dowjones.com |
