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

To: SteveG who wrote (3487)	1/22/1998 2:51:00 PM
From: SteveG	Read Replies (1) \| Respond to of 12468

Some of Vogel's comments from his telecom conference call 2 days ago: Vogel's talk, plus several questions from myself and another participant, lasted maybe 15+ mins. I had notes taken and the following is a brief (and rough, though presumably accurate) synopsis. RE:the LMDS auction- I asked him whether he saw the LMDS minimum bid as support for his WCII price target (referencing the apparently incorrect $2.25 min. per channel pop). He said that a number of valuation approaches seemed to support the 12 month targets, but (IMO more interestingly), he said he thought the auction would either not occur or would be voided if it did occur. He referenced the charge of "discriminatory" auction rules (section 251) which severely limits the RBOCs' entry - all of whom have applied for spectrum. He added that he thought this would INCREASE the value of the existing licences. Also that OWNERSHIP of local facilities is a driving force for AT&T and others. In general, his talk focused on 3 factors affecting the telecom field: 1) consolidation 2) regulation 3) data strategies 1) consolidation- Citing the impending entry of the RBOCs into LD, he said AT&T's asset value would be significantly impacted. The pressure on ALL telcos to own and single-bill (for ALL services) their customers end-end was increasing. Addressing the continuing backbone buildout (by referencing QWST, WMB and IIXC), he emphasized the scarcity of players in the local arena, and refered to WCII in specific (and seemingly to fixed wireless in general) as the "last piece of beachfront property". He indicated that in addition to AT&T as a potential suitor, GTE and RBOCs interested in growing their local market presence (such as SBC) would likely also be interested in WCII. Comparing WCII to TCGI, the point was made that WCII's growth offers "superior assetts" and should be valued at a premium. The figure of $180MM/market (in the 50-60 major markets, with the remaining markets thrown in for free) was suggested, and the expectation of 8000 buildings in 2 years as the justification. 2) regulation- Current regulations promote significant churning. Again, the telco driving-force is owning the customer and controlling provisioning at single point integrated facilities - to "bundle around the churn". The value of "integrated carriers" such as WCOM was emphasized. WCOM was singled out as "superior" and "unparalleled" in this strategy. He referenced a recent Yankee Group study which suggested that AT&T (among telcos) has a better image and enjoys significant customer preference. He predicted that the RBOCs would be in LD within 18-24. 3)data IP telephony, ATM and Frame Relay buildout/transition of the telecomm networks is impending, specifically referencing the superiority of WCOM's assets in this regard, and the quantum leap in bandwidth it will provide. Mentioned ADSL nad FTTC. US West's data strategy and outstanding balance sheet was highlighted and a $69 target given. IIXC was also highlighted and said to be trading at a massive discount to QWST. On WCII valuations, top down evaluation he has modeled is looking at, at LEAST, $64MM/market (which is at the low end of his range of between $60MM and $80MM / market) using only the top 50 MSAs (the rest of the markets, currently ~75, just going along for the ride). With the "riskiest 12 months behind" WCII, the growth over the next 12-24 months will do a lot to significantly increase shareholder value. By then they will have double the assets of TCGI at double the margins He is still working on a revised bottom up (operational basis) valuation, given WCII's impressive ahead of schedule buildout. A DCF model (as Grubman uses) is what he is working on. Speaking of Grubman, I'll try to get some comments on his TGNT report out sometime soon. It's very worthwhile, and lays the groundwork for his WCII DCF model and price target, as well as pertinent technology issues.