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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: DubM who wrote (3361)	1/12/1998 1:56:00 AM
From: SteveG	Read Replies (1) \| Respond to of 12468

OK DubM, finally (Hong Kong now down 9%, Singapore getting crushed down >12%): (Often I get pdf files, but this is a rough hard fax (no OCR), so I have to summarize and type. NOTE This is NOT verbatim - I will attempt to summarize as accurately as possible. Most of this is not news to this thread. And fwiw, my previous "plant" valuation queries are referenced here) Salomon SB's Jack Grubman 1/9/98 "1S" (speculative) rating and $71 12-18 month price target. $71 is a 10 year, discounted cash flow (DCF). Price target translates to less than 5x 1999 and 4x 2000 net plant. Winstar expected to deploy network faster than wireline CLECs, and note "it's voice, video and data offering, competitive pricing and superior customer service". Winstar largest holder of 38Ghz licences covering 125 markets including 49 of the top 50 MSAs. WCIIs broad spectrum (4 or more 100Mhz channels in 43 license areas) alows for fiber-quality services.. greatly needed with increases in bandwidth demand. Estimated earnings (losses) FY97 <7.86>, FY98 <11.25>, FY99 <11.00> More- WCII currently trading at 3.3x net plant - compares to average CLEC of 4.4x net plant. Besides direct service to small and medium businesses, WCII will wholesale to other carriers. The recent point to multipoint FCC approval will significantly reduce capital expenditures. Compared to TGNT 24Ghz (which Grubman ALSO follows, and has a Dec report out on describing more technical details that are refered back to in this report), 38Ghz hub serves smaller area, but has more capacity (at least 4 channels in 43 MSAs) is better suited for urban than suburban areas. P-MP Current operations include 15 markets and 51K lines with expectations of 21 markets near end of 98Q1 - 1 year AHEAD of original schedule, and entering all of it's licenced markets over next several years. 97Q4 is expected to be inflection point (greatest EBITDA losses) 12-18 month $71 target based on 10year discounted cashflow analysis further applying a 15% "trading" discount (same as used evaluating other CLECs) and 8-10 times "firm-value"/"EBITDA-multiple" which implies (at $71) a 22.6 times 2007 P/E. DCF yields a NPV of $2.8B, or $84/share, to which was applied the 15% discount rate. The conservative model only assumes a 24.4% EBITDA margin 10years out (well BELOW most CLEC assumptions of 55-60% - due to the timing of WCIIs buildout schedule. Estimates are said to be conservative given that WCII will have 60 markets in service by approx 2004. Expected revenues $2.7B by 2002 and $5.3B by 2007. EBITDA expected positive in 1999. A LOT of technical detail, too for me to summarize and present now, but the following will be of interest: The dispersion characteristics of 38Ghz allow numerous T-1 or T-3 circuits to be placed close together without intereference - multiple 100Mhz channels alow for reuse where DS-3 paths are densely deployed. 3-4 cuurent hubs per market (with 15/market eventually expected). Each hub site is connected by "wireless fiber" link providing equivalent of 8 T-1s (=192 voice lines) or one T-3 (= 672 voice lines). Each P-P hub addresses ~50 buildings, which will increase to several hundred buildings with P-MP. P-MP will allow OC-3 (155Mbps) capacity per paired Mhz channel (>3 times faster than T-3 P-P) Each hub costs ~$275K and CPE are ~$20K (including DS-3 capacity, multiplexer, power and DLC. Wireless fiber is 99.999% reliable with 10 to -13 error rates (unfaded). 24 hour manned monitoring with backups. More details as I have time and/or in response to questions, suffice to say that this tech/company seems to impressively fill a major bandwidth and CLEC void. Steve