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Technology Stocks : 360Networks - TSX - TSIX -- Ignore unavailable to you. Want to Upgrade?

To: Dan Hamilton who wrote (107)	3/24/2001 7:05:04 PM
From: ms.smartest.person	Respond to of 449

360networks seen as shaky as telecoms consolidate 'Too much competition' Simon Avery Financial Post LOS ANGELES - Senior analysts and investors yesterday forecast a massive shakeout in the telecommunications industry and counted Vancouver's 360networks Inc. among the leading casualties. "We funded too many companies whose business models didn't work, and we hurt the models of those bigger companies who were making money," said Greg Geiling, vice-president and communications equipment analyst with J.P. Morgan H&Q. Today, only 14 of the 300 U.S.-based telecommunications firms funded during the boom are still able to raise money, said Erik Gustafson, senior portfolio manager of Stein Roe Mutual Funds, a Chicago-based manager of US$4 billion. "But even with just 14 companies, there's still too much competition. We still need a further flushing out," he said. "We are going to see massive consolidation of the companies that are left." 360networks shares took a beating on Wednesday over concerns about its ability to fund further expansion of its global communications network. But a spokeswoman said she is confident the firm would be among the sector's winners, saying the its business plan is fully funded and citing strong demand for its products. She also said the firm's network project is on time and budget. Still, Mr. Gustafson predicted that ultimately there would be only five or six survivors, with just two or three large companies providing the backbone and gear to served long-haul traffic. They would include such big telecom equipment makers as Cisco Systems Inc. and Ciena Corp., along with network builders Level3 Communications Inc. and Qwest Communications International Inc. But 360networks, which has warned that it won't meet revenue projections for 2001, would not make it, Mr. Gustafson said. Speaking at the Milken Institute's Global Conference here yesterday, Mr. Gustafson and other institutional investors said the rush to fund new telecom players bordered on mania between 1996, when the U.S. government deregulated the industry, and last year. "Wall Street took the reins and jumped on this raging animal. Flush with cash, every IPO worked, every IPO was going to the moon," said Mr. Gustafson. Since last fall, the top 20 telecommunication equipment firms have seen their market values plummet more than 50% from a high in excess of US$900-billion, according to data from Research Insight. Leading cellular and wireless companies are also worth about half of what they were one year ago, and the 20 largest long distance providers are together worth just a fraction of the US$730-billion they were valued at in early 2000. In Canada, the situation has been markedly different, with startup firms facing a limited pool of venture capital. The problem is exacerbated by foreign investment restrictions in the telecommunications sector that limit foreign investors to a 46% stake in a Canadian telecom. Toronto-based telecommunications consultant Eamon Hoey said as a result there are only a handful of new players in the sector here, and at least two have sought protection of creditors. The ride back to Earth in the United States began as soon as funding dried up last spring. Despite its severity, the shakeup is not killing all enthusiasm for the telecom industry. Even as the economy has slowed and the stock markets fallen, the flow of data over networks has surged. "We're not using the Internet any less today than we were six months ago," Mr. Geiling said. The key for the industry is to figure out a business model that benefits from the increased flow. According to Mr. Geiling, the amount of traffic the service providers handle has risen by between 100% and 200% since deregulation, but the companies have posted revenue growth of only about 2% a year. This summer, Japan and Spain will become the testing ground for new wireless phone technology dubbed 3G. The service is meant to deliver up to 2MB of data a second, bringing full-motion streaming video to the handset. Investors, however, are worried that companies paying billions of dollars for scarce spectrum licenses and to build 3G infrastructure haven't worked out a model to profit from 3G applications. nationalpost.com

To: Dan Hamilton who wrote (107)	3/24/2001 7:52:48 PM
From: ms.smartest.person	Respond to of 449

360networks Moving Ahead With Expansion 3/24/0112:28:11 PM Quick Quote: T.TSX 4.75 (+0.10) Michael Lewis Financial Post 360networks Inc. is pressing ahead with plans to spend up to US$4-billion this year to expand its global fibre-optic communications network, even though it will need approval from its banker to exceed spending limits set out in loan agreements. The Vancouver-based company said J.P. Morgan Chase & Co. has imposed a US$1.6-billion spending ceiling for 2001, but a J.P. Morgan official in New York, who spoke on the condition of anonymity, said the limit will be waived or removed. He said 360networks broadened the scope of its project after it negotiated limits on bank loans, and would have sought higher limits had the entire network been envisioned at the time. The banker will grant either a one-time waiver or a loan covenant amendment, he said, adding the company will be able to proceed this year as planned. Normally, spending limit waivers or amendments are granted as a matter of course, but doubts about 360networks' ability to fund the planned US$7.2-billion system have generated new scrutiny. The company said slowing demand for network services would reduce 2001 sales by 23%, contributing to a 62% plunge in the company's share value since then. But the J.P. Morgan spokesman said the company is well funded and said its network assets alone are greater than its obligations. Concerns over the viability of 360networks and other builders stem from what observers call excess network capacity, particularly in the United States and Europe. The amount of fibre installed in the United States grew 30% last year but, with technology increasing each fibre strand's capacity, transAtlantic fibre capacity grew 130%, according to a report by Angus Telemanagement Group Inc. of Ajax, Ont. "Dozens of companies installed vastly more fibre than they could fill in the short term," said the report. It says the result has been falling prices over all competitive routes, with the spot price for digital bandwidth in the United States plunging 48% between October, 1998, and October, 1999, 80% on some European routes. stockhouse.ca