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

To: SteveG who wrote (9219)	11/9/1998 12:30:00 PM
From: SteveG	Respond to of 12468

Legg Mason, apparently reading the WCII-WCOM speculation on Yahoo (it is understood that they read these threads regularly), last friday and then again today put out a note addressing it. Emphasizing their doubt that this occurs (based on some insufficiently considered rationale), the following is an excerpt of the report in which LM considers the synergies - in the event something WERE to occur: --------- "...Assets are complementary, An acquisition by WCOM would create substantial incremental value from WEll asaeta. Primacy benefits of such a combination include: Expansion of WCOM's owned, local footprint, We continue to believe that the fixed-wireless network topography is extremely complementary with fiber-based competitive local exchange networks (CLECs) of which WCOM is the largest owner. The economics of fixed-wireless enable the technology to provide broadband services to small and medium-size business customers not economically served directly by fiber facilities, This expands the potential addressable business market for owned, facilities-based services, which is WCOM's underlying strategic modus operandi, From a financial standpoint, this increases asset turnover, asset utilization, and ultimately returns as WCOM would pull more traffic back co its high-fixed-coat local fiber and switch-baaed CLEC infrastructure. Additionally, it would allow WCOM to terminate existing traffic closer to, or at, customer facilities. The closer WCOM can terminate traffic to a customer, the more access coat it avoids paying the Regional Bell Operating Companies (RBOCs). This was the rationale behind Teleport's acquisition of BizTel another 38 GHz fixed wireless provider that is now part of AT&T Avoid building sales and additional network Infrastructure at WClI, WCII's current business plan requires establishing distribution channels, investing in switching platforms and developing transport arrangements. In our opinion, virtually ail of this investment required to support the last-mile fixed-wireles, loop could be avoided as WCOM already has it. Reduce WCll current cost of sales: Currently, WCIl pays 75% of every revenue dollar to other companies in the form of leased network and access payments. A significant portion of rheas expenaes could be avoided aa WCOM would be providing the underlying long-haul facilities and by virtue of its size, have more favorable traffic termination contracts where it does not have its own network. Acquisition could be non-dilutive for WCOM, in light of the cost saving categories described above and the size of WCOM relative to WCIl, we believe an acquisition could be structured as non-dilutive. Specifically, we estimate that WCOM would need to drive a combined $600-$700 million of pretax operating synergies out of any combination to mitigate the impact to EPS. As a percent of our estimated total-combined expenses, these necessary reductions account for 2% - 3%. This is an aggressive, but attainable number, in our view, as achieving it would imply a 50% reduction in WCII cost of sales, a 50% reduction in WCII SG&A and a 2% reduction in WCOM's access costs..." --------- And as has been offered here previously, the report DOES emphasize the greater likelihood that a WCII partnership might occur, rather than an acquisition at this time.