<..INVESTOR LOWERS TELIGENT INC. CLASS A STAKE TO 12.3%..>
Not a big deal - she's been regularly selling and still owns more than a million shares.
And we (WCII) finally cleaned up OUR two day seller today. Fwiw, after thoroughly confirming there were NO fundamental problems/concerns (and I really dug around), I took advantage of the opportunity to add both stock and options (LEAPs). Conference call should be good. News out when ink is dry, hopefully by CC (certainly SOME announcements are expected). In the meantime and for this year, execution is the gameplan.
And fwiw, here's Jim Henry's (BS) take today on yesterday's QWST analyst conference and announcements:
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INVESTMENT VIEWPOINT
Industry Implications From Quest Analyst Meeting. Qwest
Communications International Inc. hosted its analyst/investor
meeting in Denver on February 24, 1999. During the meeting
management reviewed Qwest's financial and operational progress
during 1998 and discussed the outlook for the future. The
company reiterated again and again its overriding view that the
telecommunications world is rapidly changing from a narrowband
circuit-switched environment to a broadband packet-switched
environment. With that theme in mind, management discussed the
initiatives that it had underway to capitalize on that shift.
The overall themes and content of the analyst meeting rang true
with our views on the industry and certainly served to underscore
the value of the underlying assets and the wisdom of the strategy
of a number of companies in our space. As it relates to the
company's broadband initiatives and desire to move into the local
loop, we believe that companies like Covad, e.spire, Electric
Lightwave, GST Telecom, Hyperion, ICG Communications, and
Intermedia are highly attractive as either wholesale suppliers of
bandwidth, strategic partners, or outright acquisition candidates
for Qwest. As it relates to Qwest's view of the migration to a
data-centric packet-switched world, we believe that companies
like Covad, Concentric Network, and Intermedia are very well
positioned in this space with strong business prospects as well
as scarce and strategic assets. The following paragraphs outline
our thoughts on the Qwest analyst meeting as it relates to the
CLECs. Please see today's note from our colleague Michele Wolf
for the takeaways from the analyst meeting that relate
specifically to Qwest.
Qwest Announced Its CLEC Strategy. Consistent with our long-
standing view that the next generation of long distance carriers
would follow in the footsteps of those that came before them,
Qwest announced its entry into the CLEC business. The company
revealed that it had spent approximately $100 million in 1998 to
build local fiber networks in 10 markets and was in the process
of building an additional 9 markets during the course of 1999.
This network footprint will continue to be deployed through a
combination of fiber swaps, dark fiber leases, and construction
while Qwest builds its long distance network. While we believe
that this announcement is certainly a positive strategic move by
the company, we recognize that Qwest is a long way from having a
network footprint or business strategy that will enable it to
truly be a player in the CLEC business. While the company has
put 19 "dots on the map", its actual level of fiber
infrastructure is quite underdeveloped. A $100 million capital
investment in 10 markets is equal to only $10 million per market.
In contrast, the average CLEC spends anywhere between $25 and
$100 million per market to develop the dense network topology
necessary to interconnect with the ILEC central offices and with
the largest office buildings. In addition, Qwest management
indicated that it has not yet filed for CLEC certification,
interconnection with the ILECs, central office collocations, or
connected many buildings to its network. To put the level of
commitment necessary to establish a robust national CLEC
footprint in perspective, consider the fact that Teleport
Communications Group deployed $2+ billion in capital and incurred
$1.5+ billion in operating losses in order to develop a network
footprint adequate to address the top 75 markets in the US. The
bottom line is that we think that Qwest will have a long road
ahead of it if its wants to be a relevant player in the CLEC
business.
So, What Will Qwest Do In The Local Loop? We believe that Qwest
will ultimately not have the stomach to incur the $2+ billion in
capital expenditures and $1.5+ billion in operating losses
required to build a large-scale national CLEC business that would
enable it to compete toe-to-toe with telecom giants AT&T and MCI
WorldCom, who themselves purchased national CLECs instead of
building local businesses. While the company certainly has the
financial muscle necessary to make such a commitment, we would be
surprised if it was willing to dilute EPS so significantly over
the 3+ year period necessary to build the CLEC business. That
being said, the company's CLEC announcement indicates that Qwest
realizes the CLEC business is a strategic imperative in order to
be competitive over the long term. So how will the company
reconcile these conflicting issues? We think that the logical
outcome is for the company to either establish strategic
partnerships with CLECs or make an outright acquisition of a CLEC
that has already built out its networks and is approaching
positive EBITDA. To that end, Qwest recently made a minority
investment in xDSL CLEC Covad Communications, enabling it to
leverage Covad's collocations and high-speed local lines in a
total of 22 markets. In fact, Qwest management spoke quite
frequently about that relationship during the analyst meeting,
indicating that Covad will play an important role in its
broadband local strategy going forward. Covad's xDSL network
footprint will enable Qwest to reach 25 million homes and 2.5
million businesses by year-end 1999. However, Qwest will
ultimately need lots of local fiber in order to connect with
business customers in each of the major markets across the
country. To that end, we would expect the company to either buy
dark fiber from Metromedia Fiber Network or to consider
acquisitions of attractive CLEC assets that are within shooting
distance of positive EBITDA such as e.spire, Electric Lightwave,
GST Telecom, Hyperion, ICG Communications, or Intermedia.
The Migration To A Packet-Switched World. The central theme of
Qwest's analyst presentation was the notion that we are rapidly
migrating from the circuit-switched world to a world in which
packet-switched data and Internet networks will be the preeminent
means of communication. We echo that view wholeheartedly and
would like to point out two companies in our universe of coverage
that are particularly well positioned in the packet-switched
arena. First, Intermedia Communications is the leading CLEC with
respect to the rollout of enterprise data and Internet services.
In fact, it is the 4th largest provider of frame relay data
services after such giants as AT&T, MCI WorldCom, and Sprint. To
put its exposure to this key segment in perspective, Intermedia
posted $54.9 million of enhanced data revenue in 4Q98, equal to
roughly 30% of its total revenue. Moreover, this segment posted
organically generated sequential revenue growth of 15% versus
3Q98 with Internet access up 9%, frame relay up 19%, and web
hosting up 21%. With strong internal sales channels and
strategic data relationships with Ameritech, Bell Atlantic, US
West, and Williams Communications, we believe that Intermedia
offers investors a compelling play on the huge growth in data.
The second name that we would point out is Concentric Network
Corporation. This company is highly focused on providing
broadband Internet access, web hosting, virtual private networks,
and value-added IP services on its national packet-switched IP
backbone. Concentric posted sequential revenue growth of 16% in
4Q98 and we expect the company to grow revenue by nearly 75% in
1999. The visibility into the company's growth rate is
increasingly clear as a result of the company's contractual and
strategic relationships with companies like SBC Communications,
Williams Communications, Microsoft Web TV, Qwest, and Teligent.
We believe that investors will be well served by owning both
Concentric Network and Intermedia Communications as high-quality,
high-growth plays on the burgeoning demand for data
communications. |
