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

To: ANDREW TISTLE who wrote (8494)	10/6/1998 2:16:00 PM
From: TheSlowLane	Read Replies (1) \| Respond to of 12468

I agree with you and Kingpin. I think that this is a great entry point but also agree that it might get "better" near-term. I actually thought it was "real ugly" already, but definitely could be more ugly to go. What is the event on Thursday that will precipitate (another) selloff?

To: ANDREW TISTLE who wrote (8494)	10/6/1998 2:46:00 PM
From: SteveG	Read Replies (1) \| Respond to of 12468

From Governali last week: THIRD QUARTER PREVIEW - EARNINGS VISIBILITY DIFFERENTIATES TELCOS FROM THE REST OF THE MARKET. The ILECs are likely to report solid high-single digit to double digit earnings growth rates. Access line growth for the RBOCs may fall slightly below last quarter's 4.2%-4.3% growth as a result of increasing competition and tougher comparisons on second line growth, but no material impacts will likely be felt until some time next year. The CLECs are however, making progress in winning market share and we suspect that in this quarter most of the CLECs entered one or two new markets each and will have sequential increases in access line additions. Once again the CLECs will come close, if not surpass the total number of business lines added by the ILECs. The long distance providers should also have solid gains in the quarter, with volumes up in line with last quarter. Business volumes are rising in the mid- teens, while consumer is as always high single digits. Cost savings and merger synergies are predominant factors for companies like AT&T and MCIWorldCom The two tables below show our third quarter and annual estimates as well as any adjustments we made to our annual estimates during our review of the companies. Only two companies reflect significant changes, Frontier and WinStar. The earnings per share decreases we made for Frontier to $1.00 and $1.20 in 1998 and 1999, respectively, from $1.07 and $1.37 are a result of higher spending in its local business to improve its New York operations and from higher costs and lower revenue growth assumptions associated with the slower deployment of the network that Qwest is building for it. In WinStar's case, we have increased its 1999 EBITDA loss to $113 million from closer to $65 million. Estimated 1998 Actual 1997 Earnings Third Quarter Third Quarter Release Company CSFBC Consensus Reported Normalized Expected Est. AIT 1 $0.58 $0.58 $0.56 $0.52 October 15 BEL 2 0.68 0.68 (0.05) 0.62 October 21 BLS 3 0.82 0.81 1.19 0.71 October 20 SBC 4 0.53 0.53 0.44 0.45 October 15 USW 5 0.75 0.75 0.75 0.72 October 21 GTE 0.85 0.83 0.79 0.79 October 19 CTL 0.54 0.54 NM NM October 27 AT 0.55 0.54 0.55 0.55 October 20 FRO 0.24 0.26 0.19 0.19 October 22 FON 0.47 0.44 0.48 0.48 October 20 WCOM 0.24 0.24 0.05 0.05 October 29 IIXC (1.06) (1.07) (1.08) (1.08) October 29 ESPI (0.92) (0.97) (0.90) (0.90) November GST (1.34) (1.36) (1.72) (1.72) November HYPT (0.61) (0.59) (0.57) (0.57) November ICGX (2.01) (1.99) (2.05) (2.05) November 4 ITCD (0.14) (0.14) (0.10) (0.10) October 26 MCLD (0.72) (0.60) (0.44) (0.44) November NXLK (0.57) (1.65) (1.08) (1.08) November WCII 6 (2.89) (2.96) (1.97) (2.01) November 1 AIT's 3Q97 results included a $0.07 gain from the sale of Sky Network Television in New Zealand. 2 BEL's 3Q97 results included a $59.3 million charge for CWC restructuring; $131.8 mil for video related expenses; $41.4 mil gain from SkyTV sale. 3 BLS's 3Q97 results included a $0.35 gain from the sale of Optus and a $0.13 gain on the sale of ITT World Directories. 4 SBC's 3Q97 results included a one-time $43 mill merger integration charge and local number portability expense. 5 USW's 2Q98 results are pro forma for the re-acquisition of Dex. 3Q97 results included includes a $0.04 gain from the sale of telco assets and a $0.01 loss from the early extinguishment of debt. 6 WCII's 3Q97 results included $0.04 loss from discontinued operations. Current Estimate Former Estimate Company 1997A 1998E 1999E 1998E 1999E AIT $2.13 $2.35 $2.54 BEL1 2.45 2.71 2.98 $2.70 BLS1 2.83 3.26 3.65 3.27 SBC1 ,2 1.76 2.06 2.36 2.05 USW 2.59 3.01 3.20 3.00 GTE 2.90 3.07 3.50 3.05 CTL 1.64 2.00 2.30 AT3 2.14 2.07 2.54 2.02 $2.57 IIXC (3.71) (4.10) (3.84) (3.33) (1.97) FRO 0.97 1.00 1.20 1.00 1.43 FON 2.14 1.80 1.93 1.68 1.90 WCOM 0.40 0.88 2.00 T4 2.70 3.40 3.80 ESPI (4.65) (3.83) (3.74) (3.75) (3.28) GSTX (5.11) (5.16) (6.60) (5.29) (6.08) HYPT (1.00) (2.57) (2.52) ICGX (8.47) (8.16) (6.43) (7.51) (5.36) ITCD (0.24) (0.49) (0.70) (0.67) MCLD (1.45) (2.19) (1.89) (2.31) (1.94) NXLK (3.91) (5.93) (9.06) (6.16) (9002) WCII (7.49) (11.40) (10.68) (11.50) (9.45) 1 1997, 1998 and 1999 estimates are calculated using diluted shares outstanding. Former estimates were calculated using basic shares. 2 SBC's estimates are pro forma for the acquisition of SNET. 3 ALLTEL's estimates are pro forma for the acquisition of 360º Communications. 4 AT&T's 1998 and 1999 estimates include the planned acquisition of Teleport. 5 GST's 1997 results reflect September year-end. 1998 and 1999 estimates are December year-end. The material changes in the Frontier model is a function of management deciding to re-invest in the business, and sacrificing short term results for long term value. This is not new information that there will be a managed shortfall in earnings. The company has been effectively sending this message for weeks. In the case of WinStar, the higher EBITDA losses are consistent with trends for the rest of the CLECs. We believe these losses are appropriate to the game plan, and to have been shooting aggressively for faster reduction in losses, would have meant sacrificing long term growth opportunities. The company has the flexibility to reduce these losses in order to preserve cash, if that becomes necessary, but for the time being using the higher target EBITDA losses makes more sense.