Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Global Crossing - GX (formerly GBLX) -- Ignore unavailable to you. Want to Upgrade?

To: Bill Fischofer who wrote (11842)	6/16/2001 9:25:47 AM
From: TechMkt	Read Replies (1) \| Respond to of 15615

Can anyone confirm or deny this note from Merrill? It was posted on the Yahoo! board. Fez ______________________________ Merrill counters CSFB take on leases by: liberti2 06/15/01 11:34 pm EDT Msg: 193322 of 193363 We have fielded several questions today regarding the funding outlook, ILEC sale and revenue mix at Global Crossing. • We also believe that industry trends from purchasing bandwidth on shorter term leases (vs. long term IRUs) will not materially affect Global Crossing. In fact, as argued in our the shift towards shorter term leases is positive for several reasons. • First, shorter term leases are worth more in terms of both gross revenue per unit and NPV. Relative to IRU prices, short term pricing premiums are high and payback periods are short. For example, total payments received over a three to four year lease will be roughly equal to the cost of a 15 year IRU. Since the capacity can then be resold (several times over 15 years), the present value of total cash inflows is greater (repeat sales are worth more than the time value of money in those first few years). In this respect, the IRU is really just a financing vehicle. • Second, short term leases don’t have materially negative near term cash flow impact as some have erroneously argued. Although short term leases bring in less cash up front than IRU sales, lease contracts from carrier customers can still be monetized by borrowing against the future receivables, if necessary. • Third, we believe Global Crossing’s core international carrier customers still want long term IRU deals. While certain types of bandwidth customers want shorter term deals, we believe this trend is less pronounced among Global Crossing’s core international carrier customers (ie, Deutsch Telekom), which generally face less short term capital constraints and greater need to lock in very long term capacity than web centric start ups. Also they are happy to secure capacity as an asset since it takes an expenses item out of EBITDA and places it in the depreciation line of their P&Ls.