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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (302)	6/2/1999 1:46:00 PM
From: SteveG	Respond to of 1860

SSB on TGNT/LBTA: --SUMMARY:--Teligent, Inc.--Telecommunications Services Liberty Media announced it will acquire The Associated Group, which owns roughly 41% of TGNT, for stock & assumption of $187 mil of Associated debt. Salomon Smith Barney acted as advisor to Associated Group in this trans. Although Liberty Media is a wholly owned subsidiary of AT&T it is managed for the benefit of its shareholders given the corporate governance of the Liberty Media/AT&T tracking stock. Thus, AT&T has no claim to these assets & there are no entanglements between AT&T & TGNT currently. This transaction frees TGNT from the investment company "shackles" and will allow TGNT more freedom in entering into strategic relationships. *This transaction as well as Qwest's $90 million investment in Advanced Radio Telecom (ARTT), a fixed wireless operator, for a 19% stake is another validation that fixed wireless is a valuable asset. --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/98 EPS $(0.73)A $(1.12)A $(1.49)A $(2.00)A $(5.35)A Previous 12/99 EPS $(2.05)A $(2.45)E $(2.65)E $(3.05)E $(10.20)E Current 12/99 EPS $(2.05)A $(2.45)E $(2.65)E $(3.05)E $(10.20)E Previous 12/00 EPS $N/A $N/A $N/A $N/A $(10.00)E Current 12/00 EPS $N/A $N/A $N/A $N/A $(10.00)E Previous 12/01 EPS $N/A $N/A $N/A $N/A $N/A Current 12/01 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:1S Prior:No Change Price (6/1/99)......:$54.56 P/E Ratio 12/99.....:N/Ax Target Price..:$70.00 Prior:No Change P/E Ratio 12/00.....:N/Ax Proj.5yr EPS Grth...:0.0% Return on Eqty 98...:N/A% Book Value/Shr(99)..:-1.14 LT Debt-to-Capital(a)N/A% Dividend............:$N/A Revenue (99)........:35.0mil Yield...............:N/A% Shares Outstanding..:61.2mil Convertible.........:No Mkt. Capitalization.:3339.1mil Hedge Clause(s).....:# Comments............:(a) Data as of the most recently reported quarter. Comments............: --OPINION------------------------------------------------------------------- Liberty Media Group (LMGA and LMGB) announced a definitive agreement to acquire The Associated Group (AGRPA and AGRPB), which owns roughly 41% of Teligent, in exchange for 25.9 million shares of Liberty Media Class A stock, 19.7 million shares of AT&T and the assumption of $187 million of Associated Group debt for a value of roughly $3 billion. Salomon Smith Barney acted as advisor to Associated Group in this transaction. However, given that Associated Group already owned 14.5 million shares of Liberty Media Class A stock and 19.7 million shares of AT&T, another way to look at this transaction is that Liberty Media paid 11.5 million of its Class A shares (pre-split) and assumed debt of $187 million (a total of roughly $950 million) for Associated Group's assets which consist of essentially TGNT. Other assets owned by Associated Group includes True Position (a patented wireless location system in early stages of commercialization), an interest in a Mexican cellular telephone company, ownership of radio broadcasting properties and a portfolio of marketable equity securities including Liberty Media and AT&T. Given the current value of TGNT's shares, the 21.4 million shares owned by Associated Group are worth $1.2 billion. Thus, from Liberty Media's point of view they were able to buy TGNT at a 20% discount. However, as detailed in the table below, since Liberty Media is issuing 1) the exact same number of AT&T shares that Associated Group already owns and 2) issuing more shares of Liberty Media shares than Associated already owns, Associated Group's $800 million tax liability on AT&T and Liberty Media shares is eliminated. Thus, from Associated Group's perspective they received $1.7 billion in value in this transaction for assets that are worth $1.2 billion today--clearly a win-win for both Associated Group as well as for Liberty Media. In fact, any other buyers of Associated would have had to factor in the Associated tax liability in their purchase price. Associated Liberty Media Net Consideration Group Assets Purchase Terms For AGRPA $ in Bil. (shares in mils) AT&T stock 19.7m 19.7m -- $-- Liberty Media Cl A 14.5m 25.9m 11.5m $0.7 ---- Net consideration paid $0.7 Plus Assumption of Debt $0.2 ---- Purchase price to Liberty $0.9 Tax liability eliminated $0.8 ---- Total value to Associated $1.7 Associated Group Assets: Teligent Stock 21.4m $1.2 Given that Liberty Media is a tracking stock of AT&T as a result of AT&T's merger with TCI, there is a notion that AT&T now has access to TGNT and its network. Although Liberty Media is a wholly owned subsidiary of AT&T, given the corporate governance of the Liberty Media/AT&T tracking stock, as in all tracking stock arrangements, the Liberty Media shares are managed for the benefit of its shareholders. Thus, AT&T has no claim to these assets and there are no entanglements between AT&T and TGNT currently. AT&T can strike agreements with TGNT but on the same basis that any other carrier would be able to. Furthermore, AT&T has no inside track to acquire TGNT; any potential buyer will have to pay full value--AT&T included. Liberty is a 41% owner of TGNT and will manage its investment in TGNT for the benefit of Liberty shareholders with no consideration for AT&T. Thus, John Malone will be as interested in maximizing TGNT share price as any other investor. Traditionally, Malone has been an incubator of developing assets. As a registered investment company, Associated Group's percentage share in TGNT would have had to be maintained. However, since Liberty Media is not an investment company these rules no longer apply. Thus, from TGNT's point of view, this transaction frees it from the investment company "shackles" and will allow TGNT more flexibility if they want to merge with another company, use its stock as currency for other transactions, sell an equity stake to a strategic buyer or enter into other strategic relationships without having to maintain Associated Group's ownership percentage. Furthermore, TGNT will benefit from this relationship with Malone and his ability to drive value. This transaction as well as Qwest's $90 million investment in Advanced Radio Telecom (ARTT), a fixed wireless operator, for a 19% stake is another validation that fixed wireless is a valuable asset. While ARTT has licenses at the 38 GHz level, WinStar is the carrier which owns the most spectrum in the top markets in the US. Therefore, if any carrier wants to do anything at the 38 GHz level, WCII would be the asset they needed. We continue to view Teligent and WinStar assets as particularly valuable assets given the amount of fixed wireless spectrum that they own. In addition, Nextlink which has a combined fiber based/fixed wireless strategy obviously has a very valuable set of assets which address the entire suite of access technologies to end users. NET/NET: Transaction highlights value of Teligent and fixed wireless assets. We reiterate our Buy and our $70 price target.