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-------------------------------------------------- Telecommunications Reports presents.... TR DAILY Oct. 22, 2001 -------------------------------------------------- PLEASE NOTE: This electronic publication is copyrighted by Telecommunications Reports International. Redistribution or retransmission of any part of this electronic publication -- either internally or externally -- is strictly prohibited. Violation will be cause for immediate termination of your sub- scription and liability for damages. You may print out one hard copy for your personal use. If you are interested in having this publication sent to colleagues at your company, additional authorized recipients may be added to your subscription for a fee. Call Subscriber Services, at (800) 822-6338, or send an e- mail to customerservice@tr.com for more details. If you prefer not to receive TR Daily, please reply to customerservice@tr.com. -------------------------------------------------- Table Of Contents Click here for the full issue: http://www.tr.com/online/trd/2001/td102201/index.htm FCC MAY RAISE SPECTRUM CAP, EVENTUALLY LIFT IT ENTIRELY http://www.tr.com/online/trd/2001/td102201/Td102201.htm SBC COMMUNICATIONS SHOWS LOW REVENUE GROWTH, PLANS TO CUT SEVERAL THOUSAND JOBS=20 http://www.tr.com/online/trd/2001/td102201/Td102201-01.htm U.S. BANKRUPTCY COURT RESCHEDULES NextWave=20 HEARING ON DISCLOSURE. STATEMENT http://www.tr.com/online/trd/2001/td102201/Td102201-02.htm CenturyTel TO PAY $2.15B FOR VERIZON's=20 ALABAMA, MISSOURI EXCHANGES http://www.tr.com/online/trd/2001/td102201/Td102201-03.htm VERIZON SEEKS END TO UNBUNDLED=20 LOCAL SWITCHING http://www.tr.com/online/trd/2001/td102201/Td102201-04.htm CLEARER VISION ON BROADBAND POLICY REQUIRED, 3COM EXECUTIVE SAYS http://www.tr.com/online/trd/2001/td102201/Td102201-05.htm TELECOM EARNINGS ROUNDUP http://www.tr.com/online/trd/2001/td102201/Td102201-06.htm NEWS IN BRIEF=20 http://www.tr.com/online/trd/2001/td102201/Td102201-07.htm ***************************************************************** FCC MAY RAISE SPECTRUM CAP, EVENTUALLY LIFT IT ENTIRELY The FCC is considering raising for 18 months the cap on how much spectrum wireless carriers may hold in any one market before eliminating the restriction, sources said on Monday.=20 Currently, wireless carriers can only hold 45 megahertz of spectrum in urban markets and 55 MHz in rural markets. FCC Chairman Michael K. Powell has proposed raising the limit to 55 MHz in urban markets for 18 months, according to sources. Some other Commissioners have indicated they would be willing to establish a higher limit, according to one source. Under proposals being discussed, after 18 months, the FCC would either "sunset" the restriction or forbear from enforcing it, a source said. The Commission plans to vote on the proposed changes at its Nov. 8 meeting, sources said. Much of the wireless industry has long urged the FCC to remove the cap, saying it is no longer needed to ensure competition in the marketplace and instead is thwarting carriers' growth. Since the Sept. 11 attacks, industry officials have stressed that carriers need access to additional frequencies to handle the increased traffic after emergencies. "We think the time has come to eliminate the cap altogether," said Diane Cornell, vice president-regulatory policy for the Cellular Telecommunications & Internet Association. "The market is very competitive." She added that the Commission and the Justice Department have the authority to "reach out and address any competition issues." But smaller providers and some consumer advocates contend that the cap is still necessary to ensure that smaller players are not forced out of the market. -- Paul Kirby, pkirby@tr.com ***************************************************************** SBC COMMUNICATIONS SHOWS LOW REVENUE GROWTH, PLANS TO CUT SEVERAL THOUSAND JOBS=20 SBC Communications Inc. posted year-over-year revenue growth of just 0.8% in the third quarter excluding one-time items, and said on Monday it plans to eliminate several thousand jobs and cut capital spending by up to 20% next year. For the quarter ended Sept. 30, SBC generated $13.5 billion of revenues, less than one percentage point above the year-ago total. Driving top-line performance during the quarter were $2.2 billion in data revenues, up from $2.0 billion in last year's third quarter, a net gain of 150,000 DSL (direct subscriber line) Internet service lines, and 13.6% revenue growth at Cingular Wireless, in which SBC holds a 60% equity stake.=20 Net income of $2.0 billion, or $0.59 per share, met forecasted levels, and was slightly higher than the $1.96 billion of profit recorded in the year-ago quarter. SBC said it continues to "work toward" its previously-stated full-year earnings target of $2.35 per share. =20 With larger financial performance gains hard to come by, SBC management indicated the firm will be concentrating on expense savings to shore up future results. "The impact of a tough economy is being exacerbated by an adverse and uncertain regula- tory environment, so we've taken the steps required to maintain our keen focus on controlling expenses, strengthening margins and maintaining financial flexibility," said Edward Whitacre Jr., chief executive officer.=20 "Overall conditions have worsened in recent months, making for one of the most challenging business environments in recent memo- ry," Mr. Whitacre said. He added that the current downturn is expected to hamper business and consumer demand through 2002, in turn putting "significant pressure" on SBC's ability to improve its financial performance next year. "In response to these challenges, we must reduce our work force by several thousand jobs and cut our capital spending by approximately 20% in 2002," the CEO said. =20 In particular, Mr. Whitacre blamed existing federal telecom regulations for exerting a significant drag on expansion of the firm's DSL business and adding hundreds of millions of dollars to SBC's costs in providing the service. And because of the heavy hand of regulations, SBC said, the company will slow its build- out of broadband service. "No responsible company could justify fully deploying broadband capabilities and investing in new advanced networks in the face of this uncertain environment," Mr. Whitacre said.=20 Cutting against the grain of a broader market rally, SBC common stock fared poorly on Monday, closing down $2.24 per share, or about 5%, at $41.40. Goldman Sachs telecom analyst Frank Governali noted that while SBC made its bottom-line target for the quarter, the earnings report revealed a "greater than expect- ed" erosion in revenue growth. As a result, the analyst trimmed expectations on SBC's 2002 revenue growth to 2.0% from a previous figure of 4.7%, and cut the 2002 full-year earnings estimate from $2.45 per share, to $2.35 per share.=20 -- John Curran, jcurran@tr.com ***************************************************************** U.S. BANKRUPTCY COURT RESCHEDULES NextWave=20 HEARING ON DISCLOSURE. STATEMENT A bankruptcy court on Monday rescheduled a NextWave Telecom, Inc., hearing that had been scheduled for today. NextWave had asked for the hearing to be continued until Nov. 1, but the session was set for Nov. 2 because of an attorney's scheduling conflict, according to a court clerk. At the hearing, the court will consider the adequacy of NextWave's disclosure statement, which accompanied its bankruptcy reorganization plan, and whether to approve the carrier's tech- nology cooperation and subscription agreements with QUALCOMM, Inc. The action by Judge Adlai S. Hardin Jr. of the U.S. Bankruptcy Court for the Southern District of New York (White Plains) came as several wireless carriers that bid on NextWave's spectrum at an auction earlier this year continued negotiating an agreement with NextWave and the FCC that could settle the 5-year-old dispute involving NextWave's "C" and "F" block PCS (personal communications service) licenses. Last Friday, the federal government asked the U.S. Supreme Court to review a lower court's ruling that the FCC illegally reclaimed the carrier's licenses (TR, Oct. 22). Filing separate petitions for a writ of certiorari were Verizon Wireless, and VoiceStream Wireless Corp., Arctic Slope Regional Corp., and Council Tree Communications LLC. Arctic Slope is the managing member of Alaska Native Wireless LLC, the second-highest bidder at the auction of NextWave's spectrum. Like the government, the carriers filed their petitions to preserve their rights in the case, according to a source. "We want a settlement to work," the source told TR Daily today. -- Paul Kirby, pkirby@tr.com ***************************************************************** CenturyTel TO PAY $2.15B FOR VERIZON's=20 ALABAMA, MISSOURI EXCHANGES CenturyTel, Inc.'s plan to expand its rural wireline operations via the acquisition route took a big step forward today, as the company announced an agreement to purchase all of Verizon Commu- nications, Inc.'s access lines in Alabama and Missouri for $2.159 billion. =20 The proposed transactions includes 90 wireline telephone exchang- es and 306,000 access lines in Alabama, and 98 exchanges and about 369,000 access lines in Missouri, the companies said. Upon completion of the transaction, about 450 Verizon wireline employ- ees in Alabama and 500 Missouri workers will become employees of CenturyTel, they said. "This transaction will allow us to sharpen our focus on competing in targeted markets and on growing the company," said Verizon President and Vice Chairman Lawrence T. Babbio Jr. "We will focus resources on states where we have greater critical mass in terms of operations support and clustered markets," he said.=20 "Verizon and CenturyTel worked together to reach an agreement that provides for the fair and equitable treatment of the affect- ed Verizon employees in Alabama and Missouri." For CenturyTel, the deal fits with its strategy of becoming the "leading pure-play rural local exchange carrier." In rebuffing ALLTEL Corp.'s takeover bid earlier this year, CenturyTel offi- cials said the company planned to expand its rural wireline operations and sell its wireless business (TR, Aug. 22 and Aug. 27). The proposed transaction with Verizon requires approval by the Alabama and Missouri public service commissions, the FCC, and the Department of Justice, the companies said. They hope to complete the transaction during the second half of next year. -- Ryan Oremland, roremland@tr.com ***************************************************************** VERIZON SEEKS END TO UNBUNDLED=20 LOCAL SWITCHING The FCC should eliminate, "or at a minimum significantly limit," incumbent local exchange carriers' obligation to provide local switching to competitors as an unbundled network element (UNE), Verizon Communications, Inc., told the FCC late Friday, Oct. 19. In response to a federal appellate court's remand of an earlier FCC order that listed the UNEs incumbent telcos must provide competitors, the Commission is currently considering which network elements it is "necessary" for a competitor to have access to. It is also considering whether failure to provide access to a given UNE would "impair" a competitor's ability to provide service. The U.S. Court of Appeals in Washington had remanded the FCC's previous UNE order in Common Carrier docket 96-98 because it failed to consider the "necessary" and "impair" standards laid out section 251(d)(2) of the Telecommunications Act of 1996. In an ex parte letter filed late Friday, Oct. 19, Verizon told the FCC that "the deployment and use of competitive local switch- ing is a success story," and that therefore unbundled provision of local switching is not necessary. It also argued that the availability of unbundled local switching at prices based on the TELRIC (total-element long-run incremental cost) methodology "undermines investment in competing facilities." -- Lynn Stanton, lstanton@tr.com ***************************************************************** CLEARER VISION ON BROADBAND POLICY REQUIRED, 3COM EXECUTIVE SAYS A significant problem with the slow deployment of broadband services is a lack of clear policy vision on the issue, as well as a commonly shared definition of "broadband" itself, said Eric Benhamou, chairman of 3Com Corp. and Palm, Inc., on Monday in a talk before the New America Foundation. "Our expectations have been significantly disappointed," he said. For some, the definition of broadband is 256 kilobits per second, while others think an ISDN (integrated services digital network) line is broadband, Mr. Benhamou said. "We have set our sights fairly low. . .in trying to use existing architectures like [copper wires or coaxial cable]. It's not how you would build it from scratch," he said. But while the Telecommunications Act of 1996 failed to create competition in the local market and to spur CLEC (competitive local exchange carrier) broadband deployment, the Act did bring more options for broadband services from other sources such as wireless, cable TV, and even incumbent local exchange carriers, he said. Mr. Benhamou said the information technology industry has lacked a "powerful, inspiring vision" for broadband. IT executives need to get together and create a strong vision, such as, "Delivery of 100 megabits per second to 100 million households by the end of the decade," he said. That focus on a common goal would create a technology-neutral policy transformation, he said, and advances in technology and innovation would make that goal possible. He also urged against government favoritism in promoting the availability of broadband. "There should be no policy for the promotion of any technology [for example, DSL (digital subscriber line) or cable modem services]. It's bad when government picks the technology." -- Ed Rovetto, erovetto@tr.com ***************************************************************** TELECOM EARNINGS ROUNDUP Brightpoint Inc., an Indianapolis-based mobile phone distributor, disclosed that revenues for the third quarter of this year are expected to total $499 million -- below the guidance previously supplied by management. Brightpoint expects to report third quarter losses in the range of $0.12 to $0.14 per share. Helping to drive the losses were especially difficult conditions in Brazil and Venezuela, the company said. Brightpoint is due to report official third quarter results on Nov. 1. =20 Network Plus Corp. reported third quarter revenues of $76.2 million, up 23% from the $62.1 million of revenues generated in the same quarter last year. Net loss for the most recent quarter widened to $28.7 million, from a loss of $20.7 million last year.=20 Network Plus, a competitive local exchange provider, noted that it broke into positive EBITDA (earnings before interest, taxes, depreciation and amortization) territory during the third quarter with a $104,096 EBITDA profit, compared to a $4.9 million EBITDA loss in the year-ago quarter.=20 Cogeco Cable Ltd., based in Montreal, generated $69.7 million in revenues for its fiscal fourth quarter ended Aug. 31, up 12.7% from the $61.8 million in revenues booked in the year-ago quar- ter. Net income in the most recent quarter totaled $2.1 million, versus $410,000 last year. For the full fiscal year 2001, Cogeco reported revenues of $277.7 million and net income of $3.6 million, compared to $235 million of revenues and $7.3 million of net income last year. The company said it expects to achieve 9% revenue growth in fiscal 2002.=20 ANADIGICS, Inc. said that third quarter revenues sank to $16.3 million, from $51.0 million in the year-ago quarter. The compa- ny, which makes radio frequency integrated circuits for broadband and wireless communications, posted a $22.3 million net loss in the most recent quarter, compared to a $7.0 million profit in the same quarter last year. ANADIGICS said it expects to generate up to $18.5 million in revenues during the fourth quarter, and forecasts a return to profitability during the second half of 2002. =20 360networks Inc., the Vancouver fiber optic network services provider in bankruptcy proceedings, announced that revenues for the first half of 2001 fell to $17 million, from $234 million in the comparable period last year. "The decreases are due to the renegotiation of a number of dark fiber contracts," the company said, adding that it took an asset impairment charge of $4.4 billion to reflect the downturn in telecom and data communica- tions markets. EBITDA loss for the first six months of 2001 was $429 million, versus positive EBITDA of $51 million for the same period last year. =20 ***************************************************************** NEWS IN BRIEF=20 Eagle Broadband has named Manny M. Carter president and chief operating officer. He was president and chief executive officer of Mobile Oil Caribe. H. Dean Cubley will remain Eagle's chair- man and CEO. The company also promoted Roger Ihde to VP-adminis- tration and strategic planning, and James Futer to executive VP and director-international activities. Eagle, based in League City, Texas, is a wireline and wireless broadband provider....=20 Jose A. Segrera has been named chief financial officer of Terremark Worldwide, Inc. Before joining the company in Aug. 2000, he was with First Com (now AT&T Latin America). Terremark is an Internet data company based in Miami.... At Westell Technologies, Inc., Kurt Nelson has been named region- al sales vice president (channel sales), and Lisa East has been named product line director-customer network equipment. Mr. Nelson has held sales and management posts at @LinkNetworks, Inc.; Ameritech; and the Ohio Bell Telephone Co. Ms. East was product line manager-DSL (digital subscriber line) products at 3- Com, Inc. Westell is a broadband access company based in Aurora, Ill.... The World Trade Organization's fourth Ministerial Conference, scheduled in Doha, Qatar from Nov. 9-13, will go ahead as sched- uled, according to WTO Director-General Mike Moore. "We are going ahead. I am confident with the planning and preparations here in Doha. If something seismic or catastrophic happens we will reconsider. But we're planning to come here to Doha in just over two weeks time," Mr. Moore said today in a press release. Commerce Secretary Donald L. Evans issued a statement today calling on the Senate to vote "as soon as possible" to reinstate the ban on Internet taxes for "at least two years." The three- year moratorium expired yesterday. The House last week approved legislation that would have extended the moratorium until Nov. 1, 2003, but the Senate failed to consider the bill before the ban expired (TR, Oct. 22). In his statement today, Mr. Evans said, "In a time of uncertainty, we must continue to reassure consum- ers, businesses, and markets that we continue to create the right environment for growth. Extending the moratorium will do that."=20 Motorola Inc. revealed plans to raise more than $1.2 billion through the sale of equity units consisting of senior notes plus contracts to buy Motorola common stock, as well as senior unse- cured notes. Proceeds are slated to reduce short-term debt and for other corporate purposes.=20 RCN Corp. said it closed its "dutch auction" debt buyback offers with agreements to purchase $593 million face amount of outstand- ing junk bonds for $161 million.=20 L-3 Communications completed a previously announced sale of $350 million of 4% senior subordinated convertible contingent debt securities due 2011. The securities are convertible into L-3 common stock at $107.62 per share. Proceeds from the offering may be used to fund acquisitions, the company said.=20 UbiquiTel Inc. completed the sale of the California spectrum of VIA Wireless to VoiceStream Wireless. Purchase price was $50 million. VIA Wireless was acquired in August by UbiquiTel, a Conshocken, Pa.-based provider of Sprint PCS digital wireless services.... Cable Design Technologies Corp. entered agreements to purchase a 79% stake in Prague-based Kabelovna Decin - Podmokly S.A., a manufacturer of communications and fiber optic cable. Terms were not disclosed, but Cable Design said the acquisition is expected to be accretive to earnings.... Brightpoint, Inc. completed its acquisitions of the common stock of Mega-Hertz SARL, and assets of Dirland S.A., both of France. Terms of the deals were not disclosed, but Brightpoint said that the acquired businesses generated about $46 million of revenues last year.... AOL Time Warner Inc. announced an agreement to distribute its CETV channel to cable television subscribers in the southern region of the People's Republic of China. The agreement was hailed by AOL as the first instance in which a foreign TV insti- tution has been permitted cable TV carriages rights in mainland China. CETV is a 24-hour Mandarin language information and entertainment channel. As part of the deal, AOL Time Warner will carry a 24-hour channel produced by China Central Television, the country's national television network.... Viasystems Group, a supplier of electronic manufacturing services to the telecom sector, among others, said its shareholders approved a transaction enabling the firm to issue ten million share of common stock to Hicks, Muse, Tate & Furst Inc. The stock would be issued to Hicks Muse upon exercise of warrants associated with a $100 million note that Hicks Muse placed with Viasystems in July.... Telex Communications, Inc. extended the expiration date of its subordinated note exchange offers to Oct. 26. The extension was announced as Telex continues to seek financing for its proposed debt restructuring plan, of which the exchange offers are a part.... McLeodUSA Inc. said it deferred payment of a quarterly stock dividend on its outstanding Series A preferred stock. The dividend historically has been paid in shares of McLeodUSA Class A common stock. However, since the market price of the common stock has declined substantially in recent months, McLeodUSA said it deferred the payment rather than issue more than seven million shares of new common stock to cover the payment.... Startec Global Communications Corp. shareholders approved a measure to increase the company's authorized common stock to 300 million shares. The increase was sought by management to further a "preliminary and tentative agreement" with Startec bondholders to restructure the firm's $160 million of outstanding senior notes. Based in Potomac, Md., Startec is a facilities-based provider of Internet Protocol telecom services.... IntelliSpace said it that it secured an additional $10 million in venture financing through funders including Halpern Denny & Co., bringing its fund-raising total to $110 million since inception.=20 Based in New York, IntelliSpace is an Ethernet IP broadband services provider.... =20 Ikanos Communications, Inc. announced that it raised an addition- al $5.1 million of venture financing from funders including Intel Capital and VentureTech LLC. Ikanos, based in Fremont, Calif., develops next-generation broadband semiconductors.=20 ******************************************************** TR DAILY Copyright 2001 Telecommunications Reports International, Inc., (ISSN 1082-9350) is transmitted weekdays, except for holidays. Visit us on the World Wide Web at http://www.tr.com.=20 Published by the Business & Finance Group of CCH INCORPORATED. Editor: John Curran Associate Editor: Tom Leithauser Associate Editor: Ryan Oremland Associate Editor: Ed Rovetto Publisher: Stephen P. Munro 1333 H Street, NW, 1st Floor-East Tower, Washington, DC 20005 Editorial Information: Telephone: (202) 312-6060 Fax: (202) 312-6111 Email: jcurran@tr.com tleithauser@tr.com Customer Service: Telephone: (202) 312-6050 (877) 874-8737 Fax: (202) 312-6116 Email: customerservice@tr.com Federal copyright law prohibits duplication or reproduction in any form, including electronic, without permission of the publisher.=1A
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