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Teligent Inc., a provider of wireless broadband access to more than 4,100 office buildings nationwide, stunned investors in October when it said it had only enough cash to operate through the first half of 2001 and was seeking additional capital. The Vienna, Va.-based company fired more than 600 workers. In December, it nailed down a $250 million private equity placement with Rose Glen Capital Management LP that critics say places few restrictions on what the investor can do with the Teligent shares it acquires. Teligent is expected to report financial results for the fourth-quarter and full year 2000 about Feb. 28.
Hamid Akhavan, Teligent's chief technology officer, recently talked with Broadband Week Senior Editor Jeanie Stokes about the company's prospects.
BBW: Has the company drawn against the $250 million agreement with Rose Glen Capital? How does Teligent plan to use the $225 million to $250 million it will make in capital expenditures this year?
HA: We expect to go through this year with cash and capital that's available to us from other sources. If, and when, it becomes necessary to draw down on Rose Glen, we'll do so, but it probably will be later in the year. We also expect that when we make that draw down, hopefully we'll have seen some rise in our stock price, so the Rose Glen deal will be more attractive to us than it is today. We are not obligated to use the Rose Glen arrangement, and we're always looking for better financing than what we have now.
With the Rose Glen deal, we are funded through 2001. That's good news. We plan to add 2,500 on-net buildings this year. We already have over 4,100 on-net buildings. We are finding ways to be more efficient and make better use of our back office systems. We are placing more emphasis on cost-cutting and capital conservation. We also shifted our deployment to focus on faster profitability.
BBW: How has Teligent's business plan changed in light of what's happening elsewhere in the telecommunications industry?
HA: In terms of what we sell and who we sell it to, not much has changed at all. We're trying to do everything more efficiently in order to preserve our cash and weather the storm in the industry. Obviously, there's not as much capital available as there used to be. We've not reduced our focus on small-to-medium size businesses. We've also introduced a wholesale approach that's not necessarily tied to the shortage of capital and the market downturn. It was just the right time for us to be in that space because the number of on-network buildings and the number of customers that we can serve in an on-net environment got to a critical mass. We can focus primarily on-net and still meet our revenue targets.
BBW: What services are you considering wholesaling?
HA: We have not completely defined our suite of products for wholesale. You can almost be assured that one offering will be simple wholesale bandwidth. We would sell other companies the broadband link to a certain number of buildings and they can offer whatever services they want. We are also looking at scenarios where we would offer end-user services. We could offer them the local, long-distance and excellent data services that we have and let someone else sell them to their customers.
BBW: Is wholesale one way to maximize the facilities you already have in place?
HA: Absolutely. Wholesale will be one avenue to quickly put additional traffic on the broadband network that we have. We also have focused our sales efforts on a given number of buildings, as opposed to expanding sales beyond the buildings we have and going to an off-network arrangement. There, traffic comes from a far greater number of sources and the network has to be built for a greater reach, but less utilization.
Why didn't we do that two years ago? Two years ago, we had 200 buildings. It's hard to get $50, $30, $70 or $100 million in revenue out of 200 buildings. Now we believe that we've reached that critical mass.
BBW: Your share price is severely depressed - down about 97 percent since March. Are there any plans for a share buyback or something else to bolster the price?
HA: I can't disclose anything that we haven't shared with the public, but let me say this about our stock price: We are, first of all, in a market that is overreacting. Just as the market overreacted on the upside 10 months ago, beyond all reason, the market is over-reacting in the other direction now. It's just a correction. It's gone far deeper than it should have, not just for us, but also for everyone in the telecommunications sector. Telecommunications was one of the first segments to feel the pain of the economic slowdown 10 months ago. Other industries lagged, and now, one after another, are coming down in terms of valuations. As telecommunications led the slowdown, it hopefully will be the first sector to recover.
The demand for bandwidth is now higher than it's ever been, so the fundamentals of the business are absolutely sound. We are very pleased with our business plan. We just have to weather the market over-reaction.
BBW: What about more layoffs?
HA: I can't talk about the future. We obviously had a downsizing activity toward the end of last year that was very difficult. Two factors contributed to that: first, many of our back office systems had reached a point where we could automate a number of job functions. Second, we had to stretch the dollars available to us in case this drought in the capital markets lasted longer than we expected. We reduced our staff size without impact on our customers, without reducing our product sets, and without cutting back on future opportunities for growing this business.
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