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To: SteveG who wrote (205)	5/19/1999 1:16:00 AM
From: SteveG	Respond to of 1860

BTAB on ARTT: ARTT: Process Of Raising Capital Eats Into 1Q 1999 Operating Results Bankers Trust Research/BT Alex. Brown Research Bo Fifer May 18, 1999 --------------------------------------------------------------------------- ---- ADVANCED RADIO TELECOM CORP. [ARTT] "BUY" Process Of Raising Capital Eats Into 1Q 1999 Operating Results --------------------------------------------------------------------------- ---- Date: 05/18/1999 EPS 1998A 1999E 2000E Price: 11.88 1Q (0.50) (0.87) A (0.79) 52-Wk Range: 15 - 2 2Q (0.42) (0.62) (0.83) Ann Dividend: 0.0 3Q (0.56) (0.75) (1.04) Ann Div Yld: 0.0 4Q (0.57) (0.79) (1.19) Mkt Cap (mm): 349 FY(Dec.) (2.06) (3.02) (3.87) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (2.06) (3.02) (3.87) Est. Changed Yes CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- HIGHLIGHTS: -- Advanced Radio Telecom (ART) reported 1Q 1999 results last night (17- May) after the market's close. The customary conference call to discuss these results has been postponed until ART is able to discuss its ongoing search for strategic equity. -- HEADLINE RESULTS: Metric 1Q98A 1Q99E 1Q99A Revenue $0.2M $0.6M $0.2M EBITDA -$5.4M -$12.4M -$7.4M* EPS ($0.50) ($0.75) ($0.63)* Bldgs. On-Net 0 136 126 Source: Company documents, BT Alex. Brown Incorporated. -- STRATEGIC EQUITY TIME LINE: The next public announcement from ART, we believe, will concern the company's progress toward finding a strategic partner and we don't expect ART to discuss that progress until a deal has been reached. We remain hopeful that an announcement will be made within the next 7-10 days, although the closing of a license sale in May for $7 million extends ART's cash life likely at least into the July time frame. We would continue to expect to see ART raise between $100M and $125M to take full advantage of the Lucent credit facility, an amount we believe would represent 20%-plus of the company. -- FOCUS IN 1Q 1999 WAS CLEARLY ON FINANCING: ART improved its customer orders to 250 from 142 reported at 4Q 1999, while growing its base of on-net buildings to 126 from 85. While the operating numbers are somewhat light (resulting in lighter-than-expected revenue of $0.2M), this is perhaps unsurprising given that ART's attention in 1Q 1999 was focused squarely on securing additional funding. -- HOW LONG CAN ART HOLD OUT? ART's change in cash plus debt for 1Q 1999 implied a $12.7M cash burn rate in the quarter. ART currently has $6.6M of unrestricted cash plus the $7 million received for licenses for a total of $13.6M. We believe this is sufficient to take ART into the July time frame, but no later. ART has no remaining availability under its current credit facilities. -- VALUATION: Based on our 10-year DCF, using a 25% equity discount rate to reflect the imminent need for capital and a 10x terminating multiple, our 12-month price objective on ARTT is $14/share. We would normally use a 20% discount rate, which would imply a $20/share target, and a higher discount rate may be appropriate given ART's very limited liquidity (although we remain confident that ART will successfully attract additional sources of capital, a 30% equity discount rate would imply a $11/share target).