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

To: stockboy who wrote (4152)	4/8/1999 2:05:00 PM
From: Teddy	Read Replies (1) \| Respond to of 11568

thanks Bernie! from todays The Wall Street Urinal: Dow Jones Newswires -- April 8, 1999 MCI WorldCom Seen Passing Up Nextel If There's Big EPS Hit By Shawn Young NEW YORK (Dow Jones)--Price is quite likely to be the undoing of merger talks between MCI WorldCom Inc. (WCOM) and wireless-phone company Nextel Communications Inc. (NXTL), a top telecommunications analyst said Thursday after talking to MCI WorldCom officials. MCI WorldCom almost certainly won't buy Nextel on terms that would substantially weaken its earnings; and Nextel almost certainly wouldn't sell for a price that would leave MCI WorldCom's earnings largely intact, said Credit Suisse First Boston Corp. analyst Frank Governali. Merger talks between the No. 2 long-distance company, based in Jackson, Miss., and Nextel, of McLean, Va., were first reported Tuesday in The Wall Street Journal. The newspaper said the parties hadn't agreed on price and other key terms. MCI WorldCom, which has built itself on a string on acquisitions, is virtually alone among the top telecommunications companies in not having a big wireless business, and Nextel is the only coast-to-coast wireless company not already owned by another major phone company. Nextel has $7.7 billion in long-term debt and a market capitalization approaching $11 billion. Assuming MCI WorldCom paid a premium, buying Nextel would probably cost in the neighborhood of $20 billion or more. Governali said MCI WorldCom's chief financial officer reaffirmed MCI WorldCom's aversion to deals that cut deeply into earnings. An MCI WorldCom spokeswoman declined to comment. For a deal to be acceptable to MCI WorldCom, earnings dilution would have to be in the mid- to low single digits, Governali said. "Our conversations with CFO highlight: distaste for dilution; unwillingness to do a deal with dilution north of mid-single digits; and recognition that time is on WCOM's side in terms of buying wireless assets," Governali wrote. Other analysts also have suggested that MCI WorldCom might wait for a better, more economical way to address the exploding wireless market. Since Nextel doesn't appear to have other suitors, MCI WorldCom can afford to wait for another acquisition or better terms, Governali said. Nextel, which is still in the very costly phase of building and expanding its domestic and overseas networks, lost $1.8 billion, or $6.46 a share last year on revenue of $1.9 billion. After the company reported fourth-quarter earnings, one analyst projected the company's capital spending for this year will be $1.6 billion. Merrill Lynch & Co, analyst Daniel Reingold estimated Tuesday that if MCI WorldCom bought Nextel for $42 a share and accounted for the deal as a purchase, its estimated earnings for 2000 would drop 25% to $2.10 from $2.80. However, he said, such a deal would add 30% to 38% to MCI WorldCom's earnings in five years. Concern that MCI WorldCom might make a dilutive deal with Nextel has pushed its stock down in recent days. Governali said recent prices create a buying opportunity. Recently, MCI WorldCom shares were up 1 1/8, or 1.3%, to 87 1/8 on moderate Nasdaq volume of 8.2 million. Nextel shares were down 1 3/16, or 3%, to 38 21/64, also in moderate Nasdaq trading. - By Shawn Young; 201-938-5248 shawn.young@cor.dowjones.com