Don't Miss the Telecom Trees Looking at the Forest

By Richard McCaffery (TMF Gibson)
June 22, 2000

Summary: Telecom investors shouldn't waste all day fretting about the WorldCom/Sprint deal. There's lots of other news in the sandbox.

While telecommunications investors watch the shares of their favorite carriers drop on speculation that the deal between WorldCom (Nasdaq: WCOM) and Sprint (NYSE: FON) will get torpedoed by regulators, there's actual news happening in corners of the telecom world.

It's understandable that investors want to pay attention to the proposed $129 billion WorldCom/Sprint merger. WorldCom needs a wireless presence and Sprint needs the international scope of WorldCom's operations. The whole telecom world is in a tizzy over the deal's possible demise. Virtually all of the major U.S. wireless operators are taking hits in the market, signaling uncertainty across the board on the outcome of the merger and what it means for the industry. Will WorldCom turn around and buy Nextel (Nasdaq: NXTL) or VoiceStream Wireless (Nasdaq: VSTR) ? Does the company become a takeover target for Deutsche Telekom (NYSE: DT) ? Who knows.

The market is mesmerizing, but reading charts and guessing about WorldCom doesn't teach investors anything about competitive advantages, financial strength, 3G technology, or the importance of upcoming wireless auctions.

Here's a quick sampling of telecom news stories worth reading today:

• Long-distance company AT&T (NYSE: T) won its appeal against the city of Portland, Oregon, which ordered the company to open its cable lines to competitors. A Federal appeals court struck down the ruling, saying Portland overstepped its boundaries, Bloomberg reported. While it looks like open access to cable lines is the wave of the future with giants like America Online (NYSE: AOL) and Time Warner (NYSE: TWX) vowing to provide equal access, the ruling puts AT&T in the driver's seat regarding control of its cable network. The company is the country's largest cable operator, with access to more than 30% of U.S. homes.
  
  
• Telecom equipment company Lucent (NYSE: LU) opened its $20 million optical fiber manufacturing plant in Denmark today and rolled out plans to invest another $120 million in the facility. The company is spending $1 billion to add to its optical manufacturing capabilities as it tries to catch market leader Nortel (NYSE: NT) .
  
  
• Sprint PCS (NYSE: PCS) and Lucent announced plans to test a 3G CDMA-based platform that can transmit data at 2.4 Mbps -- compared to today's rates in the range of 14.4 Kbps to 19.2 Kbps. Trials start in the first half of 2001. Sprint and Lucent aren't the only companies testing this kind of technology, but with so much riding on the fast roll-out of wireless Internet services, investors should know, for example, what kind of technology Sprint is testing and who it's partnered with to provide equipment.
  
  
• Aram Fuchs, a columnist who writes for the Telecom Analyst, argues that the GSM standard is a bad choice for wireless carriers in the U.S. He defends his position against readers wed to the technology in this report.
  
  

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