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

To: Pamela Murray who wrote (10328)	2/17/1999 2:41:00 PM
From: MangoBoy	Respond to of 12468

<< Is it me or does there seem to be a lot of key people leaving...wonder why?? >> in both cases it appears the leaving folks are moving on to positions with more responsibilities: Schmeig gets to be CEO at Diginet Americas and Kins makes VP at TEOCO. Sometimes people just move on in order to move up (like our buddy Alex Mandl).

To: Pamela Murray who wrote (10328)	2/17/1999 2:56:00 PM
From: SteveG	Read Replies (2) \| Respond to of 12468

From Grubman last week: 02/10/99 Winstar Communication (WCII $38.87,1-S, Tgt $52.00) Jack B. Grubman --OPINION: Recent weakness in Winstar's stock price presents a buying opportunity. The company recently completed a secondary offering and received roughly $170 million net proceeds from the offering. The fundamental drivers and outlook for Winstar remain strong which we believe will be evident when it reports earnings on March 4. We are expecting revenues of $75 million (a 23% sequential increase), EBITDA losses of $81 million and net business line additions of 60,000. Given its $2 billion equipment financing agreement and relationship with Lucent, its expansion to 60 markets domestically and 50 internationally by 2003, its focus on increasing the on-net lines (which yield greater margins) through its innovative Project Millennium as well as migration of off-net lines, its capacity swap agreement with Williams and the commercial deployment of point-to-multipaint technology by both Winstar and Teligent, not to mention the recent endorsement by NXLK in its fixed wireless deals to fill in its national footprint, WCII is well-positioned to take advantage of the CLEC opportunity. LUCENT FINANCING AGREEMENT: Lucent and WinStar announced an agreement where Lucent will provide $2 billion of vendor financing to Winstar at an interest rate of the lover of LIBOR plus 350 basis points or Prime + 250 basis points. This provides a much lower cost of debt than WCII's current mid-teens rate. As WinStar meets certain performance goals, the rate will decline to LIBOR plus 2.5% and eventually LIBOR plus 2%. In addition, Lucent will provide, in addition to capital, expertise in building and designing networks and implementing and integrating certain support systems to get WinStar's networks up and running. DOMESTIC & INT'L EXPANSION: WinStar announced a plan to expand its network to 110 markets worldwide- - 60 domestic and 50 international markets--providing additional addressable market opportunities. By the end of 1999, WCII will be operating in 45 domestic markets and 6 international markets including Amsterdam (March 99 expected launch), Paris, London, Tokyo (Q2'99), Sydney and Buenos Aires (Q1'99). Aiding in the expansion plan, especially internationally will be Lucent, which will manage WCII's accelerated buildout as part of the alliance formed by the two companies in October. PROJECT MTLLENNIUM DRIVING ON-NET LINES: WinStar's MCI-like promotion called Project Millenium will drive on-net customers and margins. In 1,000 buildings in 13 cities WCII will roll out an on-net point-to-point product where customers, if they sign up for a three year commitment and take intralata toll services from WinStar will get a one year waiver on the fixed monthly rental for the phone line (essentially a 30% discount taken up front). We expect this offering to be rolled out into several thousand or more buildings and into at least twice as many cities. Although Project Millennium is in its early stages, its penetration rates for customer orders is impressive. At its analyst meeting in December, WCII disclosed that overall penetration of Millennium buildings is already 6% with up to 50% in some buildings. In 40% of Millennium buildings, WinStar has one or more customers and the average lines per customer improves to 21 lines. At the end of Q3'93, 18% of all lines were on-net (compared with 15% in Q2'9s) with 33% on-net penetration of lines in "mature" markets (those markets that have been in operation for at least one year). In fact, in New York, WCII's oldest market which has been operational since December 1996, the on-net penetration of lines is 54%, gross margins exceed 45% and it reached positive EBITDA during Q3'98. WILLIAMS AGREEMENTS: Winstar signed a $400 million contract with Williams whereby Williams will obtain 2% of the long-term capacity of WinStar's fixed wireless network. Williams will use this capacity to offer integrated local/long distance services to its wholesale customers In addition, if Williams chooses to sell local service, WCII will be its preferred supplier. Thus, WCII has upside potential beyond this deal. In addition, WinStar will obtain nationwide dark fiber from Williams Communications for $640 million and will make payments to Williams over seven years. WCII is getting dark fiber and network support on a newly built network which will allow WCII to dramatically enhance its ability to offer data and IP services. NET/NET: Recent weakness in WinStar's stock price presents a buying opportunity. The fundamental drivers and outlook for WinStar remain strong which we believe will be evident when it reports earnings on March 4. We reiterate our Buy and $52 price target.