Monday February 23, 5:05 pm Eastern Time
Company Press Release
Winstar Reports Fourth Quarter Revenues More Than Doubled
CLEC Revenues Reached $46 Million Run Rate
NEW YORK--(BUSINESS WIRE)--Feb. 23, 1998-- Quarterly EBITDA Losses Have Peaked
WINSTAR COMMUNICATIONS, INC. (NASDAQ - WCII) today reported fourth quarter 1997 revenues of $30.0 million, 49% greater than third quarter revenues of $20.2 million and more than double 1996 revenues of $13.2 million. This revenue growth was primarily driven by rising demand in the company's competitive local exchange carrier (CLEC) and information services businesses.
''In little more than a year, WinStar has raised $800 million in capital, established a switched telecommunications network in major metropolitan markets throughout the country and developed a broad range of high speed voice, data, and Internet services,'' commented Nathan Kantor, President and Chief Operating Officer.
''During this same period, we gained market acceptance for our Wireless Fiber(SM) broadband service and laid the groundwork for the deployment of advanced multipoint systems during the latter part of 1998. As the year progressed, we became convinced that we could boost shareholder value by moving faster and farther, and so we worked to bring that about, without losing sight of our planned EBITDA improvements,'' added William J. Rouhana, Jr., Chairman and Chief Executive Officer.
Revenues from CLEC operations climbed to $10.2 million in the fourth quarter, 57% ahead of third quarter revenues of $6.5 million. CLEC revenues reached an annual run rate of $46.2 million at year end, versus $33.2 million at the end of September and $2.9 million at the end of 1996. Wholesale revenues were $2.4 million for the period, reflecting increased construction activity compared to the previous quarter.
The information services business continued its rapid growth in the fourth quarter, with revenues of $15.7 million. This was almost 43% greater than the $11.0 million in revenues for the September quarter, and resulted from higher customer demand, anticipated seasonal increases in revenue and incremental sales attributable to the Telebase online business service acquired earlier in 1997. Information services revenues were more than double the level of the year-ago fourth quarter.
WinStar's residential long distance business had revenues of $1.8 million, essentially even with the preceding three months. This performance was expected and reflects the company's decision in mid-1996 to concentrate on the business market.
For the full twelve months of 1997, WinStar's consolidated revenues were $79.6 million versus $48.6 million in 1996. The company benefited from substantially higher sales of CLEC and information services throughout the year. These gains more than offset the expected decline in residential long distance services revenues, which amounted to $8.5 million in 1997 versus $29.5 million in 1996.
The net loss applicable to common stockholders for the fourth quarter amounted to $85.4 million or $ 2.50 per share, and for the full year totaled $255.4 million or $7.68 per share.
The fourth quarter EBITDA loss of $49.5 million is expected to mark the peak in quarterly EBITDA losses, with subsequent quarters in 1998 showing modest improvements. As previously noted the company believes it will become EBITDA neutral by the end of 1999.
CLEC Business Expanding Rapidly
WinStar's telecommunications services reached a substantially wider customer base during the fourth quarter of 1997. The company received orders for in excess of 40,000 lines during the period, bringing cumulative orders to 118,000 lines at year end. The company began 1997 with about 6,000 cumulative lines ordered. Line installations rose to 30,000 versus the 21,000 lines installed in the third quarter, while cumulative lines installed climbed to almost 82,000 versus the 1996 year-end figure of 4,400 lines.
In the New York City market, over 50% of customer lines were on the company's Wireless Fiber(SM) network at year end. This is consistent with the company's goal of placing a high percentage of customer lines on its network to avoid reliance on Regional Bell Operating Company facilities and to thereby maximize WinStar's service quality and profitability. New York is WinStar's first market, and the company expects that its on-net percentage in that city and in other markets will rise as its network expands.
WinStar also achieved continued success in the fourth quarter with its efforts to obtain roof rights which enable its transceivers to be installed on customer buildings. The company held roof rights for in excess of 2,100 buildings at December 31, an increase of more than 300 from the preceding quarter. WinStar exited 1996 with roof rights on fewer than 800 buildings.
In WinStar's Wireless Fiber(SM) network, voice and data traffic from customer buildings is transmitted to hub sites, which collect traffic from approximately 30 or more target buildings and route it to a WinStar switch. Further illustrating the expanding breadth of its network, the number of completed hub sites now stands at 51 nationwide, compared to 21 in October 1997 and no completed hubs as the year began. The company had approximately 173,000 voice grade equivalent circuits (VGEs) in place at December 31 versus 156,000 in the September quarter and 90,000 VGEs on December 31, 1996.
Major Growth in Network Capacity and Services
Since the beginning of the third quarter, WinStar has substantially broadened the scope of its operations through a series of actions designed to accelerate the company's entry into new markets, establish the foundation for a data services business, and control EBITDA losses.
WinStar expanded its national network in October when it acquired 14 newly-installed Lucent 5ESS-2000 switches from U.S. One Communications Corp. in a bankruptcy proceeding. Seven of the switches are located in major markets WinStar had already planned to enter in 1998, and which will now be served on a shortened timeframe starting in the 1998 first quarter. Two of the additional seven switches have been sold, and the company expects to sell the remaining five, dramatically reducing WinStar's costs for its accelerated network rollout.
WinStar acquired GoodNet, a rapidly growing nationwide Tier 1 Internet backbone provider and data transport company, which became part of WinStar Broadband Services, the company's new data communications unit. Also, as part of its data strategy, WinStar acquired the assets of MIDCOM Communications, a national frame relay and long distance provider, in bankruptcy proceedings. The integration of MIDCOM's PacNet subsidiary places WinStar among a select number of companies able to provide business customers across the nation with a choice of IP, ATM and frame relay modes of data transport. MIDCOM'S PacNet frame relay business is also now part of WinStar Broadband Services.
The purchase of MIDCOM should provide a significant impetus to WinStar's CLEC business in 1998 and beyond. MIDCOM's long distance operations bring to the company a substantial base of incremental revenues which will be migrated to WinStar's network. It also enhances WinStar's sales capabilities, adding to the company's small and medium business sales force and to its newly established large account salesforce.
Other Major Developments
The ongoing deployment of WinStar's network gave rise to these additional highlights since the third quarter:
The company obtained CLEC authority in Arizona, Hawaii and Missouri, bringing the total number of such authorizations to 29, representing 47 of the largest U.S. markets.
The company signed interconnect agreements with local operating companies in the states of Texas, Michigan, Minnesota, Kansas, Missouri, Virginia and Washington. WinStar now has interconnect agreements applicable to 41 of the top 50 markets.
The company completed a private placement of $175 million of Senior Cumulative Exchangeable Preferred Stock, $92 million of which was used to fund the MIDCOM acquisition.
Since September 30, 1997, installed switch capacity became available to nine new markets: Atlanta, Columbus, Denver, Ft. Worth, Kansas City, Minneapolis, Seattle, San Francisco and Tampa.
Total headcount increased to 1,479 at the 1997 year end versus 1,375 at September 30 and 750 at the beginning of 1997. WinStar's current headcount now approximates 2,000, a figure which includes the GoodNet and MIDCOM acquisitions.
In October, WinStar reached agreement with Broadband Networks Inc. now a subsidiary of NORTEL, and Siemens Telecom Network for the initial deployment of a digital multipoint local network in the U.S. Multipoint equipment successfully underwent its first field test in December and will move to an expanded evaluation at customer locations in the 1998 first quarter. Multipoint technology will enable WinStar to utilize its spectrum more efficiently, while also enabling new services, reducing network costs, and enlarging the market for the company's Wireless Fiber(SM) services.
Also in October, WinStar acquired Community Schools Networks, one of the nation's foremost providers of high-speed Internet access services and specialized software for schools and libraries.
In January 1998, WinStar formed a small organizational unit that will secure spectrum rights in Europe and other regions outside the U.S. where the company is expecting to provide fixed wireless services in future years.
WinStar's ongoing spectrum license acquisition program resulted in the purchase of 69 additional 38 GHz licenses in the top 50 markets during the final three months of 1997. For all of 1997, WinStar's license coverage grew by one-third over 1996, reaching more than 800 million channel pops (covered population times the number of 100 MHz channels). A combination of new FCC grants and purchase agreements announced by the company on February 20, 1998, further increased these holdings to more than 875 million channel pops. WinStar's bandwidth in the top 20 U.S. markets now averages 700 MHz.
''WinStar is positioned to attain further substantial revenue growth in 1998 as we roll out our network to a total of 30 cities by year end,'' Nathan Kantor said. ''Additionally, revenues should benefit from our new data business, and from significantly expanded sales and marketing programs. Acquisitions which drive incremental revenues over our network while also forcing down costs continue to be a priority for our company.''
''Our spending levels already take into account our 30-city target for 1998,'' added William Rouhana, ''and we are planning for gradually improving EBITDA performance as the year progresses. The impact of higher revenues should be more pronounced in 1999 and subsequent periods, and we firmly believe we are creating a larger and better positioned company through these accelerated investments.'' |
