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 (10046)	1/18/1999 10:01:00 PM
From: SteveG	Respond to of 12468

OK I'm way late, but here's Reingold on NXLK-WNP (ps, it wouldn't surprise me - given the renewed focus on this technology - to see ML initiate on WCII at some point relatively soon): 2 Acquisitions Of Wireless Licenses That Will Bulk Up Existing Holdings And Accelerate Local Market Entry; Raising PMV By 11% Or $4 To $40 On January 14, NEXTLINK announced two important transactions that will help to bulk up its existing wireless local loop capabilities and accelerate its local market entry strategy. Both deals involve the acquisition of additional LMDS or "local multipoint distribution service" licenses providing access to wireless spectrum in the 28 GHz band and allowing NEXTLINK to connect end user customers to its network via low cost, wireless local broadband connections. Combined, these two deals provide NEXTLINK with 82 LMDS licenses covering an estimated 150 million POPs or 95% of the population in the US's top 30 markets. Overview of Acquisitions Deal 1: NEXTLINK has signed a definitive agreement to acquire WNP Communications for $695M comprised of $340M in cash and $355M in stock. Through this acquisition, NEXTLINK will receive 39 A block licenses covering 98 million POPs and 1 B block license covering 16 million POPs. The differentiation between A block and B block licenses is significant as A block licenses provide the holder with 1,150 MHz of wireless spectrum while B block licenses cover only 150 MHz. NEXTLINK estimates that one hub site in an A block LMDS license area can provide 8 OC-3's worth of wireless broadband capacity (or over 16,000 DSOs or single phone lines) to numerous customer buildings, while one hub site in a B block license area can provide 1 OC-3 worth of capacity (or approximately 2,000 single phone lines). Deal 2: NEXTLINK has agreed to buy out its partner NEXTEL's 50% ownership in NEXTBAND, a 50/50 joint venture between NEXTLINK and NEXTEL. Terms of the deal call for NEXTLINK to pay NEXTEL approximately $138M, evenly split between cash and stock. NEXTBAND owns 13 A block licenses and 29 B block licenses covering approximately 36M POPs. Benefits To NEXTLINK From These Acquisitions: Based on what we have learned so far, it would appear that these deals will: · Allow NEXTLINK to accelerate and enhance local market share capture in its existing markets; · Accelerate time to entry in new markets; and · Permit NEXTLINK to lessen its dependence on leased capacity from regional bell operating companies (RBOCS) in order to reach local end user customers, thereby boosting profitability of local services. We reiterate our intermediate term Accumulate and long term Buy opinions. As a result of these 2 LMDS spectrum acquisitions, we are raising our 12 month private market value based price objective by $4 or 11% from $36 to $40 (11% upside): To reflect the impact from these transactions on our 10 year DCF (discounted cash flow) model, we have made the following revisions to our 10 year forecast. · Increased our outer year EBITDA margin estimate by 4.5 percentage points from 34.5% to 39% to reflect the benefit from running increased traffic on-net rather than through leased facilities from the RBOC; · Increased our local services revenue estimate by approximately 10% beginning in 2001 to account for NEXTLINK's ability to accelerate its local market entry and reach additional customer buildings through owned, wireless facilities; and · Increased our capital expenditures estimate by 10% beginning in 2000 to account for expenditures required to build a wireless local loop infrastructure. The net impact from these transactions on our 10 year DCF model is an approximate 10% accretion to private market value. Therefore, we are raising our 12 month private market value based price objective by $4 or 11% from $36 to $40. Our private market value is based upon our 10 year forecast, assuming a 15% discount rate, 12x terminal year EBITDA multiple and no public to private market discount.