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Technology Stocks : NEXTEL -- Ignore unavailable to you. Want to Upgrade?

To: Leo Abenes who wrote (9006)	4/7/1999 2:39:00 AM
From: SteveG	Respond to of 10227

ML/Reingold: MCI WorldCom - Impact If WorldCom Buys Nextel Investment Highlights: · WSJ today speculates that WCOM may be in talks to buy Nextel. We believe WCOM will eventually need a wireless product in the US and see only 3 alternatives: 1. Sprint PCS, MMDS licenses which would still require full buildout and Nextel. We assess below financial impacts of a Nextel acquisition assuming USD 42 per Nextel share, 500M of pretax synergies and full tax benefit to WCOM from NXTL's losses which our wireless colleagues Linda Mutschler and Paul Wuh forecast at 1.4B in 2000 turning around to 741M net income in 2005. 2. Using purchase accounting, our 2000 eps est would decline by 25 pct to $2.10 from $2.80, however, we estimate 5 year eps growth would be enhanced from 30 to 38 pct. 3. Valuation would still be reasonable in our view. At 92.50, WCOM shares are now at 33x our year 00 eps est of $2.80 vs 30 pct growth. Post a Nextel acquisition using our assumptions which the companies have not commented on, WCOM would be at 44x for 38 pct growth, a 1.15 pe:growth ratio that we consider to be very attractive. RBOCs are at 1.2 as is ATT. · We reiterate our Accumulate/Buy on WCOM shares and view the strategic and competitive benefits to WCOM as significant. We also see the industry-consolidation process as positive for WCOM and indeed the entire telecom sector especially in light of the explosive growth in internet traffic that is benefitting everyone.