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Thursday, April 18, 2002 |
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• McLeodUSA Emerges From Chapter 11 • Minority Whip Says Tauzin-Dingell Has 'Opportunities' In Senate • Alcatel Touts Fiber-To-The-User • Covad Strikes T-1 Deal With DSL.net • Concurrent taps Everstream for targeted ads
Despite posting strong DSL subscriber growth, SBC Communications reported first-quarter net loss because of acquisition related expenses. The company says meeting its full-year revenue targets will be difficult. The carrier's revenue dipped 6 percent from $11.19 billion in Q1 2001 to $10.52 billion. SBC reported a net loss of $81 million, or 2 cents a share. In first quarter 2001, SBC posted net income of $1.85 billion, or 54 cents a share. SBC's results reflect increased competition in the telecom sector and a lagging economy. SBC's $3.5 billion Sterling Communication acquisition resulted in a $1.8 billion charge in the first quarter. During the quarter, SBC added 183,000 DSL subscribers - the most growth SBC has seen in this sector in the past 12 months. The company has roughly 1.5 million DSL lines at the end of the quarter. Cingular Wireless, SBC's joint venture with BellSouth, plans to launch its high-speed wireless service this year. New York and California will be the first U.S. markets targeted. SBC has reiterated it expects full-year EPS growth, before special items, in the 5 percent to 7 percent range. The company, however, believes that achieving its 2002 revenue growth targets will be "challenging." The company previous forecast full-year revenue growth between 1 percent and 3 percent. Since the third quarter 2001, SBC has cut 7,500 jobs, and expects to trim further to pare costs. SBC expects full-year capital expenditures to be below its earlier target range of $9.2 billion to $9.7 billion, due to lower demand. At one point in early trading, SBC shares had lost
3.6 percent of their value, trading at $33.25. The stock was teetering
close it of 52-week low of $33.20.
McLeodUSA Emerges From Chapter 11 Many have tried, but only a few have succeeded. McLeodUSA Inc. joins a very short list of telecom companies that have successfully escaped from the trenches of bankruptcy protection proceedings. The CLEC's security holders approved an amended reorganization plan, calling for McLeodUSA to distribute $670 million in cash to its senior noteholders. These noteholders will receive new preferred series A stock and warrants. As part of the deal, McLeodUSA also will distribute new common stock to its old preferred shareholders. The company's stock will resume trading on the Nasdaq today -- trading was halted on January 30. The stock last traded at 18 cents a share. Buyout firm Fortsmann Little & Co. has upped its equity investment commitment to $175 million in exchange for a 23 percent stake of the reorganized CLEC. Including the preferred stock stake it already holds, Fortsmann has increased its stake in the company to 58 percent, making it the largest McLeodUSA shareholder. McLeodUSA also entered a five-year revolving credit facility valued at $110 million. The bank group is led by JP Morgan Chase, Bank of America and Citibank. Earlier this year, the CLEC agreed to sell its directories business to Yell Group for $600 million. It also closed a deal with Level 3 Communications to shed some of its non-core assets. Under the terms, Level 3 purchased 350 points of presence across the United States and the related facilities, equipment and underlying circuits. McLeodUSA is following in the footsteps of DSL carrier
Covad Communications, which successfully emerged from Chapter
11 bankruptcy proceedings in December after filing a pre-negotiated
plan of its own in August.
Minority Whip Says Tauzin-Dingell
Has
Congress should take steps to encourage broadband infrastructure deployment, but without implementing tax credit regime, Senate Minority Whip Nickles said Thurs. at Tax, Budget & Legislative Policy Seminar in Washington. He said use of tax credits as means of spurring broadband network construction was form of micromanaging economy, tantamount to federal govt. telling industry how to spend its money. He said Senate should pursue other avenues of economic stimulation, such as deregulatory approach proposed by Tauzin-Dingell bill (HR-1542) recently passed by House (CD Feb 28 p1). Bill by House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.) "has some opportunities" in Senate, he said. Nickles in interview later dodged questions whether he was involved in or would support broadband legislation being drafted by Sen. Breaux (D-La.). Breaux is developing companion to Tauzin-Dingell (CD April 10 p1), but it was unclear whether his measure would mirror HR-1542 or would contain compromise language to satisfy opponents. Breaux was one of lone voices in last month's Commerce Committee hearing on Tauzin-Dingell to expressly support broadband deregulation. Although specifics of Breaux bill haven't been disclosed, it's now clear draft bill won't contain tax credit provisions if Nickles is to become co-sponsor. Although Nickles didn't refer to specific broadband tax credit legislation, bills under consideration includes one by Sen. Rockefeller (D-W.Va.) and companion by Rep. English (D-Pa.). Computer industry observer at tax seminar said question of what language might be in Senate version of Tauzin-Dingell was moot point. Referring to Senate Commerce Committee Chmn. Hollings (D-S.C.), one of Senate's staunchest opponents of Bell deregulation, he said: "What difference does it make? Tauzin-Dingell is dead in the (Senate) Commerce Committee." Proponents of HR-1542, including Tauzin, have expressed confidence that Senate will take up some form of bill, even if it requires modification. Tauzin spokesman Ken Johnson said Nickles' comments were "another indication that momentum for our bill is beginning to grow in the Senate. More and more people are coming to realize that the best way to create jobs and spur investment in the high tech community is to pass Tauzin-Dingell." Nickles also raised issue of estate taxes, which
he said serve as "a disincentive to grow businesses."
He said rather than phasing out "death tax," which by
law will sunset in 2010, "we need to make it permanent, and
we have the votes to do it." Permanent repeal of estate tax
has broad support in communications industry. Repeal supporters
say tax has particularly negative effect on smaller family-owned
companies upon death of majority owners. Since such providers
often lack liquidity, they say they can satisfy estate tax burden
only by selling their company or pieces of their networks. Nickles
said: "There's something wrong when the government takes
half of what they own when they die." House Ways & Means
Select Revenue Subcommittee Chmn. McCrery (R-La.) agreed 2010
estate tax sunset date made tax planning "tougher than ever."
However, although he said permanent repeal legislation would pass
House, he was "not confident the Senate will follow our lead
on that."
Alcatel Touts Fiber-To-The-User Despite concerns over cost and manageability of all-fiber delivery systems, the development of deep fiber platforms to deliver ultra-high speed communications directly to users continues to plod along. Telco gear maker Alcatel has announced a Fiber-To-The-User optical fiber cable platform that delivers light-speed communications right up to subscriber premises. The new Alcatel 6620 platform brings optical access right to the end-user, enabling super-fast transmission of bundled voice, video and data. When coupled with Alcatel core technologies, an operator could potentially deliver traffic over all-fiber Alcatel gear from long haul all the way to individual residences. The new 6620 solution is platform independent and can handle current advanced transmission architectures like APON, BPON and Gigabit Ethernet. FTTU solutions, though not widely deployed, operate
hundreds of times faster than the premium data services of today.
Potentially, subscribers on an all-fiber platform would be able
to use multiple phone lines, download full-length movies in minutes,
receive high-definition programming, or participate in full-motion
videoconferencing ... applications that today are restricted by
bandwidth-constricted connections.
Covad Strikes T1 Deal With DSL.net DSL.net Inc. is expanding its T1 service with help from Covad Communications Inc. and its several hundred points of presence. Although terms of the deal were not disclosed, DSL.net will gain access to Covad's 600 POPs nationwide. The agreement means another source of revenue for the former bankrupt Covad. DSL.net is embracing T1 as a means of providing high-speed Internet access to small and medium-sized businesses regardless of their distance from the central office. Previously the company only offered DSL services. "In combination with our prior T1 announcements, we will be able to offer a more complete set of T1 offerings, under our NETgain-T product umbrella, to an expanded set of service areas," says Keith Markley, DSL.net's president and chief operating officer. Earlier this week, DSL.net inked a similar deal with Allegiance Telecom. Separately, Covad released its operating statistics for first quarter 2002. As of March 31, Covad's cash balance was roughly $255 million, and cash usage was under $45 million. Covad's number of lines in service increaed 2 percent from Dec. 2001 to 359,000. Half of the company's total lines are business-class and half are consumer-class. At the end of the previous quarter, business-class lines represented 52 percent of Covad's total lines. Covad is working to grow its subscriber base through direct channel and wholesale partners. At the end of the first quarter, direct channel represented 7 percent of Covad's total lines, and wholesale accounted for 93 percent.
VOD vendor Concurrent Computer Corp. has inked a deal to license and co-market Everstream's proprietary advertising system for targeted and interactive ads delivered over broadband networks. Tied to deal, Concurrent has made a $500,000 equity investment in Everstream. On the technical front, the companies have built a joint interface that will run Everstream's S4 Campaign Director ad-insertion software on Concurrent's MediaHawk video servers. Concurrent said the combination will further the
development of its network-based Personal TV System.
Satellite television broadcaster BSkyB
has revealed plans to offer broadband internet access and interactive
services to its six million customers. The company is believed to have developed an add-on adapter for its digital satellite TV receivers which will allow them to connect to an ADSL line. At present, Sky's receivers connect to internet services such as email and its interactive and pay-per-view services using a built-in 56k modem. Adding broadband connectivity to the receivers will allow Sky to offer full high-speed internet access through the box and to improve the size and appearance of its interactive services. DSL access could also eventually allow Sky to offer television over broadband. Last year BSkyB was granted a licence to broadcast television channels over DSL, giving it access to additional capacity in the future and to homes without satellite, cable or digital terrestrial TV.
ADC Telecommunications has filed suit against
PCI Technologies, alleging that certain PCI “MAXNET”
modules infringe on U.S. patent No. 6,289,210 B1, which relates
to “an improved RF circuit module.” ADC makes and sells
those modules under the RF Worx brand. The modules are designed
to help cable operators deliver traditional video services as
well as “future targeted services” over the same network
via headend signal balancing techniques. ADC is seeking undisclosed
past damages and injunctive relieve against PCI. PCI declined
to comment.
Metromedia Fiber Network has once again delayed
its 10-K filing with the Securities and Exchange Commission, citing
a need to restate results for the first three quarters of 2001.
The delay is another blow to the struggling telecom company, which
has defaulted on an interest payment and has warned that Chapter
11 might be in its future. Regional fiber provider Digital Teleport Inc. reports first quarter 2002 bandwidth sales of $4.2 million, a 35 percent increase over numbers posted in the first quarter of 2001. The company says it is on track to emerge from Chapter 11 reorganization by the end of the year.
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