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To: oldirtybastard who wrote (87197)	3/28/2001 7:55:55 PM
From: Ilaine	Read Replies (1) \| Respond to of 436258

Good find. He doesn't mention QCOM, but here is what he says about 3G: >>Ravi Suria: What really spooked the bond market was the amount of money the companies were expected to spend on 3G over the next five to seven years. Brett D. Fromson: By "3G," you mean the next-generation wireless networks, right? Ravi Suria: Yes. Wireless is the next big thing, but it must be financed off the same balance sheet that is supposed to finance the current wire-line networks. And the companies don't have the cash flow to do both. When people started to realize this, things started falling apart for the whole industry. Brett D. Fromson: How much do you expect 3G to cost? Ravi Suria: I look at 3G as a new project for the global industry. I don't believe it happens via individual companies. At the end of the day, you'll probably have four to six global companies offering end-to-end solutions via 3G wireless. We conservatively expect that to cost $300 billion; $150 billion is in buying the spectrums at auction, and the remaining $150 million is in build-out costs. Brett D. Fromson: $300 billion is a lot of money. Ravi Suria: Yes. If you assume that the $300 billion is financed 50% by debt and 50% by equity. Say $150 billion at 8% for the debt. That's $12 billion a year in interest costs. The entire industry is not supposed to generate revenues of $12 billion from 3G for four years and incremental cash flow for seven years. So, what spooked the bond market is the fact that the old wire-line businesses that are in decline will have to sustain the interest payments on 3G for the next seven years. The repayment of the debt and ultimately the value flowing to equity holders is much further off. Brett D. Fromson: Are there any historical comparisons? Ravi Suria: I compare 3G to prior massive capital expenditures in history like the building of the Interstate Highway System or the electricity grid or the nuclear reactors. All these projects required a lot of spending initially, but the reason the industries survived over the next 30 to 40 years was that they were regulated, and thus cash flows to repay the initial investments were guaranteed. This time you're borrowing to spend the money and letting loose a bunch of companies in a highly competitive free market under disinflationary pricing and telling them to make enough money to repay the original investment. This is an experiment that has never been tried before. It's hard to see a happy ending to this experiment under the current spending scenario.<< thestreet.com