Telecom and Communication Equipment Companies

Brokerage	Recommendation	Sentiment
Morgan Stanley
Lehman Brothers
Deutsche Securities

ADC Telecom (ADCT) Minnetonka, MN CEO Robert E. Switz http://www.adc.com/

· Focus on broadband infrastructure solutions

· Global supplier of fiber optics, network equipment, software and integration services for broadband, multi-service networks

· Provides hardware and software systems and integrated solutions that enable customers to build and upgrade communications networks – for high speed telecom networks

· Broadband, multi-service networks that deliver Internet/data, video and voice communications over telephone, cable TV, Internet, broadcast, wireless and enterprise networks

· Segments Include: Wireline Systems, Wireless, Connectivity Solutions, Software Systems and Systems Integration

ADC Acquisitions:

· Bought PairGain for $1.51B – 2000

· DSL Network Solutions

· Bought Sweden’s Altitun for its fiber components – makes lasers for telecom - $960.5M deal - 2000

· Bought IBSEN of Denmark – makers of optical components

· Acquired Broadband Access Systems for $2.25B – internet access equipment for ISP’s to deliver DSL internet and voice abilities within the “last mile” to the location - 2000

· Acquired CommTech for $185.5M – develops and supports software for communication service providers – February 2001

· Acquired Krone – Supplier of copper and fiber connectivity solutions and cabling products – March 2004

· Krone had $316M in sales in 2003

ADC General Info:

· Big in DSL, brings DSL to the customer through the “last mile”

· Products include:

· Fiber and copper connectivity components for wireline, wireless, broadcast, enterprise, and cable networks

· Digital cross connects, fiber termination equipment, small-form-factor connectors

· Fiber and copper management systems and remote test and monitoring products, RF Transport Solutions

· In the S&P500 and Nasdaq-100

· 2003 Group Breakdown:

· 63% of sales for Broadband Infrastructure and Access (Broadband connectivity systems, Wireless transport and coverage optimization systems, IP cable systems, DSL access Systems

· 37% of sales from Integrated Solutions (Systems Integration Operations Support systems software)

· 49% of sales from Baby Bells and other local phone service

· 50% of sales from broadband connectivity products – gear for high speed networks

· International sales represent 25%-30% of total revenue

· CEO succession

· CEO Richard R. Roseitt resigned August 2003 - Robert E. Switz former CFO in charge

· Main competitors – ADTRAN, Avaya, Cisco, Corning, Lucent, Motorola, Telect, Agielent, Bechtel

Brokerage	Recommendation	Sentiment
JP Morgan
Merrill Lynch
CSFB

Alcatel (ALA) Paris, France CEO Serge Tchuruk www.alcatel.com

· European telecom equipment maker for IP based and wireless broadband networks

· Network switches, routers, base stations, and software for GSM networks

· Europe’s largest fixed line telecom equipment company – World’s 6^th largest

Alcatel Acquisitions, Stakes, Etc:

· Owns 9.7% of Thales SA – French defense contractor

o Looking sell its stake in 2005

· Operated a tracking stock for its optical components business (Optronics)– accounted for less than 2% of sales in 1^st half of 2000

o First tracking stock by a European company

o Called Alcatel Optronics (ALAO)

o Delisted its tracking stock for their Optronics division and putting it up for sale

· Contract with 360 Networks for $1.1B – 13,600 mile underwater cable and fiber network connecting the US, Canada, and Japan

o To help finance will put $1B in 360 Network’s convertible preferred stock

o 360 Networks now in bankruptcy

· Supplying China Telecom with more than 50% of their equipment for DSL and high speed internet service

· Made an offer of $23.5B for Lucent – didn’t go through

· Acquired Telera Corp in 2002

· With Fijitsu – Evolium – Equipment for 3G networks

· Sold its microelectric chip unit to STMicroelectrics

· Has a 22% stake in Nexans – cable producer

· Acquiring Avanex’s optical components division and also taking a 28% stake in the company

· Sold its SAFT Battery Activities to Doughty Hansen for $452.2M - October 2003

· Merging its optical fiber business with Draka Holdings – will have 20% market share worldwide (behind Corning) – February 2004

· Acquired Spatial Wireless for $210M – US mobile phone service provider in Texas – September 2004

· Acquired Edial for $27M – Makes conference calling software – September 2004

· Shanghai Bell – Alcatel’s joint venture in China which began in 1980 but took control of in 2002 – Unit represents 10% of Alcatel’s work force

· Sold its 15% stake in Nexan’s – Europe’s biggest cable company –March 2005 (Nexan was spun-off from Alcatel June 2001)

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Alcatel General Info:

· Changed name from Alcatel Alsthom to Alcatel in 1998

· Three business groups – Fixed Communications, Mobile Communications, Private Communications

o 2003

o Fixed Mobile – 44% of revenue

o Mobile Communication - 28% of revenue

o Private Communication - 28% of revenue

· Geographic breakdown:

o 2003

o Western Europe 42%, Other Europe 8%, US 15%, Asia 18%, Rest of World 16%

· 2001 Stats:

o Has a 42% global market share for DSL equipment

o Next closest is Siemens with 13% market share

o 32% markets share for DSLAM’s (DSL multiplexer’s – components that go in Bell’s central offices) – October 2003 – No. 2 is Huawei with 18%

o 35% market share for DLC’s (Digital Loop Carriers)

o Has a 21% market share for multi-service switches – data switches

· 2003 Stats:

o World’s largest digital line installed base with 18% market share

o No.1 in optical networking with worldwide market share of 15% and No.2 in multi-service wide area networks with roughly 22% market share

o Broadband access worldwide cumulative market share - 38%

o GSM and GPRS market share – 20%

· Satellite Business

o Launched eight satellites in 2002

o Looking to sell its civil satellite business to Thales in exchange for 305 of the company

· June 30, 2002 - $4.69B in cash

· Feels the effects of currency exchange rate fluctuations with the Euro

· TCL of China will produce their mobile phones – May 2004

o May eventually have TCL manufacture all their cell equipment

o Alcatel has a 55% stake in TCL

· 1Q2004 – First quarterly profit in three years

· Alcatel Ventures – Company’s venture firm

· SBC announced that they will use Alcatel gear for their Fiber and digital initiative to connect homes to an all digital network by 2008 – October 2004

· 2005:

o Focusing on Asia, Africa, and Latin America along with Network systems for Voice, TV, etc.

o Looking for gross margins of 38%

o “If you focused too much on gross margins, you lose flexibility” – CEO Serge Tchuruk – February 2005

· Software from Microsoft

o Starting in 2005 Alcatel will use Microsoft’s software for video phone connections, previously used their own software

o Alcatel will push Microsoft software on other companies that use Alactel’s equipment

· Merged With Lucent in a $13.4B deal, company will be based in Paris

Allegiance Telecom (ALGX) Dallas, TX CEO Royce Holland www.algx.com

· CLEC (Competitive Local Exchange Carrier)

· Offers Local, Long Distance, Toll free, Calling cards, Internet, Data

· Services usually 20% cheaper than the regional Bells (incumbent)

· In 1999 had a target of 46% annual growth

· Has $1.2B in debt

· Successfully renegotiated some of its debt with GE and Morgan Stanley

· Has to reduce debt to $660M by the end of April 2003 and cut losses in free cash flow from operations – Unable to pull it off

· June 2003 – Chapter 11

· Acquired by XO Communication for $310M – February 2004

Brokerage	Recommendation	Sentiment
Merrill Lynch
JP Morgan
Goldman Sachs

Alltel (AT) Little Rock, AR CEO Joe Ford http://www.alltel.com/

· CLEC, wireless and long distance carrier operating in 26 states with more than 12M customers

· US 6^th largest wireless company with roughly 10M subscribers

· US 6^th largest local telephone company with 3.1M subscribers

· With Western Wireless merger – Will be the second largest non-Bell after Sprint

Alltel Acquisitions:

· Acquired Verizon’s local telephone operations in Kentucky for $1.93B – 589,000 fixed line customers – August 2002

· Acquired Wireless operations of CenturyTel for $1.59B - Acquired 762,000 subscribers in Arkansas, Louisianan, Michigan, Mississippi, Texas, and Wisconsin – August 2002

· Acquiring 360 communications (XO)

· 360 communication

· Chicago based, former cellular business of Sprint

· Can route its wireless traffic over new fiber optic network that Alltel is building

• Acquiring 200,000 subscribers from Cingular to satisfy Cingular’s acquisition of AT&T Wireless - 2004
• Acquiring Western Wireless for $4.3B and assuming $2B in debt – roughly $40 a share – January 2005

· Western Wireless will add roughly 1.4M subscribers with Alltel’s total being around 10M

· Will give Alltel subscribers in Austria and Ireland and service in 26 states in the US – total of roughly 1.6M subscribers overseas

· Alltel will now receive more revenue from roaming charges from Cingular’s and T. Mobiles GSM users

• Acquired Midwest Wireless for $1.08B – 2005

· Midwest wireless had 400,000 subscribers in small markets in the upper mid-west

Alltel General Info:

· Owns subsidiaries that provide wireless and wireline local, long-distance, network access and Internet services, wide-area paging service and information processing management services, and advanced application software

· Focus on the Southeast and Midwest with CDMA tech

· Wireless operates in 88 MSA’s (Metropolitan Statistical Area)

· 60% of revenue is from wireless operations – 2004

· Alltel Publishing

· Publishes 338 telephone directories in 35 states

· Service in 34 states and roaming agreements with Verizon

America Movil – (AMX)

See Telebras below

Ameritech (AIT) (SBC) Chicago, IL www.ameritech.com

Acquired by SBC

· Investing $1-3B in central or eastern European market

· Largest US investor in Europe’s phone market

Brokerage	Recommendation	Sentiment
CSFB
Merrill Lynch
JP Morgan

Amphenol Corporation (APH) Wallingford, CT CEO Martin H. Loeffler http://www.amphenol.com

· Interconnect products:

· Designs, manufactures, and markets electronic, electrical, and fiber optic connectors, coaxial and flat ribbon cable and interconnect systems

· Input/Output connectors for PC’s

Amphenol Markets and Segments:

· Wireless/telecom/datacom market

· Interconnect products for handset market and mobile network, and Internet equipment market

· Had components in more than half of all handsets in 2003

· 36% of sales in 2003

· Industrial/Automotive markets

· Interconnect components for auto safety, communication and entertainment systems including airbags and seat belts

· 26% of sales in 2003

· Military/Aerospace markets

· Interconnect products for aerospace/harsh environment applications for military, aerospace,

· Products used on Mars Rovers, Spirit and Opportunity, of 2004

· 25% of sales in 2003

· Broadband Market

· Times Fiber Unit – Worlds 2^nd largest producer of coaxial cable

· 13% of sales in 2003

Amphenol General Info:

· 60% of sales in the “Infocom” sector – communication, voice and data

· Radio frequency, fiber optic, and filter technology for wireless infrastructure

· 57% of sales in North America, 27% in Europe, and 16% in Asia and other countries - 2002

· 2003 – 55% of sales outside of the US

Brokerage	Recommendation	Sentiment
Lehman Brothers
Wachovia
B of A Securities

Anadigics (ANAD) Warren, NJ CEO Bami Bastani http://www.anadigics.com/

· Components for wireless phones, power amplifiers, wireless phones

· Designs, develops and manufactures radio frequency/microwave integrated circuit solutions (RFIC) for the communications industry, enabling manufacturers to enhance overall system performance and reduce manufacturing cost and time to market

· Wireless Solutions

· RFIC circuits

· Broadband Solutions

· RF products for cable TV and Wireless Systems

Anadigics General Info:

· Manufactures products targeted at the wireless communications, cable television/cable modem and fiber optics

· Manufactures handset power amplifiers – help reduce consumption of battery life in phone

· Makes broadband amplifiers for CATV, digital set-top boxes, Wireless Lan (802.11) and Man (802.16)

· Focuses on applications for cable television systems, cable modems and fiber optic communications systems

· Manufactures gallium arsenide integrated circuits (GaAs Ics)

· 2003 –CDMA market share of 25%

· Biggest customer is Ericsson – roughly 50% of their revenue

Analog Devices (ADI) Norwood, MA CEO Jerald Fishman www.analog.com

· Makes analog chips and digital signal processors used in wireless devices

· See Chips and Semiconductor page

Brokerage	Recommendation	Sentiment
Morgan Stanley
Bear Stearns
JP Morgan

AT&T (T) New York, NY CEO David Dorman www.att.com

· Broke itself up on purpose in 1995 (LU and NCR)

· Developed the UNIX operating system at Bell Labs

· Was once the largest cable company in the US with Comcast deal

· Was the telephone monopoly until 1984 when the government broke it up and created the Baby Bells

o Had one million employees in 1984

o Broke into seven Baby Bells – US West, Bell South, Bell Atlantic, NYNEX, Pacific Telesis, Southwestern Bell Communications, Ameritech

AT&T Long Distance and Local Service:

· Local Service:

o In competition with the Baby Bells, GTE and local phone carriers for local service

o Subscribers:

§ Has 2M plus local customer in eight states

§ Goal to obtain a total of 6M to 8M in 2003 through 2004

o Has local service in New York (750,000 customers) and Texas with 330,000 customers

o June 2004 – Exiting local residential service in seven states

o July 2004 – will no longer compete in the residential market and focus just on business customers

· Long Distance:

o No.1 in long distance with 60M customers

o Dominate carrier of Trans-Atlantic and the largest carrier of cross-border traffic in Europe

o Losing revenue at its core long distance business

o In 1997 long distance was about 80% of revenue – by the end of 2002 only 35%

o Long distance operations has $8B in cash flow

o “To make up for losses in long distance, our other business would have to grow twice as fast as they are now” – C. Michael Armstrong – 2002

· Residential Customers – 22.7M – May 2005

AT&T Recent History:

AT&T Cable, Cable Telephony and the Fallout:

· AT&T had an initiative to enter the US cable TV market in the new millennium and cable would guide the company into the future

· By 2002, the vision was crushed by several factors but big contributors were debt and the loss of confidence in C. Michael Armstrong’s vision which he firmly stood by

· AT&T got out of the cable market in 2003

· Short version of how it came about and C. Michael Armstrong:

· AT&T spent $100B buying cable TV operators – Had a vision to use cable lines for voice phone lines (VIOP)

· Bought rival Tellport Communications Incorporated TCI for $37.3B (TCGI) – a 37% premium and assumed $11B in debt

· Tellport offers local services to business in more than 60 US cities

· Paid $5.5B for @home internet services as part of the deal

· Going to convert the cable company’s one-way video lines into a 2-way highway capable of delivering voice, data, and video services over TCI’s coaxial-cable network

· Spending $4B over 4yrs to convert it, working with CSCO

· Will be able to use it for local telephone for businesses

· Acquired Media One for $54B

· Made AT&T the largest cable company in the US

· Had to sell some its cable lines and give Comcast 2M Media One subscribers to them– would have had 42% of the US ‘s cable viewers – government regulators says 30% is max

· Built a 992 mile fiber network in Argentina, completed 1Q2001

· Broadband users:

· 2001 - AT&T broadband has 16.1M subscribers (TWX has 12.8M, Comcast 8.4M)

· Cable telephone users:

· Had upgraded 65% of their cable lines in its cable footprint of 26M homes to carry voice phone calls

· July 2000 – 122,000 cable telephone users – wants 500,000 by year end 2000

· July 2002 - Has signed up over 1.7M local telephone customers over cable lines – adding new ones at 60,000 a month

· Cable unit’s operating cash flow margin of 16% - the industry’s average was 35%

· The Visions breaks down: November 2002

· AT&T has to put the Cable unit up for sale

· Comcast won the bidding war

· The combined entity will have more than 22M customers and cover 44% of the US cable market

· The US will now have only 5 giant cable companies serving 80% of the nation

· AT&T shareholders will own 56% of the company

· Will be called AT&T Comcast

· Brain Roberts of Comcast becomes the CEO

· C. Michael Armstrong becomes chairman of Comcast – Stepped down May 2004 though remains on the board

· What happened?

· AT&T ran out of money and was forced to break up its Cable Assets

· With all the acquisitions, it left AT&T with $65B in debt without enough cash flow to help pay this debt down and pay for operations

· Lawrence Bossidy’s book “Execution: The Disciple of Getting Things Done Right” sheds a little light from a CEO’s perceptive on what went wrong

· At this time WorldCom and Qwest continued to put major pressure on AT&T and their numbers making it seem AT&T was limping along compared to the two. AT&T had to streamline operations to stay competitive – Two to Three years later – Both found to be cooking their books, especially WorldCom which was engaged in massive fraud

· “I never got beat up for the cable strategy, but for breaking up the company…I would have never had faced that decision had the WorldCom fraud not taken place.” - C. Michael Armstrong – 2004

AT&T’s Other Failed Concepts:

AT&T Concert:

· Global phone venture with British Telecom for multi-national corporations

· Building state of the art phone network that uses internet technology to carry phone and data traffic generated around the world

· October 2001 – dissolved Concert, had a $5.3B charge in 3Q2001, has to buy all outstanding shares of AT&T Canada – Currently owns 22% - or find a buyer

AT&T and Excite@Home:

· Owned 23% of Excite At Home (a 78% voting stake though)

· Paying @Home’s founding partners (Comcast and Cox Communications) $1.6B in cash or $48 per share of @Home’s stock price – thus in current market conditions T has to pay around $3B for shares that are worth about $500M - 2000

· Excite@Home went bankrupt in 2001

“Project Grand Slam” – Restructured the company into four separate business – due to its cable acquisitions, AT&T had to spin -off all other its groups – called a “reverse spin” - 2001

· AT&T Broadband – video, cable, pay-TV, high speed internet access, video on demand, interest in Excite@Home H

· Was going to be a tracing stock in the summer of 2001

· Unit acquired by Comcast

· AT&T Wireless – mobile phone calling plan and data services

· Spun-off from AT&T May 2000

· Spun off its 85% ownership

· AT&T Business Services – will be the parent company and keep the “T” ticker symbol

· Long Distance, Internet Hosting, and Data to corporate customers

· Largest phone service provider to corporations

· Has 6M customers

· AT&T Consumer – Residential Long Distance, DSL and Dial up service

Has 60M subscribers

AT&T Current Structure::

· AT&T Business Services

· Global Communication services from small all the way to multinational corporations and government agencies

· Data, toll free, local voice, wholesale transport services, and long distance services

· 72% of revenue in 2003

· AT&T Consumer Services

· Communication service to residential customers

· 27% of revenue in 2003

AT&T Stakes and Acquisitions:

· Bought NCR in 1991 for $7.4B

· Was later spun off in 1996 along with Lucent

· Acquired McCaw Cellular in 1994 – Became AT&T Wireless

· Owned a 25.5% stake in Time Warner’s TWX Entertainment

· Having to sell their 25.5% stake in TWE or spin off Liberty Media

· Spun off Liberty media

· 30% stake in Cablevision (From Media One), Owns 75M shares of Vodafone (From Media One)

· Has a 5% stake in IDT corp., stakes in Comcast, Adelphia Communications, Charter Communications

· Liberty Media

· Once a tracking stock of AT&T – Now completely spun off in August 2001

· Has a 12% stake in Far EastOne Telecom

· Sold their 10% stake in Japan Telecom to Vodafone for $1.35B (paid $612M) and some cable TV systems to Media Com for $2.2B (around 840,000 cable subscribers in 4 states-all outside metropolitan areas) – April 2001

· Sales will help lower debt to $42B from $64B

· Proceeds were split between ATT and AT&T Wireless

· Acquired NorthPoint Communications for $135M

· Focus on DSL - NorthPoint’s equipment is worth $300M alone

· Has a minority stake in Net2Phone (Net2Phone claims to have a 40% market share in internet long distance)

· Acquired Velocita for $37M – networks of underground ducts, fiber-optic lines and other equipment

· Has a 49% stake in Alestra of Mexico

· AT&T Wireless - Initially a tracking stock then spun rest off July 2001- split off as a separate entity

· See AT&T Wireless Below

· AT&T Latin America – In chapter 11, April 2002 – Telefonos de Mexico buying the unit – October 2003

· Acquired Bell South in an all stock deal for $67B – Announced March 2006

AT&T General Info:

· In 1988 completed the world’s first transoceanic fiber optic cable called TAT-8.

· Runs from New Jersey to Britain.

· Only two fibers but can carry 40,000 phone conversations at once.

· Revenue Breakdown:

· 2000: Business – 40%, Consumer – 35%, Wireless – 12%, Broadband – 8%, Local – 5%

· 2003: Business – 72%, Consumer 27%

· 2004: Business – 74%, Consumer 26%

· Interactive TV Initiative:

· Using Liberate Technologies software for their interactive TV set-top boxes instead of MSFT’s – beta testing it

· MSFT invested $15B in AT&T and was awarded a non-exclusive agreement to supply around 10M set-top boxes for AT&T

· MSFT had to push back the release date till the end of 2000 for delivery – T went with Liberate

· Liberate Tech’s software runs on a Motorola PCT-5000 set top box

· Provides enhanced programming, email, chat functions

· Dave Fellows – Chief Technical Officer for cable unit – “We don’t have any plans to deploy interactive TV. We’re just testing it. There are still issues with everything that we’ve tried”

· Debt Load:

· Had a $62B debt load – As of Jan 2001 only $48B

· October 2001 – Has $39.5B in debt

· November 2001 – $36.5B

· After spin-offs debt will be in the $14B-16B range

· January 2003 - $22.6B

· End of 2003 - $14B

· April 2004 - $11.9B

· Most debt due in 2009

· CEO Succession:

· Robert E. Allen succeeded by John R. Walter January 1998

· The two didn’t get along and John Walter resigned July 1997

· Reduced their dividend from $.88 cents to $.15 cents in December 2000 – First time they ever reduced their dividend

· CEO David Dorman replaced C. Michael Armstrong after Comcast deal was complete - 2002

· Fighting AT&T’s declining revenue with discounts and match deals that MCI, Sprint and the RBOC’s hand out

· “AT&T does not intend to lose on price!” - CEO David Dorman

· AT&T business unit – brought in ¾ of AT&T’s revenues in 2003

· From 2000 to February 2004, AT&T’s Business Unit servicing revenue has dropped more than 12% to $24.99B

· Strategy to not to lose on price in 2004 – thus may hurt margins

· Will go back into wireless after the sale of AT&T Wireless (AWE) to Cingular

· Retained AT&T wireless name

· May resell other companies wireless service at first and plans to mold it after Virgin Mobil’s

· Will start be reselling Sprint Services and offering pre-paid phone card

· June 2004 – Exiting residential local service

· Stemmed from feud with FCC and dealing with the Bells and renting their lines

· Consumer Operations valued at $885M

· Will save $700M in advertising and marketing costs

· 2004 – expecting a 14% decline in revenue with 7% of that from business services

· Expected to pull in $4.5B in cash

· Exploring the idea of writing off $43.8B in assets – August 2004

· With the exit of the consumer market – most likely will be putting itself up for sale

· “We’re not ready to call a bottom yet in the market” – CEO David Dorman – January 2005

· 2005 – Pure focus on mid to large business accounts

· Being Acquired by SBC for $16B – Announced February 2005 – Being acquired at no premium

· First and only time a Bell with buy Ma Bell

· AT&T almost merged with SBC in mid 1997 and then had talks with Bell South in 2003

· Hindsight:

· AT&T’s biggest mistake was getting out of local service in 1984 when CEO at the time, Charles Brown, split local and their wireless operations including wireless licenses

· “It’s unbelievable how AT&T made the wrong choices at every major turn” – James Katz – Rutgers University – Professor of Communications

· VoIP, which they basically created, was the last pin in the coffin

· Combination will receive 23% of revenue from residential landlines

· New TV capabilities with over 100 channel out in 2007

· Focus on TV content and cell phones

· Sees growth in DSL and Wireless

· WiMax – AT&T is testing WiMax in Georgia in the Fall of 2005 and plans to offer the service to business in 2006

· AT&T wrote off $11.4B in assets in 2004 relating to the exit from marketing local and local distance to consumers

· Fiber – Bringing Fiber only to the neighborhood equipment center then using copper line to bring them to individual houses

Brokerage	Recommendation	Sentiment
Goldman Sachs
Morgan Stanley
AG Edwards

AT&T Wireless (AWE) Richmond, WA CEO John Zeglis http://www.attws.com/

· Spun-off from AT&T May 2000 – raised $10.6B - $7B went to AWE for acquisitions

· Initially a tracking stock of AT&T wireless operations with AT&T controlling 85% of the company

o Spun-off April July 2001

AT&T Wireless Acquisitions and Stakes:

· NTT DoCoMo taking a 16% stake for $9.8B

· Will market I-Mode in the US

· To Make I-mode work in the US, AT&T is having to build its networks using faster wireless tech. to comply with the Universal Mobil Telecom System

· Nortel, Nokia, Ericsson will be building the new 3^rd generation system with Nortel supplying the core components of the network

· Acquired Telecorp for 42.4B

· AWE’s largest affiliate with 1M subscribers

· Covers area of 37M people in 16 states and Puerto Rico

· Sold its 23% stake in Far EastOne Telecom for $330M – October 2003

AT&T Wireless General Info:

· Subscribers:

· Dec. 1999 – over 12M subscribers – No.3 in the US

· 2000 - 15M

· 2001

· Summer of 2001 - 16.4M subscribers

· Expected 20% growth in subscribers for 2001

· 2002

· Feb. 2002 - 18M subscribers

· July 2002 - 19.9M

· 2003

· Expected to add 1.4M to 1.5M in 2003

· April 2003 – 21.1M

· Average revenue per subscriber - $58.70

· October 2003 – 21.9M

· 2004

· 1Q2004 – First net subscriber growth loss – Lost 367,000 subscribers

· Many claim poor service quality and AWE is “feeling the effects of number portability”

· 24M subscribers

· 2007 – 70.1 million

· Converting a majority of its network to GSM Standard

· M-Mode – Suite of browsing options, games, ring tones, and other options

· Developing “Edge” – produces faster data rates that will postpone their jump into 3G

· Expects to roll out end of 2003

· 3G – Delaying until the end of 2004 and will limit itself to 13 cities

· “Edge” – Focusing on “Edge” – Has speeds of 100kbps to 200 kbps – In competition with Verizon and EV-DO

· Deal with NTT – AWE has to offer 3G service in four cities by end of 2004 – if they don’t comply – NTT will receive $3.6B from AWE – AWE has till June 2004 to reveal their progress

· Wi-Fi Service – Called GoPort – Will be an extra cost to its current subscribers

· 2004 – expects revenue to fall by 7% to 10% in 2004

· Business Service Unit – provides AWE with more that 70% of their revenue – end of 2003

· Debt - $14.4B in debt – was $22.57B in 2002

· Has reported quarterly net losses for five of its past 10 public quarters – February 2004

· Up for Grabs – AWE is on the auction block – several suitors – AWE has till February 2004 to pick the best offer

· Being acquired by Cingular (SBC & Bell South) AT&T for $41B ($15 a share at the announcement) – February 2004

· Will become the largest US wireless operator with 46M subscribers and in 97 of the country’s top 100 markets

· Using UMTS technology for their early entry into 3G service

· Roughly 90% of total revenue is from service (subscription)

Bell Atlantic Corp (BEL) (VZ) New York, NY CEO Ivan G. Seidenburg http://www.bell-atl.com/

Now Called Verizon

· Virtual monopoly in the Northeast, local lines from Maine to Virginia and home to important corporate and political centers including NY, Boston, and Washington DC

· $22.7B merger with Nynex Corp.

· $55B stock swap with GTE

· Will have 1/3 of Nations local telephone lines with systems in 40 states

· Will gain a foothold in Texas, one of GTE’s most important states and home to SBC

· First to introduce caller ID in 1987 in New Jersey

· Merged with /GTE – New Name - Verizon (Latin from truth and horizon)

Brokerage	Recommendation	Sentiment
Bear Stearns
Morgan Stanley
UBS

BellSouth Corp (BLS) Atlanta, GA CEO Duane F. Ackerman www.bellsouth.com

· Offers local telephone service in nine southern states:

· Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee

· DSL Subscribers:

· 215,000 - 4thQ2000

· 803,000 - July 2002

· 1M - 4Q2002

· 1.3M - October 2003

· 1.6M - March 2004

· 1.9M – October 2004

· 2.3M - 1Q2005

· 2.5M – 2Q2005

· DSL sees seasonal fluctuations in summer when a majority of the Universities are out for summer and the students turn off their DSL lines

· Local land line customers:

· 24.1M - July 2003

· 23.9M - October 2003

· 21.6M – October 2004

· 21.2M – 1Q2005 (residential customers – roughly 11.6M of the 21.5M)

· Long Distance:

· 3.4M - October 2003

· 3.96M – January 2004

· 4.6M – March 2004

· 5.7M – October 2004

Bell South Acquisitions and Stakes:

· Cingular Wireless - Merged their wireless with SBC (SBC 60% - Bell S. 40%) – will be 2^nd largest wireless provider and serve 40 of the 50 US wireless markets reaching 190M people – will be in 19 of the top 20 markets

· Co-owner of EPLUS – Germany’s 3^rd largest wireless

· Sold its 9.42% stake in KPN for $1.06B

· Has a 2.9% stake in Qwest – was 10%

· Paying $25M for a 11% stake of Star Media – an Internet media company that caters to Spanish and Portuguese speakers

Bell South and Latin America:

· Latin America ventures represented 10% of overall revenue in 2001 and 8% of the company’s stock price

· In 11 countries in Latin America – Spent $3B to date – November 2003

· Brazil – BCP (1.8M subscribers) and BSE (950,000 subscribers) – Exited the Brazilian market in 2003

· Argentina - Movicom

· Wireless operation in Latin America – Will become a tracking stock

· Buys used cell phones in the US and then resells them in Latin America as a cheap alternative

· 3Q2003 – Revenue was $587M – was the fastest growing unit in the company

· Unit posted a combined $190M loss in 2000 and 2001 – net income of $108M in 2002

· “Connection centers” – wireless phone booths that look like US phone booths of old with an update Latin feel. – will have 3000 by end of 2004

· Selling Latin American operation to Telefonica for $5.8B (Price now at $4.35B) – February 2004

Bell South General Info:

· Two Segments:

· Communications Group

· Consumer – 12.5M customers

· Small business – 1.1M customers

· Large business – 14,000 customers

· Interconnect Services – Wholesale services to CLEC’s

· Domestic Wireless – Cingular Wireless

· See Cingular Wireless below

· Exited the pay-phone market

· Cingular Wireless – Pulled in roughly 40% of BellSouth total revenue in 3Q2004

· In 2005 – Wireless continues to be their fastest growing segment with Broadband being the second fastest

· Long Distance approved in Georgia and Louisiana

· Selling LD in North and South Carolina, Kentucky, Mississippi, and Alabama

· If OK’d in Tennessee and Florida, will offer long distance in all of its nine states

· Data service accounted for more than 40% of revenue growth in 3^rd quarter 2000

· Expected a 13%-15% growth in earnings per share for 2001

· Debt:

· As of January 2003 - $17.4B

· Wants to gain 5M long distance customers and 2M DSL subscribers in 2004 and to have each of their divisions to pull in $1B in revenues

· Has laid 4.8M miles of fiber and claims 90% of its customers are within 12,000 feet of the network

· At the end of 2004 – still debating whether it is worth it to roll out fiber on a larger scale

· Officially launched Satellite service with DirecTV – August 2004

· Losing local phone subscribers – has see a 3.6% reduction from 3Q2003 to 3Q2004

· Seeing continued fall in local and landline though they are seeing it more as a wireless substitution

· Fiber Initiative:

· Rolling out to new housing developments only to the curb – 1M customers have access to fiber at the end of November 2004

· Looking to increase coverage to 150,000 households a year

· Goal – plans to deliver fiber within 5000 of all households

· December 2004 – 46% of households within five miles of fiber

· WiMax – Using gear from Navini Networks for testing WiMax in Athens Georgia in 2005

Brokerage	Recommendation	Sentiment
Goldman Sachs
Merrill Lynch
Bear Stearns

BT Group - British Telecom (BTY) London CEO Ben Verwaayen http://www.bt.com/

· UK’s largest telecom provider

· Three Segments:

· BT Retail

· Caters to residential and business customers

· 29M lines – 9M of that are business lines

· Fixed lines represented 29% of revenue in 2003

· BT Wholesale

· Broadband Unit including ISDN, ATM and IP Networks

· BT Global Services

· Former called BT Ignite – renamed April 2003

· Managed services for multi-site companies worldwide

BT Acquisitions and Stakes:

· Spun-off mmO2 in 2001 – BT Group’s cell phone business

· Received $7B from WCOM for MCI Communications – making $2.7B on MCI’s original price of $4.3B

· Japan – Bought a 33% stake in Malaysian phone group Binatlang for 250M Pounds

· Concert – With AT&T

o Global phone venture with AT&T for multi-national corporations

o Partnership dissolved October 2001– See AT&T

· Has a 15% stake in Japan Telecom

· Sold its 26%stake in Cegetel for 2.6 B Pounds (net profit of 1.2B Pounds) to Vivendi– January 2003

· Acquiring InfoNet Services for $964M – November 2004

o InfoNet is focused on business telecom services with 3000 multinational customers mostly in Europe and Asia

· Bought the 74% of Albacom of Italy that it doesn’t already own for $156M – December 2004

BT General Info:

· Broadband – 936,000 DSL subscriber – May 2003

· 1.4M retail broadband customers – February 2005

· Expecting 5M total broadband subscribers by April 2005

· Hoping that by 2006 their broadband operations will become profitable

· CEO Succession

· CEO Ben Verwaayen replaced Sir Peter Bonfield

· On a three year efficiency plan which will end March of 2005

· Global Services – No real presence in the US in 2005 and plans to expand

· Seeing reduction in its core land line business in the UK in 2005

· The UK government is BT’s largest customer

· Upgrading the UK

· Using Cisco, Ciena, Lucent, Ericsson, Siemens, Fijitsu and Huawei equipment – Marconi was not mentioned and stock fell 38% on the news –April 2005

· By 2010, BT wants to discontinue the traditional landline gear and rely on VoIP and fiber for the UK

· “We’re not going to make acquisitions to change our strategy, we are going to make acquisitions to enhance our strategy” – CEO Ben Verwaayen – November 2004

· Entering the cell phone market again and will use Vodafone’s network

· Has 305,000 business and consumer subscribers at the end of September 2004

· BT Fusion – Formerly called Blue Phone

· New phone introduced in 2005 that allows wireless phones to switch to using a broadband connection inside of the home for better reception

· Phone made by Motorola

· Collaboration with Microsoft on providing TV over high sped phone lines and will use Microsoft Internet Protocol TV Software – Announced June 2005

· Expecting to launch commercially by the summer of 2006

Brokerage	Recommendation	Sentiment
Merrill Lynch
Lehman Brothers
Bear Stearns

Cable & Wireless PLC (CWP) London CEO Francesco Caio http://www.cwplc.com/

· Founded in 1872 to provide telegraph service to the British Empire

· In Hong Kong - Cable & Wireless HKT

· Focusing on servicing and providing telecom services to multinational and large corporations

· Offering Voice over IP with Nortel

· Building a $1.4B optical – fiber network in Japan over the next 5 years in 80 cities – Offer loops linking buildings in Osaka and Tokyo

· Bought Digital Island for $340M

· Purchased large parts of Exodus Communication for $575M

· “I regret buying so much of Exodus assets” – CEO Graham Wallace, December 2002

· “IP related products will be our most important source of revenue” CEO Graham Wallace – 2002

· Global Division – Network and Internet Services - Hosting

· Includes assets from Exodus Communication

· Draining cash – 2002

· Expects to generate cash flow by March 2004

· Most of US revenue was from hosting large corporations

· Regional Division – Phone companies in former British colonies – Mostly the Caribbean

· Considered the healthiest part of Cable & Wireless

· Old CEO Sir Graham Wallace

· Has one large fiber cable connecting Europe and North America

· Trimming down Global Division and withdrawing from US market and selling Continental Europe assets – Still burning through cash due to intense price competition and mass overcapacity

· “Overcapacity is here to stay because of declining price of the technology to feed fiber into the ground” – CEO Mr. Caio

· Us Operations in Chapter 11 – December 2003 – plans to sell the unit – In chapter 11 primarily to relinquish them from their property-lease contracts

· Acquiring a 55% stake in Monaco Telecom for $182M – June 2004

· Buying a the UK based broadband service from Bulldog for 18.6M pounds

· Looking to acquire in the Middle East and the Mediterranean

Brokerage	Recommendation	Sentiment
Smith Barney
Bear Stearns

China Mobile (Hong Kong) (CHL) www.chinamobilehk.com

· World’s largest wireless company

· Parent company is China Mobile Communications – they control 74% of China Mobil the rest is controlled by Unicom Group – Government backed

· In 13 Chinese provinces

· Provider of cellular telecommunications services in Guangdong, Zhejiang and Jiangsu provinces in Mainland China. Guangdong, Zhejiang and Jiangsu are among Mainland China's most economically developed provinces and were among the provinces in Mainland China with the largest number of cellular subscribers

· CMHK services an aggregate subscriber base of approximately 6.53 million, which accounted 94.5% of cellular subscribers in these provinces and 26.1% of all cellular subscribers in Mainland China. Offers cellular telecommunications services in each of Guangdong, Zhejiang and Jiangsu using TACS and GSM technologies.

· CMHK's cellular telephone networks reach all cities and counties and more than 95% of the major highways in all three provinces. CTHK offers a number of optional value-added services that include call forwarding, call waiting, and short message services

· Big Advantage – Chinese telecom market closed to foreign competition

· Footprint:

• China’s mobile phone market is now larger than the US’s – It’s the world’s largest
• In China – only 10% of the population has cell phones
• Subscribers:

· July 2001- 58.9M subscribers - China has a total of 120.6M wireless subscribers

· March 2003 – 70% of China’s 200M mobile phone subscribers

· March 2005 – 204M subscribers

· April 2005 – 213.87M

· Launching WCDMA – Wideband CDMA – late 2003 – (Not QCOM’s Brand) – Nokia makes WCDMA network equipment

· TD-SCDMA – Won’t be ready for commercial use till the 2^nd half of 2004

· VOIP – was 40% of all its long distance traffic in 2003

· Buying 10 cell networks in various Chinese province from its parent, China Mobile Communications, for $3.65M – May 2004

· Acquired a 19.9% stake in Phoenix Satellite from News Corp (Star Group) – Star Group will retain a 17.6% stake in Phoenix – Chinese News Programmer based in Hong Kong. News Corp sees this as a benefit to get into the Chinese market with Chin Mobile help circumnavigating the Chinese red tape

China Network Communication (China Netcom Group) (CN) Hong Kong

· Second largest landline company in China behind China Telecommunications

· Data services arm Dominate in Northern China

· In 10 provinces in China

· Acquired Asia Global Crossing for $270M (when deal was completed the price dwindled to $80M- at one point it was worth $1.2B) with New Bridge Capital and Softbank– Asia Global Crossing has $750M in debt and needs to be restructured

o Taking all their contracts and operating units

o Connects 200 cities across Asia

o Doesn’t get Pacific Crossing LTD. – underwater cable from West Coast

o Final price paid for the fiber network was $80M

· 2003 - had losses of $21.3M (176M Yuan)

· Acquiring PCCW – Hong Kong’s biggest telecom – June 2004

· Looking to launch as IPO in November 2004

· Foreign stake holders include Goldman Sachs, News Corp, and MSD Capital (Michael Dell’s venture firm)

· Taking a 20% stake for $1B in Hong Kong PCCW (Hong Kong’s Biggest Landline Co.) – Represents the largest investment in Hong Kong by a Chinese Company - January 2005

• Venture called Zhang Chuujiang and will invest in real-estate, broadband and wireless communication and technology

· China Netcom and China Telcom looking to buy one the mobile assets of assets of China Unicom – February 2005

· Formed a $1B joint venture with PCCW

Brokerage	Recommendation	Sentiment
Bear Stearns

China Telecom (CHA)

o China’ s fixed line telecom company

o Provinces include – Jiangsu, Zhejiang, Guangdong, and the City of Shanghai – Dominant in the South

o China Telcom – in 21 provinces – September 2003

o Plans to buy networks from its parent firm in other provinces

o October 2003 – buying fixed line networks in Anhui, Fujian, Jiangxi, and Sichuan provinces as well in the cities of Chongqing, Guangxi, and Zhuang

o Will give them a total of 110M customers

o IPO November 14, 2002

o Xiaolingtong – China Telecom’s budget wireless service

o China Netcom and China Telcom looking to buy one the mobile assets of assets of China Unicom – February 2005

o Opening Internet cafes throughout China in 2005

Brokerage	Recommendation	Sentiment
Goldman Sachs
CSFB
Merrill Lynch

China Unicom Limited (CHU) Beijing, China CEO Xian Zu Yang www.chinaunicom.com.hk/

· 2^nd largest Chinese Telecom operator

· Parent company is China United Telecommunications

· Has 4.2M mobile subscribers

· 72.5% of their revenue is from wireless

· Agreed to launch CDMA in April of 2002

o Now might not be rolling it out as fast it originally stated

· Pressing CDMA2000 (Qualcomm) instead of WCDMA

· Acquired nine provincial telecom networks form their parent for $386.6M – November 2003

· Now has a total of 30 networks and covers all of China except Guizhou province

· Mobile Network has two different systems – GSM and CDMA

o CDMA subscribers – 28M – February 2005

o GSM subscribers – 84.27M – February 2005

Brokerage	Recommendation	Sentiment
UBS
Lehman Brothers
B of A Securities

Ciena (CIEN) Linthicum, MD CEO Gary Smith www.ciena.com

· Optical networking equipment, helps telecom carriers get more from their networks

· Allows them to carry more data across their fiber optic pipes and uses smart switches to efficiently direct traffic

· Technology called “Core Director” – allows operators to allocate bandwidth on the fly and prioritize traffic to the end user criteria

· Core Director accounts for 10% of sales

· Has a 25% market share of optical network gear

· High speed systems for long-distance and local exchange carriers

· Specializes in equipment for long haul networks

· Ciena has a 12% market share for DWDM (Dense Wavelength Division Multiplexing) – Nortel has a 60% market share

· New DWDM “high-channel count” will be industry leader

· 40 channel multi-plexer – tech that increases the transmission capacity of a single strand of fiber optic

Ciena Acquisitions and Stakes:

· Competitors include Nortel, LU

· Tellabs tried to acquire Ciena in early 1999 – fell through

· AT&T reneged on using the 40 channel multi-plexer gear – stock went down 45%

· Bought Cyras Systems for $2B – makes optical switching systems for metropolitan network applications

· Acquired ONI Systems for $850M – ONI specializes in gear for metropolitan networks

· Acquired Catena for $628.7M - Broadband access tech

Ciena General Info:

· Old CEO Patrick Nettles replaced by Gary Smith

Cingular (SBC) (BLS) CEO Stan Sigman

· Combination of SBC Wireless Unit and Bell South’s wireless unit (SBC 60%, Bell South 40%)

· 2^nd largest wireless provider and serves 40 of the 50 US wireless markets reaching 190M people – will be in 19 of the top 20 markets

· Subscribers:

· Had 21.8M subscribers – June 2002

· 22.1M – May 2003 – No.2 behind Verizon Wireless

· April 2004 – 24.6M

· With AT&T Wireless

· 47M – October 2004

· End of 2004 – 49.1M

· April 2005 – 50.4M

· June 2005 – 51.6M

· Swapping some wireless spectrums with VoiceStream in a tax-free exchange

· Cingular will get some of VoiceStream's spectrum in New York, Detroit, and St. Louis

· VoiceStream will receive spectrums in Los Angeles, and San Francisco from Cingular

· Converting a majority of its network to GSM standard

· Expecting to launch IPO in 2004 or possible merger with AT&T Wireless

· Acquired AT&T Wireless for $41B ($15 a share at the announcement) – February 2004

· Will become the largest US wireless operator with 46M subscribers and in 97 of the country’s top 100 markets

· AT&T customers may have problems in the switch. They may need new phones that work on Cingular’s GSM network. AT&T’s phones were TDMA in some areas

· Will need to divest operations in 16 markets for compliance with the approval of the acquisition

· Cingular transferring/selling subscribers (Roughly 200,000) and licenses to Alltel worth $170M to satisfy conditions with the AT&T acquisition

· Sold spectrum worth $230M to MetroPCS – December 2004

· 3G Service:

· Using UMTS technology for its initial inroads in 3G service – May 2004

· Using equipment from Lucent

· Cingular won’t be able to roll it out nationwide until 2006 or 2007 because that radio frequency is not commercially available yet

· “I wish I could get it out quicker-I can’t” – CEO Stan Sigman – May 2004

· 2005 – Using HSDPA for 3G service which will be rolled out in 4Q2005 in 15 to 20 markets

· Working with Yahoo on software for cell phone media content with the ability to download movies and photos from cell phone to TV or PC

· 4Q2004 – First quarter where AT&T Wireless contributed to earnings

· Push to talk phone service launched 2005

Brokerage	Recommendation	Sentiment
Goldman Sachs
Morgan Stanley
JP Morgan

Corning Inc. (GLW) Corning, NY CEO James Houghton http://www.corning.com/

Three broad based business segments: Telecommunications, Advanced Materials and Information Display.

· Telecommunications Segment produces optical fiber and cable, optical hardware and equipment and photonic modules and components for the worldwide telecommunications industry.

· The Advanced Materials Segment manufactures specialized products with unique properties for customer applications utilizing glass, glass ceramic and polymer technologies. Businesses within this segment include environmental products, science products, semiconductor materials and optical and lighting products.

· The Information Display Segment manufactures glass panels and funnels for televisions and CRTs, liquid crystal display glass for flat panel displays and projection video lens assemblies.

Corning Acquisitions, Stakes and Alliances:

· Acquired NetOptix – makes filters for Dense Wavelength Division Multiplexing (DWDM)

· Acquired Siemen's AG Optic and Cable Hardware Division

· Was in talks with Nortel to merger but both left the table

· Acquired Pirelli’s Fiber Optic Business for $3.5B - September 2000

· Two Business – Optical Components and Submarine Optical Systems

· Acquiring a 90% stake – CSCO owns the remaining 10%

· With Level 3 Communications – developing new types of advanced optical fiber and equipment

· Contracted to supply Level 3 for the next 4 yrs for fiber and cable

· Owns Steuben – luxury retailer of fine glassware

· Acquired Tropel Corp. for $190M – makes optical components, subsystems and optical netrology instruments

· Acquiring Avanax’s fiber optic component unit for $20M and also purchasing $21.4M Avanax shares for a 17% stake in the company – May 2003

· Joint venture with Samsung (Samsung-Corning) to make precision glass

Corning General Info:

· Stopped making pot and pans in 1998 – made the glass for the very first light bulb

· Corning and its subsidiaries manufacture products at approximately 40 plants in 20 countries

· Corning Telecom/Optics/Fiber:

· Optical equipment called “photonic”

· 40% global market for fiber

· CEO Roger Ackerman (retired) strived to make their optical components unit larger than its fiber line offering a complete end-to-end service

· Optical components line grew 100% from Sept.1999-Sept.2000 – Fiber business grew 35%-40% during same time period - Optical fiber/cable grew 67% in 3^rd quarter 00’

· Pre-telecom meltdown - Expected its earnings to grow 25% in 2001 and sales to double in 2001 for its optical parts business

· Fiber cable manufacturing ran at full capacity from 1998 to 2001 - In 2001 – stated fiber prices to fall no more than 5% in 2001 – China compensating

· Meltdown - October 2001 – First time in its history their fiber optics has actually deceased

· CEO John Loose – Summer 2001 – “Demand for Telecom equipment won’t recover until the end of 2001, it maybe not until the middle of 2002” – 2000

· 60% of sales is fiber, bringing in 70% of revenue – 2001

· Telecom represented 71% of revenue in 2001

· September 2002 – short sellers have 14% of Corning’s outstanding shares

· 2003 – Only one fully operational fiber-optic plant – the other four mothballed or abandoned in mid-construction

· In 2000 – Telecom accounted for 73% of revenue – 2003 – Down to 40%

· 3Q2004 – Recorded non-cash charge of $2.8B to $2.9B against third quarter earnings with the reduction of their fiber assets due to rival companies selling fiber equipment for less than Coring can make it – Announced October 2004

· 2005 – Verizon is their biggest customer with the roll-out of their fiber initiative to offer video and other high speed services to their customers

· Corning Liquid Crystal Displays:

· Leading supplier of glass substrates for active-matrix LCD technology for laptops and flat screen TV’s

· No.2 supplier is Ashai Group

· Primary supplier to Asia for LCD glass

· Supplies three fourths of the glass for LCD’s in Japan and South Korea - 2004

· Substrate material ensures that the glass is made uniformly and is both lightweight and durable

· LCD TV – Looking for growth of 20%-40% for 2003-2006

· 2003 – Has a 50% market share for glass in flat panel displays

· 2004 – Announced they’d have to raise their forecast for growth through 2006

· Has a 55% market share for LCD glass – 2005

· Expecting glass to grow at a 40% annual rate through 2007

· Corning Catalytic Converter Technology

· Diesel Filters – Corning’s technology reduces 95% of nitrogen oxides produced by these engines – EPA has a mandate by 2007 for diesel levels to be reduced

· Ceramic filters in diesel for emissions control – expects the unit to double each year from 2003-2008

· CEO succession:

· CEO – John W. Loose – Stepped in January 1 2001 replacing Roger Ackerman

· John W. Loose stepped down May 2002 – Chairman James Houghton took the reins (James Houghton retired as CEO in 1996)

· Corning’s President Wendell Weeks will be the new CEO in April of 2005

· 2003 – 70% of R&D going into technology, 30% telecom

· Sold rear projection lens business to 3M

· Owns 50% of Dow-Corning – Emerging from bankruptcy protection sometime in 2003 – mostly due to breast implants

· Shed its photonics business

· 2005:

· Seeing strength and record sales in their Display-Technology Segment in the first half of 2005

· 85% of their profits are from LCD operations

Corning Notables:

· August 2002

· $4.3B in debt

· $1.3B in cash

· Debt maturity - $2.06B due in November 2005

· Expects to return to profitability in 3Q2003

· March 2003 - $3.9B in long term debt

· October 2003 – Recoded first profit in two and half years

· 2003 – Telecom produced 27% of Corning’s Revenue, Display Technology – 24%

Brokerage	Recommendation	Sentiment
Merrill Lynch
Smith Barney
RBC Capital Mkts

Corvis Corp (CORV) Colombia, MD CEO David Huber http://www.corvis.com/

· Specializes in optical switches

· Williams Communications is considering using their equipment

Brokerage	Recommendation	Sentiment
Goldman Sachs
Lehman Brothers
Smith Barney

Deutsche Telekom (DT) Bonn, Germany CEO Kai-Uwe Ricke http://www.telekom.de/

· Europe’s largest Telecom and fourth largest wireless in the US

· Full-service telecommunications provider, Europe's largest and the world's 4th largest telecommunications service provider in terms of revenue

· Largest provider of public fixed-network voice telephony in Germany and is the country's second largest digital mobile communications provider, with approximately 5.5 million digital mobile telephone subscribers

· Provides leased lines, text and data services, corporate network services, and directory assistance, and supplies telecommunications terminal equipment and publishes telephone directories

· Core domestic telephone business accounted for more that 50% of its profits and 68% of its revenue in the first half of 2000

· 48M + phone lines – 22.6M mobile phone subscribers

· Germany's largest cable network, transmitting television and radio programming to approximately 17.7 million households.

· CEO Ron Summer – once a Sony executive

· German government owns 43% (was 58%) and has another 15% with a state owned development bank – German government wants to pull out completely at some future date

· T-Com – Fixed line business

· Lost 30% market share in long distance and 10% in local market share after market opened for competition

· Profit margin of 38.5%

· T-Online – Internet Unit (71.9% owned by DT

· Has 6 million subscribers and is Europe’s largest

· November 2003 – Posted their first quarterly net profit

· T-Systems – IT service unit

· IT outsourcing

· Contributes 7% EBITDA

· T-Mobile International – Wireless unit

· Europe’s largest wireless provider

· Restructuring the unit into a holding company so that it may turn on a dime to develop and react to local market conditions

· No.5 in the US market - 2003

· Subscribers:

· Worldwide

· 52M subscribers worldwide – 2003

· Almost 80M subscribers in first half 2005

· UK

· 16M – full year 2004

· Germany

· 28M wireless subscribers for full year 2004

· Austria

· 2M – full year 2004

· US

· 13.1M subscribers in the US – January 2004

· May 2004 – 14.3M (Churn of 3% and Average revenue of $54)

· Margins – 2Q2004 – 25.4%

· Full year 2004 – 18.3M

· Other Countries – 15M subscribers

· Launching 3G service in 2003 and will be based on WiFi

· 2003 – Facing a saturated German market and has 40% of the market

· Gets about 25% of its revenue from termination fees (charges on calls between a mobile number and a fixed line number and different wireless providers) – Euro regulators are looking for a reduction in these

· Average revenue per user - $54 – 3Q2003

· EBITDA growth of 40% in 2003

· 2005:

· Possibly looking to sell T-Mobile’s wireless operation in the US

· What are the factors contributing to the sale?

· T-Mobile is facing huge cost to upgrade with wireless network in the US – They use the same network as Vodafone

· They have no broadband or TV initiatives in place to offer to the American consumer unlike its rivals

· Paid $4.2B for 120 FCC wireless licenses in 2006

· Needed these licenses so they can upgrade its 3G network and make it more competitive

Deutsch Telekom Acquisitions and Stakes:

· Acquired VoiceStream Wireless for $3.5B

• Possible problem - DT is 43% (was 58%) owned by the German Government – FCC threshold is 25% - may be a problem with VoiceStream

· FCC let it slide

• Buying VoiceStream for its dominant role in US with GSM
• Expects Voice Stream to contribute about half of its EBITDA growth in the future
• Changing VoiceStream’s name to T-Mobile

· Has a 25% stake in Indonesian wireless Satellite Palapa Indonesia (Satelindo) worth $325M

· Acquiring the 51% of Polska Telefonia Cyfrowa (Polish Wireless company) that it already doesn’t own – August 2003

• September 2003 – DROPPED BID
• DT still controls a 49% stake of PTC but is in litigation with numerous parties including Vivendi which revolve around deals both of them made with Elektrim who owns or owned the remaining 51% of PTC
• Vivendi had deals with Elektrim on PTC’s local prepaid and billed brands, Heyah and Era.
• PTC has seen competitors take a large percentage of their customers while DT has been unable to upgrade PTC systems to its global T-mobile wireless brand due to the lawsuits.

· Buying out all the minority shareholders in its T-Online unit for $3.5B – October 2004

· Reducing its stake in Mobile TeleSystems of Russia (MTS) to 13% for $1.4 B – December 2004

• MTS is the largest mobile operator in Eastern Europe

· German government reduced stake in Deutsch Telecom to 16.7% while the German State owned bank KfW increased their stake to 15.3% - December 2004

Deutsch Telekom General Info:

· Ron Summer has “Four Pillars of Dominance” he wants to achieve – Wireless, Consumer Internet, Data networks, Consumer and Business Access

• Summer predicts that Telekom will grow more than 10% a year until 2004
• Summer “You can’t transform a state bureaucracy into a growth company with acquisitions. And you can’t make acquisitions without goodwill and amortizations.”

· Posted a loss for 2001 – First one since going public – attributed to Voice Stream

· Ron Summer resigned July 2002 – New interim CEO Helmut Sihler

· New CEO Kai-Uwe Ricke

· 1Q2003 – Posted first profit in almost two years

· Plans to bring back a dividend in 2004 – last paid in 2001

· Its 250,000 employees account for 30% of the company’s total cost

· “It’s a utility…the only possibility they have to generate growth is through cost-cutting, and that is difficult with German labor laws” – Joerg Schlinghoff, West Asset Management

· German government mandates that they must now resell their lines to competitors – 2003

· “We have achieved the turnaround…the story going forward is growth” – CEO Kai-Uwe Ricke, March 2004

· Toll Collect – Satellite based toll collection for the German autobahn – Caused major problems in 2003 – developed with Daimler-Chrysler and Vinci

· Dropping Four Pillar strategy due to rapidly evolving technology and the advent of WiFi and other tech – now focusing on connectivity and IT service

Deutsch Telekom Debt Problems:

· Feb 2002 – Has 15B Euros in operating cash flow to service its debt, pay its dividend and invest with

· May 2002 - 67.74B Euro in Debt

· July 2002 - Has 64.2B E in debt – want to reduce it to 50B E by the end of 2003

· Has 7B Euro debt maturing 2003

· Needs to raise $6.85B to meet its debt target

· 2002 – Net loss of $27.1B – Largest in loss in German History

· August 2003 – 53B Euros in debt loans

· Debt target on 2.5 to 3 times EBITDA in 2004

· August 2004 - $44.6 B Euros in debt and considered under control

Efficient Networks (EFNT) Dallas, TX CEO Bruce Brown http://www.efficient.com

· Makes hardware and software for DSL systems – ASDL, SDSL, IDSL, VoDSL

· PCI and USB modems, Ethernet LAN modems, DSL routers, Voice over DSL technology (VoDSL)

· Products in 60 networks

· 78% of its revenue comes from the US, 16% Asia, 6% Europe

· 3/4^th of their sales from 10 customers

· Acquired FlowPoint Corp. – specialized in SDSL and IDSL

· Acquired Network Telesystems – Broadband software, IP management, virtual private networks

· Acquired Multimedia Development – Network software to manage DSL systems in broadband carriers

· Clients: SBC, Bell South, Covad, Sprint, WorldCom, BT, Verizon, AOL, Juno, Mindspring

· Acquired by Siemens for $1.5B

Brokerage	Recommendation	Sentiment
Goldman Sachs
UBS
Deutsche Securities

Ericsson, Telefon AB L.M. (ERICY) Stockholm, Sweden CEO Carl-Henric Svanberg http://www.ericsson.com/

· World’s largest mobile-infrastructure maker

· Was the world’s number three mobile handset maker – now lagging behind

· Jan 2001 - 9% market share - MOT 13% - Nokia 30%

· Summer 2001 - NOK 35.3%, MOT 13.2%, Siemens 6.9%, Ericsson 6.8%

Ericsson Acquisitions and Alliances:

· Joint venture with MSFT to develop mobile e-mail software for cell phones – will integrate MSFT’s exchange client with Ericsson’s phone infrastructure – Called Ericsson MSFT Mobil Venture – MSFT has a 30% stake – Ericsson – 70% stake – will launch Jan 2001

· Has had problems in the last two years with cell phone handset sales – some say they may have to get out of the industry in the division doesn’t become profitable by mid 2001

· January 2001 – decided to outsource all their handset manufacturing to Flextronics Int.

· Phillips Electronics (Their supplier for RFC “radio frequency chips”) had a fire at one of their plants thus delaying production – could have been the final blow

· Looking to break even on their handset division in 2002

· Sony-Ericsson:

· Joint venture with Sony – Sony Ericsson Mobile Communications for 3-G networks – Ericsson’s name may eventually be phased out

· Launched late 2001

· Sony will make their music catalog available to their phone users – Announced February 2005

· Why the marriage – Sony was eager to join in with Ericsson due to their patents on 3G technology. Sony previously paid through the gills for 3G licensing fees

· Teamed up with Napster to deliver songs over their network to mobile phones – Announced June 2005

Ericsson General Info:

· Infrastructure division accounts for 70% of their revenue (Handset sales are 20% of their revenue)

· Infrastructure division has solely been awarded 22 of the 33 announced 3^rd generation cell networks

· Has 35%-40% of the current network building operations worldwide

· China is its 2^nd largest market

· Increasing its direct and indirect investment in China to $5.1B by 2005 from $2.4B

· Won an $805M contract from Guangdong Mobile Com to expand its GSM network to handle 54M subscribers in Guangdong Province – December 2004

· 2005 – Controls the largest market share for infrastructure equipment in China with a 35% market share

· Working with Chinese phone maker ZTE in 2005

· Ericsson Notables:

· 2001 - Expected flat to modest growth in its mobile-systems unit, its core unit, through 2002

· 2002 - US and China represented 24% of sales in 2002

· 2005:

· Seeing strength in the booming emerging market sector

· Seeing a slowdown in the first half of 2005 in North America and less capital spending in that market

· “Our focus on profitable growth through intensive customer partnerships and operational excellence is successful and is giving us a distance competitive advantage: - CEO Carl-Henric Svanberg – April 2005

· Upgrading Cingular’s Network – Big project though margins are small

· Increasing growth target in the second half of 2005 from 2% - 5% to 6% - 9%

· Seeing strong results from Latin America, Eastern Europe, Middle East and Africa in the first half of 2005 – Western Europe remains weak

· With Nokia and Siemens in China – All agreed to lower the limit their licensing fees to less than 10%

· Nokia and Ericsson have 50% of all WCDMA patents

· “Ericsson and Nokia can afford to throw away some licensing revenue…but need WCDMA to succeed at any cost”

· Old CEO - Sven-Christer Nilsson

· Ericsson 3G software – Pushing HSDPA for 2005

· “We will absolutely gain market share in professional services” – CEO Carl-Henric Svanberg, February 2005

· “Our market position in relatively stronger in the emerging markets than our competitors – CEO Carl-Henric Svanberg – April 2005

· Shutting down its US headquarters for CDMA and will no longer look to obtain CDMA sales in the US – May 2005

E-Tek Dynamics (ETEK) (JDSU) San Jose, CA CEO Michael Fitzpatrick http://www.e-tek.com/

· Designs, manufactures and sells fiber optic components and modules for optical networks

· Makes components for optical technology that splits light beams

· Acquired by JDSU for $20.4B

Brokerage	Recommendation	Sentiment
Bear Stearns
Goldman Sachs
Lehman Brothers

France Telecom (FTE) Paris, France CEO Didier Lombard www.francetelecom.fr/en

· In 75 countries and 34.1M phone lines

· Wanadoo – Internet Access – Has a 39.6% market share in France

· Voila – Web portal

· Innovacom – Venture Fund

France Telecom Acquisitions, Stakes, Etc.

· French government has a 56.5% stake in France Telecom

· January 2004 – French Government selling 11% of their stake in 2004

· June 2005 – French government reduced stake to 32% to 35%

· Acquired Orange – UK’s No.3 mobile phone carrier for $37.72B from Vodafone

o Controls a 84.6% stake – currently 86.3% - June 2003

o Acquiring the 13.7% is already doesn’t for $7.69B – August 2003

o In Europe, Orange is the 3^rd largest wireless carrier after Vodafone

o Trying to sell as much as 25% of Orange

o Will be an IPO

o Orange has 41M subscribers worldwide

o Launching 3G service in 2003

o Orange CEO Solom D. Trujillo resigned March 2004 – New CEO Sanjiv Ahuja

· Selling its 10% (56M shares) stake in Sprint to help pay down debt

o Its Global One turned out to be a failure

· Has stake in Wind SpA of Italy

· Has a 54% stake in Pages Jaunes – French Phone Directory

· Trying to sell Telediffusion de France (TDF) for $1.8B – Broadcast services

· MobilCom - as a 28.5% stake – paid $3.74B Euros for that stake in March of 2000

o Ending Pact with MobilCom of Germany

o Will possibly put MobilCom in bankruptcy

o December 2002 - $7.58B bailout of MobilCom

o Taking over its 6B Euros of loans and swapping them for perpetual bonds redeemable for France Telecom shares at 47 Euros

o Writing down both bailout costs and its stake

o Sold its 27.3% stake in MobilCom to Texas Pacific Group for $340.8M – May 2005

· Buying the rest of Wanadoo it already doesn’t own (29.4%) – March 2004 – Wanadoo is an Internet service provider

· Buying up to a 40% stake in Equant of the Netherlands (Phone communications for large companies)

o Equant has been unprofitable since 2000 and France Telecom is its second largest customer with 13% in revenue in 2003

o Equant’s biggest account is Sita Air

o Acquiring all of the remaining stake that it does not own for $578M – February 2005

· Bidding on Amena (Spain’s 3^rd largest wireless company) – July 2005

o Now taking a 80% stake in the company for $7.7B

o France Telecom will now be a fierce competitor to Telefonica and will have a 24% market share in Spain

o France Telecom considers Spain one of the last area for growth in Europe

· Acquired Telkom Kenya in a consortium that they led for $390M – Announced November 2007

o Telkom Kenya is a state owned telecom company with 280,000 fixed line customers

France Telecom General Info:

· Debt Load:

o March 2002 – has 57.4B Euro in debt – the largest debt load of any telecom

o May 2002 – 60.7B Euro in debt

o August 2002 - $68.7B

· Michael Bon resigned September 12, 2002 – Feared he would be ousted

o Thierry Breton became the next CEO – From Tomson Multimedia

o March 2005, Thierry Breton resigned to become Frances Finance Minister

o Didier Lombard succeeded Thierry Breton

· 80% of its employees are classified as government functionaries and can retire at 60 and retain 75% of their salaries

· France and UK to be their “only clear strategic markets”

· Goal of 15B Euros of increased cash flow for 2003-2006

· 2002 – 22.7B Euro loss – 2^nd largest in French history

o Due to write off’s of bad investments in the 1990’s and 3G mobile licenses

· Will be the first company to offer Walkie-Talkie service in Europe in 2004

· 2005 – Expecting EBIDA of $19B

· “There are no clear growth drivers” – Mike Jeremy, ING Financial Markets – March 2005

· Broadband:

o 3.4M Broadband customers – May 2005

Global Crossing (GLBCE)(GBLX) (GX) Hamilton, Bermuda CEO Tom Casey http://www.globalcrossing.bm/

· Building a global undersea cable network that will connect 80% of the world

• Currently connects 27 countries and 200 major cites
• Spent $13.7B building the network

· Building a 20,000 mile North American network

· Building a 15,500 mile European intercity network

· Links to Tokyo, Hong Kong and across the Atlantic

· Controls 20% of all undersea capacity leaving the US

Global Crossing Acquisitions and Stakes:

· Acquired Frontier Communications in March of 1999 for $11.2B

· Acquired Global Marine Systems

· Acquired IXNET – broadband for financial services

· Acquired Britain’s Racal Telecom

· Selling its local phone services to Citizens Communications for $3.6B in which it acquired from Frontier

• Wants to sell its web hosting unit for around 6.5B it received from Frontier – thus Global Crossing would in effect have acquired Frontiers long distance for free

· Selling its Global Center for $6.1B to Exodus Communication and in turn will have a 17% stake in Exodus – Global Center is their web hosting unit which is #2 in dominance behind Exodus

• Exodus went into Chapter 11

· Selling their trading system for $360M and selling Global Marine Systems

· Richard Rainwater (Texas Billionaire) buying a 7.5% stake that will increase his stake to 13.6% - May 2004

· Carlos Slim Helu has a 9.9% stake in Global Crossing – Claims that he may raise his stake to 20%

· Singapore Technology Telemedia has a 61.5% stake

Global Crossing General Info:

· CEO Tom Casey – Claims they can and will produce revenue growth of about 30% and operating cash flow growth of about 35% for the next 3-4 years (2004)

· Expected cash revenues of $7.1B-$7.2b in 2001 compared to $5.2B in 2000

· Expected a loss of $2.94 a share in 2001

· Connected Lima, Peru June 21, 2001 – With Peru they have completed their four year $20B 100,000 mile network

• Links Europe, North America, South America, and Asia

· Has $14.4B in debt and spending $390M annually on interest payment

· Went into Chapter 11 on Jan 28, 2002

· Hutchinson Whampoa and Singapore Technology may be taking a 60% interest in the company – Fell Through April 2003 – Due to US regulatory problems with oversea ownership and national security

· Out of Chapter 11 – December 2003

· 4Q2003 – First quarter out of chapter 11 and Global Crossing ends up making a first quarter profit of $24.88B – the highest amount of net income ever recorded by a US company in a quarter

• Earned more in 4Q2003 than ExxonMobil, GE, Sears, BofA, and Wal-Mart combined
• Works out to a P/E ratio of .029
• Hats off to Chapter 11!

· For 2004 – needs to erase $100M in new cash for operating expenses throughout the year

· Restating 2003 results and revising 2002 statements – May 2004

· Suspending all 2004 projections

· 61% of Global Crossing is owned by Singapore Technologies

· Global Crossing access costs in 2003 - $1.9B – reducing this cost is their main objective

· Additional Financing:

• Carlos Slim investing another 15M into Global crossing through Orient Star Holdings – August2004
• Global Crossing need $400M in additional financing – Announced November 2004

· Working on $300M in secured debt financing and a $50M to $100M credit facility

· Has enough funding to last until end of 2004

· If secured debt doesn’t go through, Singapore Technology Telemedia will hand over $155M that should last them through early 2005

· Received $404M bond offering thus giving Global Crossing another 12 months of liquidity – December 2004

GTE Corp. (GTE) (VZ) Irving TX CEO Charles R. Lee http://www.gte.com/

· Local and long distance – local in 28 states, nationwide long-distance

· Airfone – barley profitable airplane telephone business

· Lost bidding war for MCI to WorldCom – now suing WorldCom

· Saying it would hurt competition in the long distance community

· MCI/WorldCom would have unfair dominance over primary long distance networks that carry Internet traffic globally

· Operates in fast-growing suburban markets

· Pushed hard into the data-services arena w/BBN Tech and Qwest Communication International

· $55B stock swap with Bell Atlantic

· Merged with Bell ATL now called Verizon

Hutchison Whampoa Limited Hong Kong www.hutchison-whampoa.com

· 49.97% owned by Cheung Kong Holdings

· Cheung Kong LTD – Li Ka-Shing – His real-estate firm – Chinese Billionaire

Five Divisions:

Hutchinson Energy and Infrastructure:

• Sole supplier of electricity to Hong Kong
• Owns Husky Energy of Canada – integrated oil and gas
• Gas distribution network in Australia
• Power Generation Projects, Toll Roads, and Bridges in mainland China

Hutchinson Retail and Manufacturing: A.S. Watson and Co. Limited

• Has 218 Drug Stores in Taiwan, 90 in Singapore and Malaysia
• Food and Beverage manufacturing in Hong Kong
• ParkNShop Supermarkets
• Fortress Consumer Electronic Stores
• 90 outlets in China – the largest foreign owned chain stores
• Savers of the UK – 170 discount health and beauty stores in the UK

Hutchinson Property and Hotels:

• Cheung Kong (Holdings)
• Buying lots of land in China in 2005
• Seeks out undervalued land around Beijing and Shanghai which are positioned for high growth

Hutchinson Ports and Related Services: 162 berths, 167, shipping carriers, 35 terminals (ports), in 17 countries

• Control 14% of the global shipping trade
• Started with a single berth in Hong Kong in 1976
• Controls the ship terminal in Rotterdam, Netherlands
• Creating a world-wide network of ports
• Has a 90% stake in Felix Stowe – controls the ports in the UK and is Europe’s 4^th largest container port
• Has a 40% stake in China’s Shanghai Terminal – World’s 5^th largest
• Has a 50% stake in Shenzhen Yantian Port
• Control 25% of China’s throughput (volume of business measured by the number of 20 foot containers processed)
• Ships more than 40% of all containers heading to the US
• Selling off parts of its Hong Kong port to help raise cash for its Telecom ventures – Announced June 2005

Hutchinson Telecom and E-Commerce:

· Hutchinson Telecommunications Group (HTX)

· In eight countries with service in India, Thailand, Israel, Macau, Sri Lanka, Ghana, Paraguay and Hong Kong

· Will start service in Vietnam in 2005

· Unit includes Hong Kong’ s Fixed line business, Hutchinson Global Communication Holdings, and Israel Partner Communication

· Subscribers:

· June 2004 - 11M subscribers

· 12.6M – End of 2004

· Went Public on NYSE October 2004

· Will float Hutchinson Max (India telecom assets) by June 2005 and list 10% of the assets

· India Telecom is considered their crown jewel

· Acquired the remaining shares (a 47.5% stake) of Hutchinson Global Com (Hong Kong) for $308M – May 2005

· Started the Orange PCS network – Sold it to Mannesmann of Germany in 1999

· NTT has a 35% stake in Hutchinson Telecom – stake has been reduced

· Hutchinson Max

· Comprised of its Indian Assets

· India pulled in 47% of Hutchinson total revenue in 2004

· Hutchinson Global Communication Holdings - Formerly called Vandas Systems and Communications

· Comprises of their Hong Kong Fixed line business

· 2005 – Unit going private

· June 2005 – Hutchinson bought the 47.5% of Hutchinson Global Communications it doesn’t own

· Now consolidates all of Hutchinson’s Honk Kong’s Telecom assets

· Hutchinson 3G UK – with KPN and NTT DoCoMo

· 3G service called “3”

· Planed to have 3G service set up in the UK and Italy by October 2002

· Rolled back –Will first go in UK and Italy, then Australia, Denmark, Hong Kong, Ireland, Israel, Austria and Sweden

· March 2003 – Rolled out “3” (3G service) in UK and Germany – network still needs a lot of work

· Looking for 3G to attack fixed line business – “A 3G network running a full call volume can carry voice calls at ¼ the cost of an equitant 2G network” – Bob Fuller CEO of Hutchinson 3G UK

· Subscribers:

· Goal at end of 2003 - 2M wireless customers in Europe and Australia (At end of August 2003 – 300,000 UK, 155,000 in Italy, 50,000 in Australia, 15,000 in Sweden)

· November 2003 – says that they won’t meet their goal – reason – they can’t produce enough phones (NEC and MOT)

· “3” and Profitability

· Hutchinson has spent $11B on 3G – Plans to spend $17B more in licenses, network construction and marketing in nine countries

· 2003 – Unit lost HK$3B

· 2004 - 3G unit had a net loss of $3.24B in 2004 or HK$25.32 – Loss doesn’t include infrastructure and handset subsidies

· Expecting to break even in 2006

· NTT of Japan sold its 20% stake Hutchinson Telecom in June 2004

Hutchinson Whampoa Acquisitions and Stakes:

· Acquired Kruidvat Group for $1.27B of the Netherlands – Giving them one of the largest drug store chains in Europe - will place and sell its handsets in these stores

· Acquiring parts of Global Crossing – getting them for one cent on the dollar

· Fell Through April 2003 – Due to US regulatory problems with oversea ownership and national security

· Buying close to 10% of China Shipping Container in its IPO – roughly $30M – May 2004

· Acquiring Marionnand Parfumeries (Through Hutchinson’s A.S. Watson Group) – French perfume and cosmetic company for $700M – January 2005

· Acquisition of Aircell and Aircell Cellular of India in 2004 fell through due to regulatory hurdles in India

Hutchison Whampoa General Info:

· Started out of a plastic flower operation and then turned into a multifaceted global empire

· Victor Ka-Shing – Li’s son – owns almost half of Hutchinson

· Invested $16.7B in 36 wireless companies – expecting 1M subscribers in UK and 1M in Italy by end of 2003 – expects to be profitable in 2005

· Owns A.S. Watson Stores – has 250 with acquisition will have 1900 drugstores in 6 countries

· Kruidvat has 709 superstores in the UK

· Launching 3G service in UK, Italy, Australia, Austria, Ireland, Hong Kong and Sweden

· “We don’t get too carried away when times are good or get too pessimistic when times are bad” – Li Ka-Shing – COO

· Splitting off its International mobile phone business, fixed line, and 3G business in Hong Kong into a new company that will be listed on the Hong Kong Stock Exchange

· 2004 – Revenue up 48% in 2004 but profit only due to sales of stock in investment

· Selling off parts of its Hong Kong port to help raise cash for its Telecom ventures – Announced June 2005

Japan Telecom

· No. 3 in Japan

· J-Phone – Mobile Unit

· Vodafone now has a 66.7% stake in Japan telecom

· Vodafone is their largest shareholder and has minority stakes in each of their four units

· Acquired by Ripplewood Holdings in a $2.2B leveraged buyout – 2003

· William Espry and Ronald LeMay from Sprint to be the new CEO’s

· Japan Telecom acquired by Softbank for $1.28B – May 2004

Brokerage	Recommendation	Sentiment
Goldman Sachs
Merrill Lynch
Smith Barney

JDS Uniphase (JDSU) San Jose, CA CEO Jozef Straus www.uniphase.com

· Formed in June of 1999 with the merger of JDS Fitelin and Uniphase

· Maker of optical fiber equipment

JDS Uniphase Acquisitions and Stakes:

· Bought SDL for $41 B – 2nd largest maker of fiber components

· Acquired E-Tek for $20.4B – makes components for optical technology that splits light beams – giving them an 80% market share for some types of lasers

· Bought Optical Coating Laboratories for $2.8B in Nov. 99’ – biggest maker of optical filters used to separate light into multiple wavelengths

· Bought Cronos Integrated Microsystems in April 2000 for $572M

· Feb. 2001 – SDL merger closed – now a $17B deal

· New business unit called Amplification and Transmission Group – includes most of SDL

· Buying IBM’s optical transceiver business for $340M

· Acquiring Acterna for $760M – June 2005

· Acterna is one of the largest test equipment makers in Europe

JDSU General Info:

· Revised its growth projection in 2000 from 90% to 115%-120%

· Alcatel, Nortel, and LU accounted for more than 10% of sales in 2000

· For 2001 – projected for revenue growth at the low end of 115%-120% for fiscal 2001 ending June 30^th

· Sold its pump laser chip unit to Nortel for $3B – the unit makes chip that amplify signal sent along fiber – needed to sell unit for approval of SDL acquisition

· March 2000 – cut earnings estimate for fiscal 3^rd and fiscal 4^th quarter 2001

· Looking for demand to increase in the 2^nd half of 2001

· August 2001 – announced they had a $50.6B loss for fiscal year ending June 3, 2001

· 2001-2002 sales have evaporated

· Jozef Straus retiring at the end of August 2003 – Kevin Kennedy will take over

· Problems in 2004/January 2005 – Having problems with one large account (failure to pay for services) and problems with a new product start-up an legal expenses

KDDI Telecom Japan President Tadashi Onodera

· Japan’s No. 2 telecom company

· Personal Handyphone System, PHS, 7 times faster than current phones

· Phasing out Personal Digital Cellular for CDMA technology

· Has 1.79 Trillion Yen in debt

· Rolling out 3G CDMA2000 1X April 1^st 2002

· Will have speeds up to 144 kilobits per second

· Expected to expand on those speeds in the future

· All out war with DoCoMo and their more expensive version of 3G – W-CDMA

· Users can use their existing phones while DoCoMo users need new phones

· Subscribers for 3G:

· 16.5M – December 2004

· Traditional Wireless subscribers

· 18.5M – December 2004

Leap Wireless (LWIN) San Diego, CA CEO Harvey White www.leapwireless.com

· Spun-off from QCOM – Wireless services in Mexico and Chile

· QCOM didn’t want this showing on their books if these countries didn’t pay up so spun it off

· $350M agreement with Nortel for equipment

· Went bankrupt, Ch.11, April 13, 2003

· Took on too much debt during a buying spree in new markets and spectrum licenses

· Out of Chapter 11, August 2004

· Has $570M in NOL (Net Operating Losses) and doesn’t need to pay taxes for eight to ten years

· Cricket Communications – Leap Subsidiary

· Cricket has the 6h largest cell phone network in the US in 2004

· In 39 markets and geared toward a lower-end market end user

· Sold 23 spectrum licenses to Verizon Wireless for $102.5M – March 2005

· Spectrum is in 20 markets and signed roaming agreement with Verizon

· Acquired 99 licenses for $710M in cities including Washington, Philadelphia, Baltimore and St. Louis - 2006

Brokerage	Recommendation	Sentiment
Lehman Brothers

Level 3 Communications (LVLT) Broomfield, CO CEO James Crowe http://www.level3.com/

· Engaged in the communications, information services and coal mining businesses through ownership of operating subsidiaries and substantial equity positions in public companies

· PKS Information Services, Inc., the Company offers computer operations outsourcing and systems integration services

· C-TEC is comprised of Commonwealth Telephone and RCN. Commonwealth Telephone is a Pennsylvania public utility that provides local telephone service to a 19-county, 5,191 square mile service territory in Pennsylvania. RCN provides local, long distance, Internet and cable television services primarily to residential users in densely populated areas in the Northeast.

· Has coal mining through its subsidiary, KCP, Inc.

• 65% equity interest in California Private Transportation Company L.P., which developed, financed, and currently operates the 91Express Lanes, a ten mile, four-lane toll road in Orange County, California.

· Nations largest software distributor through subscriptions

Level 3 Network:

· James Crowe wants to build history’s largest most advanced fiber network

· Using more than 1.24M miles of cable from Corning for its US intercity network

· Building a 16,000 mile network connecting 150 US cities

• Has expanded to a 18,500 mile network

· Building a 4,700 mile European intercity network

· Links to Tokyo and Hong Kong for North America as well as across the Atlantic

· Fiber Network Upgrade – Using gear from Infinera – Announced June 2005

Level 3 General Info:

· Sells wholesale network service to 260 customers

· Never turned a profit

· $6.5B in debt – First debt payments was in 2004

· Trying to acquire Williams Communication Group for $1.1B

• Williams in Ch.11 and owes $725M to banks - $2.5B to Bondholders and $2.3B to its parent Williams

· Berkshire Hathaway invested $500M in Level 3 – Sold stake February 2003

· Acquired CorpSoft and Software Spectrum

· Bought most of Genuity Inc. – Provides dial-up access for AOL customers and fiber optic networks

· AOL plans to reduce its purchase of Internet dial-up by as much as $150M and reduce it annually going forward – AOL is Level 3’s largest managed-modem customer – February 2004

· Acquired the wholesale dial access business of ICG Communications for $35M – March 2004

• Company provides dial-up access to AOL, MSN, EarthLink

· Acquired Cincinnati Electronic for $172M – June 2004

· Will lease 19,000 miles of fiber to Comcast under a 20 year $100M deal connecting 95% of Comcast customers to video on demand and other fiber initiatives – Announced December 2004

· Six of the largest cable companies have bought or leased fiber from Level 3 within the last few years from 2004

· Acquired TelCove for roughly $1B in cash and stock – Telcove whole sells telecom capacity – May 2006

Brokerage	Recommendation	Sentiment
Goldman Sachs
JP Morgan
Schwab Soundview

Lucent Technology (LU) Murray Hill, NJ CEO Patricia F. Russo http://www.lucent.com/

· Formed with the combination of Bell Labs and Western Electric

· Spun off from AT&T in 1996

· Competitors include

· Nortel, NEC, Pirelli (Italy), Alcatel, Alsthom (France), Ciena, and a slew of others

Lucent Acquisitions and Spin–offs:

· From 1996 – mid 2001 Lucent acquired 38 companies

· Acquired Optimay of Germany for $65M – specializes in software for cell phones that operate on the Global System for mobile communications

· Bought Yurie for $1B

· Makes systems that turn different kinds of digital traffic such as encode voice calls and corporate data into single streams that can be handled efficiently by high-speed traffic exchanges

· These so-called asynchronous transmitter mode, or ATM switches, are expected to be critical components of future public communication networks

· Bought Lannet (Tel Aviv) subsidiary of Dutch networking Madge Networks for $117M – high speed switches for local-area networks (LAN’S)

· Bought Prommet Corp in 1998 – makes routers

· Bought Ascend Communications for $24B in 1998

· Bought Chromatis networks for $4.5B – makes metropolis- which lets service providers route traffic across optical networks

· August 2001 – Closed the entire plant

· Spun off Avaya (AV) – 2000

· Unit which makes telecom equipment for operator call centers – Lucent plans to focus more on their optic unit

· Makes VoIP equipment and systems

· Sold its Public Safety Systems to SCC Communications – LU owns 35% of SCC

· Spun off Agere Systems (AGRa) - 2002

· Latin for “to lead”

· Makes integrated circuits for communication products and optoelectronics

· Lucent still owns 58%

· Lucent must reach positive earnings EBITDA before it can spin off the rest

· Has combined PacketStar with their acquisition of Nexabit Networks to go after Juniper and Cisco in the router arena

· Got rid of Octel – voice messaging unit

· Selling its fiber optics unit to Corning and Furukawa Electric of Japan for $2.3B (Now $523M?)

· 2^nd largest producer of fiber-optic cable

· Acquiring Telica for $295M – May 2004

· Telica specializes in Voice over IP technology

· Partnership with Alvarion (Wireless network equipment) and BelAir Networks for WiFI (MCI is testing BelAir’s gear January 2005)

· Merged With Alcatel in a $13.4B deal, company will be based in Paris

·

Lucent General info:

· Structure:

· Had 11 divisions – then reduced down to five: Circuit Switching and Transport, Wireless Communication, Data, Optical Systems, Optical Fiber

· Reduced down to two in Summer of 2001

· 1) Integrated Network Solutions – land line, optical networking, switches, data and software

· 2) Mobility Solution – Wireless

· Current (2004)

· Integrated Network Solutions

· Mobility Solution

· Lucent Worldwide Services

· Bells Labs

· Combining its fixed line business, Integrated Network Solution with Mobility solution in 2005

· Runs Bell Laboratories – Famed innovator of technology from 1925 to present

· Inventions include first Binary Computer, first mobile telephone, the transistor (William Shockley was the main man – Both won Nobel Prizes in 1956 ), solar cell batteries, first transatlantic telephone cable, Unix operating system, touchtone phones, LED’s, numerous fiber optic advances, fax machine

· Head of Bell Labs, Bill O’Shea , retiring in 2005 and will be replaced by Jeong Kim

· Wireless:

· Wireless Big Bet – Focus on CDMA and got out of GSM

· Making lots of CDMA equipment and very little of GSM equipment

· Stopped making gear for GSM wireless networks completely

· Dropped EDGE development – Their GSM initiative

· Dropped GSM to help cut expenses

· Has a 45% market share for CDMA gear – October 2004

· GSM technology

· Focusing on UMTS for GSM 3G technology for 2004 and beyond

· 2004 – Wireless operations pulled in roughly 50% of Lucent’s revenue in 2004

· CDMA:

· 2004 – Had 43.8% global market share in CDMA gear (Was 29.9% in 2001)

· Alcatel made a $23.5B offer to buy Lucent in Summer of 2001

· Lamdba Router – used by large telecom carriers

· Layoffs and reorganization after the Telecom/Tech bust of 2002

· Had roughly 157,000 employees in 2002 – cut down to 32,000 by 2004

· Sold, shuttered or spun off 27 of their 40 business lines

· Closed all manufacturing plants and now relies on outsourcing for manufacturing

· Sold two factories, one in Oklahoma and one in Columbus, Ohio

· Stopped making gear from GSM wireless networks

· Problems leading up to the bust of the early 2000’s

· Lucent relied on older technology and didn’t address fast fiber optic technology – View on LU in the late 1990’s

· In 2000 – Hurt by pushing for faster growth than they could sustain and felt the effects of their failure to anticipate the demand for ultra fast optical networking gear

· During the tech boom of the late 1990’s and early 2000’s, Lucent lent companies money it needed to purchase their equipment, when the companies went bust, so did Lucent’s revenue

· Lucent CEO Succession:

· CEO Richard McGinn forced to resign in Oct 23, 2000 (Failed to meet earnings targets) – former CEO Henry Schacht took over till a replacement is found

· New CEO Patricia F. Russo – was CEO at Kodak for 8 weeks – prior to that worked at Lucent

· Class action lawsuit – Claims top officials committed fraud in 1999 and 2000 by trying to keep growth at a fever pitch with misleading sales practices

· Awarded a $568M payout

· Alliance with Juniper Networks to develop, design and maintain broadband and optical systems – Announced May 2003

· “Converged” network – running telephone and data traffic over different standards

· Plans to have Lucent installers and network designers put together telecom systems using equipment form Lucent and other companies

· Possibly halting the development of its own products used in routing Internet traffic

· 2003 – Making a shift towards selling services

· “Lucent has become increasingly dependent on large contracts from such carriers as Verizon Wireless, China Unicom, and India’s Reliance Telcom. As those contracts wind down, Lucent must find big customers to replace them… These are large builds not likely to be repeated. What comes after that?” – Stephen Kamman – CIBC World markets

· Busted and Looted: December 2003

· Had to revise revenue down by $679M for the year 2000 due to aggressive sales practices and pay the SEC a $25M fine

· SEC concluded their investigation – May 2004

· Just say “yes” to lawyers and class action lawsuits

· The two law firms that brought the class action lawsuit against Lucent got fees of over $100M while shareholders only got $653M – suit based on the collapse of Lucent’s stock price during the bursting of the Internet Bubble

· Shareholders who own the stock with purchase price between $12.19 and $84.13 received 15 cents for every share

· May 2004 – Neither admitted or denied that they fraudently and improperly recognized $1.15B in revenue and $470M in pre-tax income during the year 2000

· China:

· Won a $350M contract with China Unicom to deploy CDMA access equipment – January 2004

· “Suspended” top two executives in China (President of China, COO of China), a marketing exec. and a finance manager for possibly paying bribes – April 2004

· Lucent receives 11% of its revenue from China – No other country besides the US accounts for more than 10% of revenue

· “The majority of their growth is coming from China this year (2004) and next year (2005)” – Susan Kalla – Friedman Billings Ramsey – 2004

· End of 2004 – seeing slowdown in China’s use of Lucent’s PHS (Wireless device in fixed lines) but has migrated to other Lucent gear

· US produces 60% of Lucent’s revenue

· Department of Justice Investigation over Foreign Corrupt Practices Act – November 2004

· Under investigation for giving and paying for favors to Saudi Arabia’s Telecom Minister Dr. Ali Al-Johani

· Favors include hotels, use of Gulf Stream Jet, Bone-Marrow transplant performed in Seattle, all totaling $15M to $20M from 1995 to early 2003

· Lucent has been awarded more than $5B in contracts for work in Saudi Arabia and started when Lucent was still part of AT&T

· Lucent’s fixed line gear – In 2004, witnessing a decline and gradual decay in the business and not well positioned in future fixed line growth which is currently believed to revolve around VoIP and Optical fiber

· “Wireless an Services are growing more than fast enough to make up for the fixed line coming down” – Steve Levy – Lehman Brothers – April 2005

Lucent Notables:

· Had to erase $679M in reported revenue in 4thQ2000 ($452M was equipment they took back that vendors did not sell)

· “The consumer market is not what we are all about” - after abandoning joint venture with Phillips

· Wireless sales contribute to almost ½ of the company’s revenue

· Return to profitability?

· Breakeven point

· 2001 - Had a breakeven point of $4.25B each quarter in revenue

· August 2002 - Breakeven point reduced to $3B – wants it to be $2.5B

· October 2002 – Breakeven point at $2.5B

· 2003 - Said by 2003, telecom equipment should rebound

· Doesn’t expect to return to profitability until end of 2003

· July 2003 – Won’t turn profitable by September 2003

· Blames delayed payment from a wireless carrier

· Fiscal 4Q2003 (October 2003) First profit since March 2000

· 2004

· Forecasts sustained profits by Fiscal 2004

· Fiscal 2004 – First profitable year since 2000

· Debt Problems:

· June 30^th 2002 - $5.4B in cash and STE

· Has debt of $7B

· August 2004 - $1.9B convertible stock offering due – will have to pay $1.9B in cash or convert them to shares that currently would dilute their shares by 80%

· Has $750M debt due July 2006

· Has $943M in convertible securities it must buy back with either cash or stock by August 2004

· 2003 – Verizon accounted for 22% of Lucent’s revenue

· Won $1.5B deal to upgrade Sprint’s 3G network – Announced January 2005

· Won a three year $500M deal to upgrade Metro PCS’s network to 3G – Announce July 2005

Brokerage	Recommendation	Sentiment
JP Morgan
Lehman Brothers

Marconi PLC (MRCIY) (MCONY.OB) (MONI) London CEO Mike Parton http://www.marconi.com/

1 )Marconi systems

• Commerce – Retail automation systems (POS terminals), petroleum equipment (fuel pumps), system integration (fuel dispensing), Marconi Online
• Data – Digital imaging and supplies, Marconi Info Chain – chain management
• Medical – Sells, services, and supports medical imaging systems

2 )MSI

• Telecom Networks

3) Marconi Ventures

• VC

4) Optical Components

• Optical transmission systems

5) Mobil

• Air Traffic Control Systems
• Analog/Digital Trunking
• Secure Systems – IT
• Marine

Marconi Acquisitions and Stakes:

· Acquired Fore Systems in 1999 for $4.5B

· Acquired Reltec of Cleveland for $2.1B

· Has a minority stake in ArrayComm INC. – makes smart antenna technology – reduces cost of cell operations by letting them squeeze more subscribers into a given amount of radio spectrum without any loss of quality

· Selling its medical systems unit to Phillips for $1.1B

· Sold its Outside Plant and Power Unit to Emerson Electric for $406M – July 2004

Marconi General Info:

· Founded in 1886 as the General Electric Apparatus Co (Not related to GE)

• Marconi – named after Guglielmo Marconi – Nobel Prize winner in wireless communication

· CEO to be John Mayo resigned

· Replaced by old CEO Lord George Simpson

· Replaced by Mike Parton

· Communications division derives 30% of its sales in North America

· “Marconi is six months behind Alcatel and Nortel in developing ATM switches

· Now retreating from trying to be a global player and will focus on a few national markets

· Concentrating on Italy, UK Germany, Malaysia, Australia, Brazil, and Mexico

· Possibly putting up its router and switch business up for sale

· Key product Synchronous Digital Hierarchy (SDH)

· Now focusing on DWDM – has small market position

· Not good for Internet data traffic

· Marconi is 1/8 the size of Alcatel – its main European rival

· January 2004 – Sold its North American Access unit to Advanced Fiber for $240M - Provides fiber access to the Baby Bells

· Working with Huawei on developing new telecom equipment – Announced February 2005

Marconi Debt Problems:

· $460.3M in debt

· $6.25B debt restructuring – “We will not run out of cash but if we wanted some we wouldn’t get any”

· Filed for Chapter 11 protection – will be called Marconi Corp.

MCI (MCIC) (WCOM)

Owned by WorldCom

· Formed in 1968 as Microwave Communication of America

· First company to compete with AT&T

· Bought by WorldCom in 1995

· Sold its wholesale internet business to Cable and Wireless PLC for $625M to help with European approval for WCOM/MCI merger

· Keeping its corporate customers

· Bought SkyTel

· March 2003 – Once again renamed MCI – also see WorldCom below

MCI – The Second Coming (MCIP)

· CEO Michael Capellas started in November 2002 and was former CEO of Compaq

· WorldCom now taking the name MCI after bankruptcy – 2003

· Paying a $750M fine with the SEC for Civil Fraud

· Paying SEC $500M in cash and $250M in stock

· 2005 revenue target of $25B

· Out of Chapter 11 – April 20^th 2004

· Bondholders will receive 36 cents on the dollar

· New headquarters in Ashburn VA

· Chapter 11 wiped out $35B in debt leaving them with $5.5B in debt and $3B in cash

· Exiting the residential local business – June 2004

· Contributes 20% of MCI’s revenue and had 3.5M local customers with 15M long distance customers

· Subscribers:

· 1M business subscribers and 14M residential – February 2004

MCI Acquisitions and Stakes:

· Being courted by Leucadia National which wants a 50% stake – August 2004

· Leucadia National sold its 4.96% stake and claims to no longer want a majority stake in the company – September 2004

· Acquiring NetSec Inc. for $100M – January 2005 – Network security gear

· Qwest offering $6.3B for MCI – February 2005

· Verizon now in talks with acquiring MCI – February 2005

• The Bids For MCI in 2005:

o Qwest

§ Feb. 11 - $8B

§ March 16 - $8.4B

§ March 31 - $8.9B

o Verizon

§ Feb 15 - $6.75B

§ March 29 - $7.5B – Bid was Excepted by MCI

Mitel (MLT) Ontario, Canada CEO Kirk Mandy www.mitel.com

· Originally in phone switches and phone networks

· Started by founders of Corel

· Acquired shares in Plessey communication and some parts of GE P.L.C. semi conductor in telecomm, media, personal computer markets. MLT will rank in the top 10 networking and telecommunication Goldman Sachs helped out in this merger

· New process for enhancing the performance of optic chips

· Dividing the company in two parts – Semiconductors and telephone equipment in April of 2001

· Selling its telephone equipment business and trademark name to Terrance Mathews (One of its founders) for $230.4M

· Will now be a pure semiconductor business and will have a new name

Brokerage	Recommendation	Sentiment
Smith Barney
CSFB
JP Morgan

Motorola (MOT) Schaumburg, IL CEO Greg Brown http://www.motorola.com/

Some Motorola History:

· Introduced the first cell phone in 1984 weighing in at 28 ounces

· From 1985 – 1987 - Dominated in technology breakthroughs in miniaturizing pagers and cell phones – just before those markets took off

· 1995 - Recorded one of the highest average growth rates in sales and earnings among major American multinationals as a leader in pagers and cell phones

· Failed to switch to digital phones from its long-dominated analog devices and then overestimated them to get them to market

· Wireless share in 1998 - 30% in the US – barely #1

· Problems in cell network group with software in 1998

· Lots of cancellations due to problems – suffered 100 network failures a lot of business went to Lucent

· The Problem – Motorola lacked good switches

· In 1999 went through restructuring that merged about 6 of their business into 2 huge divisions

· Helped to make their units less internally combative and more cooperative

· Handset market share:

· 1995 - 55% (Nokia – 13.6%, Ericsson - 2.4%)

· 1997 - 34.1% (Nokia – 24.4%, Ericsson - 14.4%

· 1998 - Motorola lost their market share lead to Nokia

· Jan 2001- had a 13% market share (Nokia - 30%, Ericsson - 9%)

· Summer 2001 - NOK 35.3%, MOT 13.2%, Siemens 6.9%, Ericsson 6.8%

· 2002 - 16.3%

· September 2003 – Now No.3 – behind No.1 Nokia and No.2 Samsung in global handset revenue

· 2003 – 14.5% (NOK 34.8%, Samsung 10.8%, LG 5.3%)

· 4Q2004 – Global market share 16.6% and back to No.2 (Nokia had 31.4%)

· 2Q2005 – 18% and No.2 (Nokia 33%)

· No.1 in the US and Latin America with its strong sales in its Razr line and No.2 in Europe

· 4Q2007 – Global market share – 12%. U.S market share – 32%

Motorola’s six divisions:

· Commercial, Government and Industrial Systems

· Broadband Communication – Makes modems and set-top boxes

· Semiconductor Products – 2^nd largest unit – splitting off in summer of 2004

· Called Freescale Semiconductor

· Personal Communication Sector

· Global Telecom Solutions – Infrastructure, network service

· Integrated Electronic Systems

Motorola‘s Acquisitions Stakes and Divestitures:

· Acquired General Instrument – makes semiconductors, cable set-top boxes, wireless infrastructure, radios, and antennas, and base systems for wireless networks

· Bought Netspeak – specializes in tech for telephone services over the Internet

o Provides traditional voice communication over the Internet

· Has a 26% stake in Teledesic for design and construction of $9B satellite-based system for high-speed data and video. Will use 288 low-orbit satellites to create an Internet in the sky – Boeing prime contractor – set to go in 2003

· Sold its semiconductor parts business in 1999 to Texas Pacific Group for $338M – Texas Pacific renamed the Unit to ONSemiconductors

· Iridium LLC - a global satellite communications network venture - had its start at MOT 12 yrs ago, won’t bring much in immediate revenue - a 72 low-orbit satellite network for communications and data

· Launch was supposed to bring MOT favorable publicity - backfired

· Lost 7 out of the 72 satellites from the global mobile network - had budgeted a loss of 9 satellites

· Iridium plagued with problems

· Bought Printrak for $160M – software for fingerprint ID, records, and management

· Has a 17% stake in Groupe Bull of France

· Buying River Delta Networks for $300M – focuses on broad-band equipment and service

· Sold 25M of its 108M shares of Nextel

· Sold its Integrated-Information Systems unit for $825M to General Dynamics

· Has a 74% stake in Next Level Communications

· Buying the remaining shares of Next Level Communications - April 2003

· Selling its 19% stake in Symbian to Nokia and Psion

· New venture with Proview International Holdings to make flat-panel TV’s and screens under Motorola name – October 2003

· Taking a 30% stake (Spread over four years) in DVN Holdings of Hong Kong

· Makes digital cable equipment and adjoining cable software

· Positioned for the Chinese market

· Acquiring Symbol Tech for $3.9B – 2006

· Symbol tech has over 900 US patents and 700 international patents

· Specializes in bar code readers and product tracking, and RFIC with clients including Wal-Mart and UPS

· Data devices that capture, manage and move data

· Motorola is now the leading supplier of bar scanners.

Motorola’s Personal Communication Segment (PCS) – makes cell phones, pagers and other devices

· Unit represents 40% of their revenue – January 2005

· Problems in early 2000’s:

· Internet enabled phones selling much slower than they expected

· Felt the pain of not offering less expensive phone fast enough in the market in 2000

· Problems with the cost and manufacturing of their handsets – Has 10 different platforms of phones using multiple components making manufacturing expensive

· Solved through outsourcing

· Outsourcing their handsets, 2 way radios, and messaging devices to Celestica for $1B

· Celestica will get its operations in Dublin and Mount Pleasant, Iowa for $70M

· Claims they won’t sacrifice profitability to increase market share in its handset operations

· May 2001 – had 14% of the cell phone market share

· 3G handset – A820 – Went on sale in the Fall 2002 – first 3G handset for Europe

· China accounts for 20% of their wireless equipment sales and 13% of total handset sales

· 3Q2003 – Launched 15 new cell phones and 16 during 4Q2004

· Cell phone division is their semiconductors unit’s biggest customer

· Fourth quarter is typically huge due to Christmas sales

· First half 2005 - Motorola is making profits from a very successful line of cell phones they introduced in 2004

· Launching a phone that will compete with a Blackberry and Treo in 1Q2006

· Will have a keypad and run of Microsoft Mobile OS version 5.0 initially

Motorola General Info and Technology:

· Motorola Semiconductor Unit: Freescale Semiconductor (FSL)

· Semiconductors account for 17% of their revenue – may be looking to sell the division if it doesn’t become profitable

· More venerable to downturns in the market because they produce their own chips

· September 2001 – announced they designed a new smaller chip made of silicon and gallium aresenide – won’t be in consumer devices till 2003

· Spun off its semiconductor unit as an IPO – July 2004

· Unit has $4.8B in sales in 2002 represent 18% of total revenue and its second largest unit

· Unit segments include:

· Automotive and Industrial – the strongest segment

· Mobile Phones

· Data Networking

· With the release of its semiconductor unit – wants to focus primarily on their equipment business

· Motorola Infrastructure Unit:

· Hired Ericsson’s US CEO to run its Network Solutions Division

· Won a $556M contract with China Unicom and a $510M contract with China Mobile for upgrading with cell networks – January 2004

· Unit pulled in 16% of sales in 2003 and 23% of pretax profit

· Nextel is their biggest customer and practically their only one in the US

· Asia:

· Motorola is exposed heavy to Asia

· 2002 – 25% of all cell phone sales and 14% of total handset sales were from Asia

· China:

· China accounted for 20% of their wireless equipment sales and 13% of total handset sales in 2001

· 2004 – Motorola claimed to be No.1 in China with a 15% to 20% market share – June 2004

· Launched 14 new phone in China in 2004

· “We have a number of products that are customized to the Chinese market place and we hope to reclench the ground that we lost to Nokia” – David Tager – Motorola’s Director of Strategic Operations in High Growth markets

· Lost top spot to Nokia in China in the beginning of 2005

· Strong push for low tier phones

· Chinese Market share

· 2004 – 17% (Nokia 15%)

· 1Q2005 – 12.1% (Nokia 19.7%)

· Motorola and Nextel:

· Nextel is their biggest customer for infrastructure and practically their only one in the US

· Nextel uses Motorola’s iDEN technology for “push to talk” service

· Fallout for Motorola with the Sprint-Nextel merger:

· Motorola has been the sole supplier to Nextel for phones and Nextel is Motorola’s largest customer for handsets and infrastructure

· “The question at the end of the day is not whether Motorola will be negatively impacted…the question is to what extent: - Tal Liani – Merrill Lynch – December 2004

· Motorola specializes in iDEN Technology which is used for “push to talk”

· Nextel’s phone is Motorola’s most profitable phone

· iDEN pulls in roughly $3B annually for Motorola

· Nextel plans to keep using iDEN until 2008

· VOZML – lets people use telephones and simple voice commands to get into the internet – VOXML programmable language

· Motorola Notables:

· First Quarter 2001 – first quarterly loss in 16 years

· Slashed the number of devices it sell from 100 to 45 in 2003

· Cell phone sales represented 43% of their revenue - 2003

· Had 13% of the DSP market (Digital Signal Processor) in 2001

· MOT has had 15 consecutive quarters with “special charges” in early 2000’s

· “If a company has taken 14 consecutive quarters of special charges, these charges aren’t special, they’re a normalized cost of MOT doing business” – Vivian Mamelac – Arnhols & S.Bleich Roeder

· Operating margins

· 2Q2003 – Cell phone operating margins were 3.3% - Nokia’s was 23%

· Only Handset maker in 2003 to not have double-digit growth in shipments – only 7%

· 3Q2004 – 40% of Motorola’s revenue was from their handset division

· Motorola’s sales normally drop 10% to 15% in the first quarter compared to fourth quarter in their mobile phone division.

· 2007:

· Razr phone sales began to erode and lacked a new version or new portfolio of phone to entice customers.

· “”They have clearly written off 2008 and won’t have new products until 2009” – Ping Zhoa, Credit Insights, January 2008

· Two way radio technology

· Once was exclusive to Nextel – now selling to Verizon

· Nextel is Motorola’s biggest phone infrastructure customer

· Symphony Digital Radio Chipset – converts analog signals from AM/FM into digital signals

· Motorola CEO Succession:

· September 2003 – CEO Chris Galvin resigned – Took CEO helm in January of 1997

· Replaced by Edward J. Zander – Was a managing director at Silver Lake Partners and former President, COO, and Chairman of Sun Microsystems

· Ed Zander became CEO January 2004

· Ed Zander stepped down at the end of 2007

· Greg Brown, Motorola’s president is the new CEO.

· “They’re a conglomerate competing with very focused competitors in each of their core business…they’re jacks of all trades, masters of none.” – Brian Modoff – Deutsche Bank

· Motorola and Selling TV’s?

· Planned to begin selling TV to consumers in 2004

· October 2004 – Motorola dissolved the venture with its Chinese partner – Its partner will sell its TV’s in China under the Motorola name but will not ship any to the US

· Set-Top boxes for Cable TV:

· Motorola is the largest supplier of Set-Top boxes with a US market share of 60% (European market dominated by Thomson)

· Supplies Comcast with a major majority of their boxes (Time Warner Cable uses boxes from Scientific-Atlanta)

· Motorola is heavily dependent on Nextel – Nextel generates almost half of their handset profits and almost all of Motorola’s infrastructure profit – 2004

· Developing 36 new handset with NTT that will be out spring of 2005 and the first FOMA models (3G) that can be used outside of Japan on the GSM system

· “We have margin’s and profits” – CEO Ed Zander in October 2004 (3Q2004)– Also referred that Nokia can’t say the same statement

· Turkey’s richest and most powerful family, The Uzan’s, accused of defrauding Motorola $2.13B during the late 1990’sthrough their Telsim Mobile Phone Network

· Focus and thoughts for 2005:

· Motorola is focusing on International revenue for growth from 2005 going forward

· Motorola’s operating margins can’t touch Nokia’s – Motorola’s margins are almost half of what Nokia’s are in 2005

· “Motorola wants to own the iconic thin approach here” – CEO Ed Zander – June 2005

· Razr phone sales are very strong in first half of 2005

· Phone was launched in the fall of 2004 and has sold 5M from the launch to June 2005

· They are No.1 in Latin America and the US with the strong sales of Razr

· “To be neck and neck with Samsung just last year and now move the bar above them like they are is quite an achievement” – Kenneth Leon – Standard and Poor’s – July 2005

· Sprint PCS is testing Motorola’s WiFi technology called “Canopy” – Announced early 2005 and Sprint will begin trials in 4Q2005 and early 2006

Brokerage	Recommendation	Sentiment
Goldman Sachs
Morgan Stanley
Bear Stearns

Nextel (NXTL) Reston, VA CEO Timothy Donahue www.nextel.com

· US 5^th largest wireless supplier

· NII Holdings – Their International Division

· 95% owned by Nextel

· Wireless service in Latin America and the Philippines

· Possibly spinning it off

· Digital and analog wireless provider

· Nextel Subscribers:

· 7.2M - May 2001

· 8.7M - Feb 2002

· 9.6M - June 2002

· Added 1.96M subscribers in 2002

· 10.6M - January 2003

· 11.1M - April 2003

· 11.7M - July 2003 –– avg. rev per user - $69

· 12.9M - April 2004

· 14.5M – October 2004

· 16.2M – End of 2004

· 17.8M – June 2005

· Stats:

· Average revenue from subscriber - $67 – Highest of any wireless operator

· Average revenue per user - $73 per quarter – (Key Industry metric)

· Lowest subscriber turn-over among carriers

· Largest base is business customers who run up the largest bills in the industry and stay with their current carrier the longest

· Two way radio technology – can connect up to 100 people – Other carriers planning to add direct connect services

· Motorola exclusively makes two way radio technology for Nextel but will now offer similar technology to Verizon wireless – May 2003

· Nextel is Motorola’s biggest phone infrastructure account

· One of the most highly leveraged wireless companies

· Expects positive cash flow by 2004

· Nextel’s network based on iDEN – Not capable of 3G speeds or transferring data over its network

· Major problem going forward

· IDEN was created by Motorola

· International Unit filed for Chapter 11 - May 2002

· February 2004 – six straight quarters of quarterly profits – went almost 10 years without a profit

· CEO Daniel Akerson replaced by Timothy Donahue

· Boost Mobile:

· Pre-paid cell service with Walkie-talkie service

· Geared to youth including, skateboard, surfing, snowboard etc, movement/lifestyle

· No monthly contract with a average revenue per customer of roughly $30 in 2004

· Average revenue per user in June 2005 - $39

· Subscribers:

· 405,000 – April 2004

· 800,000 – October 2004

· 1.7M – June 2005

· Nextel & Debt:

· Has $13.4B in debt

· Retired $2.6B in debt and preferred securities in 2002

· Has retired $3.8B in debt – April 2003

· Has $959M in debt due before the end of 2005

· Motorola controls 83M shares

· Expecting free cash flow of $1.6B in 2004 – Had free cash flow of $1.3B in 2003

· Nextel’s Radio Spectrum

· Controls a thin radio wave spectrum and in dire need of more for future growth – Spectrum is in the 800 Megahertz range

· Lobbying the FCC to increase the spectrum and will give up their frequencies that sometimes interfere with emergency frequencies (They’re two different frequencies but are very close on the spectrum) for two new big splices of a new radio spectrum

· Will pay $850M to emergency official to help the upgrade their equipment and up to $2B for the actual spectrum

· FCC Chairman Michael Powel not supporting Nextel’s advances on this spectrum – May 2004

· June 2004 – Awarded 10 megahertz of spectrum in the 1.9gz band – valued at $5.4B

· Nextel will return the spectrum that interferes with the emergency frequency which is valued at $1.6B

· Nextel will also spend up to $3.2B to transition the users of the emergency frequency in a smooth transitions

· 3G – Testing EV-DO and technology from Flarion

· 1Q2005 – Nextel will announce its pick for tech gear and CDMA and Flash OFDM initiatives

· 2005 – Upgrading their entire network with total cost running around $2B - $3B

· With merger with Sprint – will not be facing this large bill alone

· Merging with Sprint for $38.5M – December 2004

· Will be the No.3 wireless player with roughly 35M subscribers

· Entity will be called Sprint-Nextel with Timothy Donahue being the Chairman and Sprint’s Forsee to be CEO of the combined company

· Fallout for Motorola:

· Motorola has been the sole supplier to Nextel for phones and Nextel is Motorola’s largest customer for handsets and infrastructure

· “The question at the end of the day is not whether Motorola will be negatively impacted…the question is to what extent: - Tal Liani – Merrill Lynch – December 2004

· Motorola specializes in iDEN Technology which is used for “push to talk”

· Nextel’s phone is Motorola’s most profitable phone

· iDEN pulls in roughly $3B annually for Motorola

· Nextel plans to keep using iDEN until 2008

· “The world is going wireless” – Tim Donahue

· Nextel planning to offer high speed internet using WiMax

· New company will be called SprintNextel

· Nextel needs to buy-out Nextel Partners - Its affiliate filed a complaint

Next Level (NXTV) Rohnert Park, CA www.nlc.com

· CLEC – competitive local exchange carrier

· Motorola has a 74% stake in the company

· April 2003 – MOT purchasing the remaining stake

Nextlink Communications (NXLK) (XOXO) McLean, VA CEO Daniel Akerson http://www.xo.com/

· CLEC – see XO Communications below

· Changing its name to XO Communications

· Voice and high speed internet connections

· Bought Concentric Networks for $2.9B

· Working on 9 local markets in Europe

· Acquired three broadband licenses in the UK using fixed wireless platforms

· In Chapter 11 reorganization

Brokerage	Recommendation	Sentiment
Merrill Lynch
Morgan Stanley

Nippon Telegraph and Telecom – NTT (NTT) Japan www.ntt.co.jp/index_e.html

· Japan’s largest telecom company

· Japanese Government owns 100% of NTT Long Distance and International – 53% of NTT holdings - 67.15% of DoCoMo

• Japanese government expected to sell a large chunk of its controlling stake

· Had the world’s highest market cap in early 200’s

NTT Acquisitions, Stakes, and notable contracts :

· Bought 90% of Virio – hosts 400k websites, 14k e-commerce sites

· Buying a 35% stake in Hutchinson Whampoa

· Awarded IBM with a 10 year $15B contact from computer services

NTT General Info:

· Vowed to bring optical fiber to all Japanese homes by 2005

· June 2003 – Announced new fiber optic technology that will increase speeds to 1 gigabyte per second – currently 100 megabits a second

· Spun off NTT Urban Development, November 2004 as an IPO – Real-estate development arm

· Exited its PHS Services – March 2005

• Included its Hanyphone Systems and will no longer obtain new customers and will end all services by 2007
• Was No.2 in PHS and the unit had never turned a profit
• PHS was a precursor to 3G service – NTT will solely focus on 3G or “FOMA” through NTT DoCoMo

Brokerage

Recommendation

Sentiment

NTT DoCoMo (DCM) CEO Masao Nakamura http://www.nttdocomo.com

· NTT’s wireless group – controls 60% of the Japanese wireless market

· Japanese Government owns 67.15% of DoCoMo – thus unable to issue new shares and can’t use stock as currency

· DoCoMo “Do Communications Over The Mobile Network”

DoCoMo Acquisitions and Stakes:

· 15% stake in KPN (Dutch Telecom) – will make it a 2^nd tier competitor in Europe

· Now reduced to 2.2% - 2003

· Hutchinson 3G UK – 20%

· Sold stake in June of 2004 for $217.3M (120M pounds) – Bought the stake in 2000 for 1.2B pounds

· Taking a 21.4%stake in KG Telecom of Taiwan for $540M

· Will be reduced to 4.9% after KG Telecom and EastOne merge

· Taking a 15% stake in SK Telecom of South Korea – Korea’s largest cellular provider

· Taking a 16% stake in AT&T Wireless (AWE) costing $9.8B

· Will market I-Mode in the US

· To Make I-mode work in the US, AT&T is having to build its networks using faster wireless tech. to comply with the Universal Mobil Telecom System

· 3^rd- generation systems will be out in 2002

· Taking a $4M stake in Emcore Tech (Beijing Lingtu Spacecom Tech) – Chinese IT firm – January 2005

· Spending $4.2M on a stake in Digital Media Group – January 2005

· Digital Media controls AD’s on subways and other transportation vehicles in Shanghai

· Acquiring a 42% stake in Tower Records Japan for $108.2M – November 2005

DoCoMo I-Mode – Mobile cellular and Internet service:

· Charges by the “packet”

· Subscribers:

· 16M users – 1 in 8 Japanese use the service

· 27.7M subscribers - November 2001

· Has 42M subscribers – end of 2003

· 46.9M subscribers – October 2004

· 47.7M – December 2004

· Offering I-Mode in Taiwan through KG Telecom (20% owned by NTT)

· Disappointing results in Europe – KPN launched I-Mode in German and Netherlands

DoCoMo 3G Wireless:

· New 3^rd generation phones that can download video and music 40X’s faster than current phones – Offered in May 2001

· First carrier in the world to offer 3^rd generation phones

· Will be nationwide in Japan in Spring of 2002

· Goal of 150,000 subscribers by March 31, 2002 the end of its fiscal year

· As of March 21^st 2002 – only 70,000 subscribers

· Goal of 6M subscribers by March 2004

· Projected to swing a profit in 2005

· Has spent $10B building the network

· Called FOMA “Freedom of Mobile Multimedia Access”

· Will be able to view video clips and have teleconferences

· Using W-CDMA – Considered revolutionary

· Speeds up to 384 kilobits per second

· Users will need to purchase a W-CDMA phone

· Competitor is KDDI using CDMA2000 1X

· With a 16% in AWE – DoCoMo will press for W-CDMA in the US

· Not Qualcomm’s technology (CDMA2000) – WCDMA is an open standard

· 3G subscribers:

· 2M 3G customers at the end of 2003

· 3.1M – May 2004

· Wants 10M subscribers by the end of March 2005

· 6.5M – October 2004

· 7.6M – December 2004

NTT DoCoMo General Info:

· “Japan’s worst phone are better than our best phones”

· M-Stage – Music to phone downloading

· From 1999 to 2002 spent 1.9T yen on small stakes in a wide range of mobile companies

· 2002 - Has written off most of its $1.2B it invested in overseas operations

· 2004 – will write down 1.5T yen or 79% of the value

· Market share in Japan:

· In 2002 – 58%

· In 2003 – 56% - Staring to feel pressure from KDDI

· CEO Masao Nakamura succeeded Keiji Tachikawa, May 2004

· 2004 – Expecting first drop in annual revenue

· Developing 36 new handset with Motorola that will be out spring of 2005 and the first FOMA model that can be used outside of Japan on the GSM system

· 4G technology - Spending $91M in R&D on 4G – was been achieving speeds of 300 megabytes per second – Expecting launch in 2010

· 2006 – Number portability goes into effect in Japan and we’ll most likely see recompressions in the first year or so due to switching

· 2006 – Selling a Blackberry type phone in Japan that reads both English and Japanese

Brokerage	Recommendation	Sentiment
UBS
Goldman Sachs
JP Morgan

Nokia (NOK) Finland CEO Jorma Ollila http://www.nokia.com/

· In 1865 produced wood pulp

· Makes cell phones, switches and satellites

· Nokia Handset Market Share Worldwide:

· 3Qrd2000, had 30.6% market share

· Jan 2001 -NOK 30%, MOT 13%, Ericsson 9%

· Summer 2001 - NOK 35.3%, MOT 13.2%, Siemen’s 6.9%, Ericsson 6.8%

· 1stQ2002 – 35% of market

· 2002 – 35.14%

· 2003 – 34.8%

· 2004

· May 2004 – 29%

· 4Q2004 – 31.4%

· 2005:

· 2Q2005 – 33% (Motorola – 18%)

· No. 2 in the US behind Motorola’s strong sales of its Razr line

· 2007:

· 4Q2007 – 40%

· Has 50% of GSM market

· Operates in 130 countries

· Network market share 2002 – 5.8% with $12.9B in revenue – Network is GSM based only (No.1 network market share is Ericsson with 29.5%)

Nokia Divisions: - Starting Jan 2004

• Mobile Phones – Handsets and voice
• Multimedia – Handsets for gaming, music, voice
• Networks – Mobile phone networks and technology
• Enterprise Solutions – Handsets and server software for companies

Nokia Acquisitions and Stakes and Ventures:

· Nokia Venture Partners - $500M venture fund investing in mobile internet start-up companies

· Buying Amber Networks for $421M

· Increased its stake in Symbian to 32.2% from 19% by buying Motorola’s stake with Psion – August 2003

· Nokia’s total stake now 48% - February 2004

· SCI is taking over manufacturing in two of their plants

· Outsourcing all manufacturing operations of Flextronics (FLEX) – January 2004

· Partnership with Intel and Symbian to design new handset templates that incorporate PDA functionality – 2004

· Using Microsoft’s cell phone technology in their new high end phones for digital music and email also with the ability to transfer or beam files to separate phones – Announced February 2005

· Will use Microsoft’s compression, copyright protection and synchronization software

· Will continue to use Symbian software on other phones

· Collaborating with Intel on WiMax technology for laptop network base stations and mobile devices

• Nokia plans to launch its first WiMax offering in 2008

· Bought Intellisync for $430M – Mobile email services for wireless applications

Nokia General Info:

· Nokia’s stock accounts for almost ½ of the value of the Helsinki Stock Market

· Aggressively trying to increase market share at the expense of profitability

· Going after the lower-end handset market

· 2003 – strong focus on low-end phones in emerging markets

· Nokia Partners:

· Texas Instruments is largest supplier, Infineon is their biggest customer

· Using Endwave transceivers for their phone for the next two years

· Big Concern – Will people want the same software on their mobile as their PC?

· Could push Nokia to license Microsoft software

· Would be a costly move that would ultimately shrink their profit margin

· N-Gage – Video game player

· Released November 2003

· Going into the video game business with its own console or mobile video game player – Similar to Gameboy

· Called N-Gage – Will use Nokia’s Series 60 handset software

· Will have phone, FM stations, MP3 player and Gameboy like qualities

· Very disappointing result in early 2004

· Now almost considered a flop – September 2004

· With Ericsson and Siemens in China – All agreed to lower the limit their licensing fees to less than 10%

· “Ericsson and Nokia can afford to throw away some licensing revenue…but need WCDMA to succeed at any cost”

· WCDMA: Nokia’s version of CDMA

· Nokia and Ericsson have 50% of all WCDMA patents

· Putting pressure on Qualcomm for GSM/WCDMA chip –

· Speculation is that since Nokia controls numerous Intellectual Property patents on WCDMA, Nokia can a 15% cost savings verse their 3G competitors in the 3G arena

· Estimated Royalties from WCDMA – Roughly 7% of the wholesale price of the phone but can go as high as 25% - 2004

· Pressing WCDMA – Wideband CDMA in China with China Mobile

· Nokia makes WCDMA network equipment but no CDMA2000 (Ericsson makes both)

· WCDMA is an open standard developed by many companies

· So more devices and services will be marketed

· CDMA2000 – QCOM controls its development

· WCDMA is very expensive and complex to deploy – 100+ companies own WCDMA patents

· European Government mandated the use of WCDMA

· CEO Jorma Ollila Quotable’s:

· “We do envisage a time when handsets and network gear won’t be a good opportunity, but it is further down the road” – November 2003

· “Market share is critical in this business” Jorma Ollila – April 2004

· “I can’t give you an exact date… but software spending will pay off” – July 2004

· “This is a brand business, a lifestyle business…This has to be supported by a somewhat higher marketing spend” – October 2004

· “There is actually a cost in having an extremely broad portfolio [of handsets]” – April 2005

· In 2003/early2004 – Nokia focused on high end phones and neglected the mid market which took off

· During this time was busy developing software

· “I can’t give you an exact date… but software spending will pay off” - CEO Jorma Ollila – July 2004

· Series 60 – Nokia’s proprietary operating software

·

· Average selling price of their phones – strong indicator on the momentum in which segment their phone are selling to the public.

· Smart Phones:

· Nokia’s smart phones sales doubled in 2004 from 2003

· Estimated that Nokia shipped 11.5M smart phones on 2004 – a 66% market share worldwide for “smart” phones – reported from Canaly.com

· 74% market share in Europe for smart phones – April 2004

· Nokia Manufacturing Plants:

· Has 10 worldwide including two in china, one in South Korea and a new one slated for Madras India – 2005

· New CEO Olli-Pekka Kallasvuo

Nokia’s Notables:

· 2000:

· Sales in 2000 rose 64% and sold 128M handsets

· Has a revenue growth target of 25%-35% through 2003

· Replacement sales accounted for 40% of all unit sales in 2000

· 2001:

· For 2001, expected to bring in .79 euro cents a share with 500M-550M handset sales

· 2002:

· Network Division – Wireless infrastructure accounted for 20% of their revenue – May 2002

· 2003:

· 2003 – sold 471M units

· Sold 5.5M smart phones (target was 10M)

· 2004:

· Expected mobile phone market to grow 10%

· Launched 35 new phone models in 2004

· Not expected to turn the bend until 2005 at the earliest – lost out in 2003 and early 2004 due to the popularity in camera phones and sharp color screens which Nokia failed to address

· Nokia lost market share in the high end handset market from Samsung as Nokia shifted its focus on the mid market in 2004

· 2005:

· 2005 – Sees wireless email as the “killer ap”

· 1Q2005 – Net income increased 18% - first double digit gain since 1Q2001

· Seeing strong shipments to China in the first half of 2005

· By the end of 2005, Nokia wants half of its handset revenue to come from clamshell models – 1Q2005, clamshells models were only 20% of handset revenue

· Entered into an agreement with the NBA to provide video highlights from games – Announced June 2005

· Increased their 2005 target sales number to 760M from 700M

· Seeing growth mostly in emerging markets with their low end products

· Expecting weak performance in their Network Division and lower margins in their device business in the second half of 2005.

· Had margin targets of 17% to 18% and now expecting 13% in their device business

· Profit Margin:

· Has 20% profit margins

· 70% of its revenue from sales of its handsets – Infrastructure business accounts for 25% of revenue

· China – Pulls in roughly 9% of total sales

· Chinese Handset Market share

· 2004 – 15% (Motorola 17%)

· 1Q2005 – 19.7% (Motorola 12.1%)

· India is their second largest market in Asia

Brokerage	Recommendation	Sentiment
JP Morgan
Merrill Lynch
Bear Stearns

Nortel Networks (NT) Ontario, Canada CEO Frank Dunn http://www.nortelnetworks.com/

Formed when Northern Telecom Ltd. bought Bay Networks - 6/15/98

· Bought Bay Networks for $7.68B

· Four Units: Wireless Networks, Enterprise Networks, Wireline Networks, and Optical Networks

Nortel Acquisitions and Stakes and Ventures:

· Bought Clarify for $2.1B in October 1999 – Consumer Management Software

· Acquired Qtera for $3.25B in December 1999 – Fiber Optic Data technology

· Acquired Promatory for $788M in Jan 2000 – DSL technology

· Acquired Xros for $3.25B in March 2000 – Makes optical switches

· Acquired CoreTek for $1.43B in March 2000 – Makes optical lasers

· Acquired Architel for $395M in April 2000 – Makes Internet Software

· Bought Qtera Corp – sends data through fiber-optic networks over long distances without required frequent regeneration – 1000 miles without regeneration

· Was in talks with Corning – both stepped away from the table

· Acquired Shasta Networks

· Acquired Alteon Web Systems in July 00’ for $7.8B (now $5.5B) – web switching company - speeds response times at busy web sites and allows preferred web users priority access – also tracks users purchasing behavior (similar to Arrowpoint Comm. which CSCO bought) – used to be execs. at Bay networks – also called “load balancing” software

· Has a 81.25% stake in Arris Interactive in which is exchanging the share for $325M in cash and a 46.5% stake in a new spin-off from Arris Interactive called Arris Group – makes and develops web access and voice over cable systems – voice over cable will be almost ½ of its revenues

· Buying a laser making facility in Switzerland from JDSU for $3B – makes pump laser chip used to amplify signal sent along fiber

· With CoreTek – turnable lasers that break laser wavelengths up into several wavelengths

· With Symantec – partnership to develop a “security engine” for data centers and corporate networks to improve security

· Joint venture with LG Electronics for telecom gear and will work with China Putian (State Owned) for 3G gear – Announced January 2005

· Acquiring PEC Solutions for $448M- April 2005

· PEC has strong US government contracts especially Homeland Security

Nortel Notables:

· Had operating earnings in the low 40% range in 2000 and an outlook of 30%-35% in 2001

· Jon Roth on their 42% sales growth in 2000 “ …Its all we can really mange for our scale”

· Had 38% market share of optical transport equipment from Oct 2000 – Jan 2001 – was 29% in 1999

· Had optical sales of $2.4B in 2000 – most of those sales was to Nortel itself

· Has a $1.2B revolving credit line from Citigroup and J.P. Morgan

· Has access to $3.4B in untapped credit lines

· 2001 - Expected 30%-35% growth in sales and operating earnings in 2001 and optical networking sales to grow by 35%-40%

· CEO John Roth “Meaningful growth in equipment spending by carriers isn’t likely before the 2^nd half of 2002

· “The company is totally cash strapped and is likely to continue funding its operations this year by tapping credit lines”

· 2002

· Expected to return to profitability in 4Q2002

· Cash Burn rate of $2.1B through 2002 and $1.63B in 2003

· Doesn’t expect a meaningful recovery in the long-haul optical market before late 2003 – early 2004

· 2003 – First full year profit in six years – Profit of $732M

· Company gross profit margin target – Mid 40%

· 2004: Revenue Breakdown:

· Wireless – 46%

· Enterprise – 26%

· Wireline 17%

· Optical 11%

· 2004 Geographic Breakdown – 49% from US, 26% from Europe, 14% Asia

· 2005:

· Resignations:

· President and COO Gary Daichenat (From Cisco) resigned June 2005 after only three months on the job

· Chief Technology Officer Gary Kunis resigned June 2005 after only two months on the job

Nortel and Debt:

· Cash:

• $4.9B in cash - June 30 2002
• $3.69B – May 2005

· Debt of $3.9B

· $300M debt due October 2002

· $200M debt due September 2003

· $1.5B debt due February 2006

· $1.8B debt due September 2008

Nortel General Info:

· Four operating divisions: Wireless Networks, Wireline Networks, Enterprise Networks, Optical Networks

· Optical networking equipment - designs and manufactures systems that transmit digital voice and data through fiber

· Feb. 2002 – shuttering all of its optical switch operations temporarily

· VoIP

· Offering Voice over IP with Cable and Wireless

· Won a contract with Verizon to upgrade its fixed line network for using VoIP – January 2003

· Wants a 25% share of the global 3^rd generation (3G) mobile internet market

· Notable contracts:

· Building AT&T’s new wireless infrastructure for the alliance with NTT’s DoCoMo’s I-Mode

· Won a contract with Verizon to upgrade its fixed line network for using VoIP – January 2003

· Nortel has a 60% market share for DWDM (Dense Wavelength Division Multiplexing) – Ciena 12%

· Wireless Gear:

· Wireless equipment accounted for 39% of sales in 2001

· In the first nine months of 2004 – roughly half on Nortel’s revenues

· CEO Succession:

· John Roth CEO from 1999 to 2002

· CFO Frank Dunn took over CEO position from John Roth - April 2002

· Cash Problems:

· “Nortel will run low on cash in 2004 and may have to put bond holders in charge of the company” – Susan Kalla – Friedman Billings Ramsey

· “Likely to burn through $400M a quarter for the foreseeable future”

· By end of 2002 – cash fell below $1B

· Aveci Systems (AVCI)– Key supplier to Nortel for IP routers

· Accounting Scandal of 2003/2004:

· Restating results for 2000 through 2002 and first half of 2003 – October 2003

· Investigations:

· SEC formal investigation into accounting practices and needs to restate and delay 2003 earnings. With delay of posting full year 2003 numbers, Nortel is no longer in compliance with its various debt and credit line obligations and may be forced to accelerate its debt repayment

· Ontario Securities Commission launching their own investigation – April 2004

· Royal Canadian Mounted Police launched an investigation August 2004

· 2004 – Under investigation by the SEC, US Justice Department and Ontario Securities Commission

· Suspended CFO Douglas Beatty and Controller Michael Gollogly due to accounting errors for 2003 – March 2004

· Both fired May 2004

· Five director voluntarily stepped down

· Twelve senior executives returning $8.6M in bonus they received (from fictional earnings) from the company

· CEO Frank Dunn Fired – May 2004

· New CEO William Owens

· Heads of all four units on paid leave of absence (Wireless Networks, Enterprise Networks, Wireline Networks, and Optical Networks)

· SEC looking at reserve accounts (money set aside for future liabilities)

· Also in question is Nortel’s “Return to Profitability” contest/promotion/incentive program for employees that is directly linked to bonuses

· Problems stem from their booking of accruals and provisions from non-cash accounting entries

· Most problems from Fiber-Optic division and Enterprise Network division

· 2003 Annual Report

· If Nortel does not file by December 15 2004, SEC “may commence suspension and delisting procedures”

· Nortel filed 2003 with revised net income of $434M (Falsely stated they had $732M) with revenue of $10.2B (Previously said it was $9.8B)

· Released first half results for 2004 – February 2005

· Restatements and fallout of 2003/2004 debacle:

· 2003’s first half profit will become a loss and one third of second half’s profit is a loss

· Fired ten executives and senior staff

· Will be wiping out $250M in past revenue

· 2003 net income will most likely be reduced by 28%

· Has not filed for 2003 or any quarter in 2004 – December 2004

· Plans to file 2003 results, First and Second quarter 2004 results on January 10 2005

· Selling all its manufacturing facilities to Flextronics for $675M to $725M – June 2004

· 2004 – Bid so low on a new contract in India (Bharat Sanchar Nigam) that Nortel could lose $200M on the $500M – Steven Levy – Lehman Brothers

· China – working with Chinese phone maker Putian on developing TD-SCDMA for the Chinese market

Orange PLC

· British mobile phone operator

· 3^rd largest cell concern in UK

· Acquired by France Telecom

PairGain (PAIR) (ADCT) Tustin, CA CEO Michael Pascoe http://www.pairgain.com/

· Big in DSL

· Acquired by ADC Telecom for $1.5B

PMC-Sierra (PMCS) Burnaby, Canada, BC CEO Robert Bailey http://www.pmc-sierra.com/

· Designs chips used to accelerate telecom transmission

· See Networks section

Brokerage	Recommendation	Sentiment
Morgan Stanley
Smith Barney
JP Morgan

Qualcomm (QCOM) San Diego, CA CEO Paul E. Jacobs http://www.qualcomm.com/

· CDMA Technology – founder and collects all licensing

· Licensing/Royalty fees

· Qualcomm receives between 5%-10% of the revenue a licensee earns from its profits using CDMA technology

· Receives 2% to 6% on all CDMA products sold

· Looking for 3% to 5% on royalties from WCDMA

· Average price per phone using CDMA is $209 – July 2004

· “Customers are gravitating towards sophisticated phones with cameras and high resolution screen with higher prices which can and will produce higher royalties that are based on the phones selling price”

· 3G phones now represent 25% of Qualcomm’s total royalty fees

· Changing the structure of royalties going from based on selling price of the phone in the quarter they were accrued to now based on received licenses - starting 4Q2004

· CDMA 2000 – Their 3G (Third Generation) cell platform

· All of 3G is based on some form of CDMA

Qualcomm Alliances and Entities using CDMA

· China – Favored GSM tech over CDMA in early 2000 and late 90’s – stock fell in 2000 due to this speculation

· China could represent as much as 5% of revenue in 2002

· Global Star – Founded by Qualcomm and Loral Space

· Satellite based phone network

· Global Star awarded QCOM $117M in contracts for the manufacture of both hand-held and fixed Globalstar satellite telephones for CDMA

· QCOM has invested $618M – 2002 figure

· In 2000 - Global Star failed to pay QCOM a $22M loan payment

· Global Star in Chapter 11

· Alliance with Ford to make mobile phone services in the cars – similar to GM’s OnStar

· China’s United Technology (Unicom) will use CDMA in a small project in China – refuses to say how big the network will be laid out

· QCOM has to cut royalty fees to 2.65% for CDMA handset sales and will receive only 1% on equipment sales

· S. Korea pays up to 8% on these sales

· China Unicom Group - purchased $1.46B in CDMA network equipment

· Must share royalties in South Korea with South Korean Electronics and Telecom Research Institute – only represents 2% of royalty revenue a quarter

· Feb. 2001 – Proceeding with building a CDMA network in China

· KDDI of Japan (Japan’s second largest mobile phone operator) now using CDMA

· Motorola and Samsung both using Qualcomm’s CDMA chip in their US phones

· CDMA 2000 VS WCDMA (Wideband CDMA)

· CDMA 2000 is thought as cheaper and evolutionary while W-CDMA thought as expensive and revolutionary

· WCDMA is a hybrid and includes non-Qualcomm technology – CDMA 2000 is all Qualcomm technology

· WCDMA’s network is much more expensive to build but also faster at the present time

· WCDMA backers – NTT DoCoMo, Japan Telecom, Vodafone, Voice Stream, All European operators, China Mobile

· CDMA 2000 backers – KDDI, Verizon, Sprint, China Unicom, SK Telecom

· Texas Instruments is the No.1 WCDMA seller with Qualcomm being No.2

Qualcomm Acquisitions, Divestitures, Stakes, Etc

· Sold their consumer products to Kyocera - 2001

· Qualcomm once produced a line of handsets

· Unit was run by Irwin Jacobs son, Paul Irwin from 1995 to 2001

· Bought Snaptrail – GPS position locating – FCC requiring cell phone operators to include location ID technology for 911 calls by Oct. 2001

· Has a 10% stake in ON24 financial news – Now defunct

· Taking a 6% stake for $300M in Nextwave Telecom – Nextwave working on 3^rd Generation CDMA

· With Thomson Multimedia of France (Technicolor) – joint venture

· Technicolor Digital Cinema – management software, encoding and decoding of Qualcomm’s image compression and encryption technology

· Digital compression of movies – puts movie on a dick or hard drive

· Digital Cinema Projectors – chips used only made by Texas Instrument and cost $150,000 per chip – could be a factor

· Buying the 86% of Iridigm Display that it doesn’t already own – September 2004

o Iridigm makes technology for displays that’s based on iridescence from insects

o When voltage is applied it produced different colors by moving elements closer or farther away from each other thus reflecting light or absorbing it

o Technology expected to be out in 2006

Qualcomm General Info:

· Co-founded by Harvey P. White along with Irwin Jacobs in San Diego

· Harvey P. White is now CEO of Leap Wireless

· Irwin Jacobs retired in March of 2005 and his son Paul E. Jacobs took over as CEO

· Who rides on their coat tails – SAWS, CDTS, Interdigital Comm. (IDC) - 2000

· Chip Set Business:

· Thought of spinning off its chip set unit in the early 2000’s but scrapped the idea

· Chipset business is becoming an increasingly strong revenue generating vehicle

· Developing a chipset that incorporates both GSM and CDMA to provide seamless roaming

· Testing chips in China that can download media clips to cell phones

· BREW (Binary Runtime Environment for Wireless)

· New software development for phones introduced in 2001

· Will be able to download programs to your phone to specialize them, such as MP3’s, Instant Messengers, location finders

· Reorganized into two business groups:

1. Wireless and Internet

2. CDMA Technology

· Omnitracks – Global positioning units – used in trucking

· DSP (Digital Signal Processor) market share

· 2002 – 12%

· 2004 – 18% - Texas Instruments is the leader

· Qualcomm Strategic Initiative (QSI) – venture group that promotes CDMA

· Brazilian venture – July 2003 now shuttering

· TD-SCDMA:

• Qualcomm has patents on TD-SCDMA and will receive licensing fees if deployed – Siemens is main supporter

· China also interested in TD-SCDMA and seen as their top choice

· Patents with Interdigital Communication

· Chinese government is wary of giving Qualcomm royalties on TD-SCDMA and the two have been in going on negations in 2004 and 2005

· Qualcomm may have to take a reduced royalty payment in China in order to play ball in China

· 2004:

• 88.2% of all CDMA sales in 2004 used Qualcomm’s technology

· MSM – Mobile Station Modem – Line of Qualcomm’s phone chips

· GSM/CDMA chips

· Wants to have 50% market share for GSM/WSCMA chip – main competition is Nokia

· Will begin shipping their GSM/CDMA compatible chips to Vodafone in the 2^nd half of 2003

· 4Q2004 – Had $112M in royalties for CDMA

· Europe:

· Only sells W-CDMA to three of the six biggest mobile phone makers

· Motorola and Nokia do not use W-CDMA in their phones

· April 2004 – Their manufacturing partners can’t produce much more than 32M set of chip thus leading to some shortages

· 2005:

• Expecting to ship 195M to 215M CDMA units
• April 2005 – Revised to 208M to 218M units
• Sprint using Qualcomm’s version of EV-DO for their wireless high speed connection and will deployed in 60 cities in the US by 1Q2006
• Seeing reduced demand in Europe and re-estimated their unit sales downward by 5M from 50M to 45M – Announced July 2005

· MediaFLO USA

· Network to help US wireless companies broadcast media such as TV signals, sports broadcasts and entertainment to handsets through high wattage transmission towers

· Will need only two to three towers to transmit the signals per city compared to hundreds for current cell use

· Technology called FLO (Forward Link Only) and network will cost roughly $800M with 100 channels and 15 live channels

· Uses radio spectrum Qualcomm currently owns

· Qualcomm currently making licensing agreements with media companies for rights to content and expects to begin roll out as early as 2006

· Negotiating with GE (NBC Universal), Walt Disney, Liberty, etc.

· Unit may eventually be spun-off once it is up and running

· Patent Infringement Cases

· Broadcom filed patent infringement suit claiming Qualcomm is in violation with 5 of Broadcom’s patents – Announced June 2005

· Broadcom now claiming that Qualcomm has monopoly status on CDMA and using their clout and influence to push their new version on WCDMA as the new standard for 3G – July 2005

· Broadcom furious that Qualcomm will receive royalties if their version of WCDMA is adopted

· Qualcomm filed a countersuit against Broadcom a week later

· May 2007 – Court found Qualcomm “willfully infringed on three patents related to EV-DO

· Qualcomm needs to pay Broadcom $19.6M in damages and will not allow Qualcomm to use the technology in any of their semiconductors

· The patents are related to video compression, push-to-talk functions and certain voice and data access on networks

· Injunction could prevent Qualcomm from selling its chips but will likely not effect Qualcomm because all of its chips are sold outside of the US and US court ruling will not have any effect

· Nokia

· Case revolving around 12 patents against Nokia regarding GSM standards used in Europe

· ITC – International Trade Commission

· ITC could place a ban on Qualcomm’s 3G chipsets

· 2008:

· Motorola announced that they would begin using Qualcomm chips for low and mid-tier 3G phones.

Brokerage	Recommendation	Sentiment
Deutsche Securities
Goldman Sachs
JP Morgan

Qwest Communication (Q) Denver, CO CEO Richard Notebaert http://www.qwest.com/

· 4^th largest telecom in the US – service in 14 states

· Merged with US West in July of 1999

· US West – Mountain Bell, Pacific Northwest Bell, and Northwestern Bell

Qwest Long Distance, Data, DSL:

• Internet and Data account for 23% of their overall revenue – wants this to be 44% in a few years
• Sells Long Distance in 0 of its 14 states

· Has withdrawn all nine applications to sell long distance

• Continuing to lose landline subscribers

· Qwest has lost 3M landline from 2000 to August 2004

• In Omaha Nebraska, Cox Cable has replaced Qwest as the city’s largest phone company

Qwest Wireless Operations:

• In 14 states and 8 metropolitan areas
• Tried to sell the operations but there were no takers
• “Qwest doesn’t have the money or appetite for an acquisition nor does the company have the muscle to build its own nationwide network” – WSJ Almar Latour

Qwest Debt Problems and Problems with the SEC:

· Feb. 2002 – tapping its entire $4B bank line of credit to pay off $3.2B in Commercial Paper

· Has $850M in debt payments due September 2002

· March 2002 – SEC launched an investigation into their accounting practices

· Improperly accounted more than $1.6B during 1999 – 2002 – Relating to “Swap transactions”

· From mid 2000-2001 – found $1.56B in irregularities

· 2001 – Improperly recorded $2.21B in revenue

· Banking Loans:

· Debt Covenants – Their debt is not to be more than 4 to 4.25 times EBITDA

· May 2002 – debt at 3.75 times EBITDA

· Debt Load

· May 2002 – 26.2B in debt

· June 2002 – 26.6B in debt

· January 2003 - $20.4B

· November 2003 - $21.3B

· End of 2004 - $17.2B

· February 2005 – Has a debt load that is twice as large as its market cap and stock value

· Spokesman claimed that they Qwest may have trouble meeting a debt-service obligation in 2004

· Has $6.5B in debt due before the end of 2005

· End of 2002 – Had $2.3B in cash on hand

· Wells Notice – Received January 2004 – Due to their use of swaps (indefeasible rights of use (IRU’s))

· “Qwest, even with the growth that they have had, will be hard pressed to improve their financial situation” – Rick Black, Blaylock & Partners – May 2005

Qwest General Info:

· Cutting back on plans to deliver video over phone lines

· Largest shareholder is Philip Anschutz with 18% stake

· Stopped working on its nation-wide fiber-optic network

· Claims full fiber roll-out is not economical

· Will roll out fiber to new housing projects only

· “The Data Center will be the Central Office of the 21^st century” - Joe Nacchio

· “If Qwest didn’t have US West – they’d be in bankruptcy”

· Selling phone directory business

· Receiving $7.05B for their Phone Directory, Qwest Dex Publishing

· Was a reliable cash generator – had free cash flow of $500M

· Now cash flow will be negative

· Sale will be in two parts

· Still waiting to sell the 2^nd half of their phone directory for $4.3B

· Credit rating cut to junk status on May 22, 2002

· Lacks a national wireless network

· Expected revenue growth for 2001and 2002 of 12%-15% with revenue of $21.3B to $21.5B

· KPNQwest – Qwest has a 47% stake – Building a Pan-Europe Fiber Optic Network

· Now in Bankruptcy protection

· Qwest CEO Succession:

· Joseph Nacchio:

· Had a stated growth goal of 15% a year for Qwest

· Resigned June 2002 due to request of the board

· September 2004 – Joseph Nacchio received Wells Notice from the SEC with the possibility of civil charges against him

· Sentenced to six years in prison for insider trading

· CEO Richard Notebaert – became Chairman and CEO June 2002 and announced his retirement June 2007

· Succeeded in reducing some of Qwest debt by more than 40% during his tenure

· Edward A. Mueller became CEO and Chairman August 2007

· Former CEO of Williams-Sonoma and Ameritech (Now part of AT&T)

· Goals for Qwest under Mr. Mueller -

· One of the most aggressive users of “swap” transactions in late 1999 and early 2000’s

· Swap – Selling long-term capacity on its fiber network to another carrier then buying the same amount of fiber on another carriers network and then booking it as revenue

· Boosted 2001 revenue by $1B

· US West portion of Qwest accounts for 80% of revenue and 90% EBITDA

· “Without a strong wireless or broadband operation…Qwest doesn’t have all the weapons the fight the competition” – Paul Wright – Loomis Sayles & Co.

· Of the Baby Bells:

· Qwest is the only “Bell” that does not pay a dividend

· Qwest is the smallest of the Baby Bells and has the smallest amount of yearly revenue

· Only Baby Bells without a national wireless network

· Qwest Cooking the Books?

· 2002 – Auditors found problems with their books – Improperly accounted more than $1.1B during 1999 – 2002

· Restated results for 2000 to 2002

· Expanded loss by $2.53B and lowered revenue by$2.48B

· Had a loss of $1.04B in 2000, loss of $5.6B in 2001, and loss of $38.5B in 2002

· 2004 – Qwest paying $250M in fines for securities-fraud (Second largest fine after Worldcom/MCI)

· Former CEO Joseph Nacchio and COO Afshin Mohebbi both received Wells Notices for securities fraud in 2004

· Over one dozen executives have been accused in civil or criminal charges with most being settled as of October 2004

· SEC 56 page report - October 2004

· Found “pervasive” fraud in every part of Qwest’s business units

· Booked phony revenue through shame transactions

· Qwest Dex, their phone directory business, manipulated revenue by $60M in 2000

· Recognized $3.8B in fraudulently recorded revenue and left out $231M in expenses

· Acquiring some assets of Allegiance Telecom (ALGX in Ch.11) for $390M – December 2003

· Will give Qwest local business and LD operations in 36 markets

· VIOP

· Launching VOIP (Voice over IP) service in December 2003

· Plans to have VOIP in all of its 14 states by end of 2004

· Offering wireless service through Sprint nationwide – 2004

· “At this point, the Bells phone line monopolies are gone. It’s history. It’s over. Phone service has become a commodity…if you accept that we’re a commodity, and not everyone does, then you realize that most commodities in the early stages operate within a deflationary pricing model…in order to differentiate yourself, you have to have outstanding service – CEO Richard Notebaert – January 2004

· Qwest has no intention of rolling out a fiber network for consumer households – CEO Joe Nacchio doesn’t believe it is economically feasible

· Qwest is considered to be the weakest of the Bells – 2004

· Qwest and MCI:

· Qwest offered $6.3B for MCI – February 2005

· With the loss of MCI to Verizon

· Without cash flow from MCI, Qwest may be in for a tough few years going forward

Brokerage	Recommendation	Sentiment
S.G. Cowen
Goldman Sachs
CSFB

Redback Networks (RBAK) Sunnyvale, CA CEO Dennis Barsema http://www.redbacknetworks.com/

· Advanced networking systems that enable carriers, cable operators and service providers to rapidly deploy high-speed access to the Internet and corporate networks

· Makes equipment for moving computer traffic across fiber optic lines

· Subscriber Management System – Largest generator of revenue

Brokerage	Recommendation	Sentiment
Schwab Soundview
Piper Jaffray
JP Morgan

RF Micro Devices (RFMD) Greensboro, NC CEO David Norbury http://www.frmd.com/

· Designs, develops, manufactures and markets proprietary radio frequency integrated circuits, or RFICs, for wireless communications applications such as cellular and personal communication services, cordless telephony, wireless local area networks, wireless local loop, industrial radios, wireless security and remote meter reading

Sawtek (SAWS) Apopka, FL CEO Gary Monetti http://www.sawtek.com/

· Linked with QCOM, CDMA tech and chemical, produces surface acoustic wave devices

· Only 1% of its revenue from QCOM

· Supplies filters and electronic signal processing components based on surface acoustic wave technology

· Being acquired by Tri Quint Semiconductor for $1.29B

Brokerage	Recommendation	Sentiment
Merrill Lynch
JP Morgan
CSFB

SBC Communication (SBC) San Antonio, TX Chrmn Edward E. Whitacre Jr. http://www.sbc.com/

· “SBC is going to be one of the world’s largest telecomm companies.” Ed Whitacre

· Nation’s 2^nd largest Telecom

· In 13 states and controls 1/3^rd of the US phone lines with 60M access lines

· Cingular is their Wireless operation with Bells South – see Cingular above

SBC Acquisitions, Stakes and History:

· Once the smallest Bell in 1984 (Called Southwestern Bell Communications) after AT&T was broken up – Was in Texas and four other states

· Acquired Southern New England Telecom (Connecticut phone co)

· Bought Pacific Telesis (Pac Bell (California/Nevada Bell)) bought for $16.5B in 1997

· Bought Ameritech for $72.36B

· SBC and Ameritech

· With Ameritech – Became the biggest local phone monopoly in America, encompassing 3 of the original 7 baby bells. Posts annual revenue of more than $40B and holds 57M+ phone lines in 13 states from CA and across TX, up to IL, Michigan, Wisconsin, and Connecticut.

· Ameritech has been building its cable TV systems in Michigan and other markets

· Cingular - Merger their own wireless unit with Bell South’s wireless unit (SBC 60% Bell S. 40%)

· Making it the 2^nd largest wireless provider and serving 40 of the 50 US wireless markets reaching 190M people – will be in 19 of the top 20 markets at the time of announcement

· Called Cingular Wireless

· 3Q2004 – Cingular pulled in roughly 32% of SBC total revenue

· Has a 10% stake in Williams Communication, 40% stake in DiAx

· Acquired Webhosting.com in July 2000 – for corporate web hosting

· Acquired Sterling Communication for $4B – E-commerce software

· Has a 43% stake in TransAsia – cell service in Taiwan

· Tender offer of $384M for 58% of Prodigy Internet that it already doesn’t own

· Had a 15% stake in Cegetel – Sold stake early 2003

· Has a 41% stake in TeleDanmark Communications (TDC) – Danish wireless company

· Reduced stake to 9.5% and pocketed $2.1B – June 2004

· Sold its stake in European Belgacom – February 2004

· Reduced its stake in Telekom SA of South Africa from 18% to 9% - pulled in $2.7B from the sale – June 2004

· Acquiring AT&T for $16B – Announced February 2005 – Acquiring the company at no premium

· SBC and AT&T had merger talks in 1997 but fell through due to the Telecom landscape at that time

· CEO Ed Whitacre wants SBC to be a “national” brand – looks like that will be achieved with this deal

· First and only time that a Baby bought Maw Bell

· SBC expected to cut 13,000 jobs and save $15B with the merger

SBC General Info:

· The sheer size of SBC and its purchase orders lets it buy equipment and software for far less than smaller companies pay, “We’re paying 30% less for key components than SNET.”

· Known as the most combative local phone Co. – Was once the smallest Bell (Southwestern Bell) with Texas and four other states

· SBC Segment Breakdown:

· 2004 – Consumer brings in roughly 68% of revenue while business lines bring in roughly 32%

· SBC Lines:

· Local lines

· 2002 – Lost 2.5M land lines customers

· Has 57M total landline customers as of March 31, 2003

· Between April 2002 to June 30 2003 – lost 1.8M local phone lines

· 2Q2003 – 55.8M

· 4Q2004 – 54.7M

· 2Q2004 – 53.6M

· 4Q2004 – 52.4M

· Long Distance

· Has 1.4M long distance customers as of Dec 31, 2000

· As of October 2001 – 4.6M L.D. customers

· October 2003 – 11.5M L.D. customers

· Offers LD in 5 of its 12 states

· Offering long Distance in Texas, started July 2000 – signs up 20,000 customers a day during July – mid September) – has 500,000 total

· Applying to offer long distance in Kansas and Oklahoma and wants to offer long distance in California by the end of 2001

· April 2005 – 22M Long Distance customers

· 2002 – Lost 9% (3.15M) consumer phone lines in 2002

· Lost 4M lines or 7% of its total land lines from 2002-2004

· DSL

· “Project Pronto” first initiative to obtain DSL subscribers - wanted 1M subscribers by 1^st quarter 2001

· Has alliance with Yahoo for obtaining DSL subscribers

· Yahoo get roughly $4 per subscriber

· DSL subscribers:

· 767,000 - Dec 31, 2000

· 2.2M - 4Q2002

· 3.1M - October 2003

· almost 4M - April 2004

· 4.7M – November 2004

· 5.6M – April 2005

· Fastest growing DSL service among the Baby Bells

· Second largest high-speed internet provider in the US

· DSL sees seasonal fluctuations in summer when a majority of the Universities are out for summer and the students turn off their DSL lines

· Operating margin:

· 1Q2002 – 19%

· June 30 2003 – 12.8%

· Launched and testing VOIP (Voice over IP) in 2004

· “It’s certainly at the stage where it has to be reckoned with” – CEO Ed Whitacre – November 2004

· Set-Top Box and TV Services:

· In the 1990’s, approached offering TV services but scrapped the idea – Now being forced to explore and offer TV in the 2000’s due to cable and satellite companies inroads

· Offering Satellite TV Service from EchoStar

· Playing this as a defense against cable companies and their entry into VIOP which will eventually offer video conferencing and other services that the traditional copper line cannot offer at this time

· Has 120,000 subscribers as of August 2004

· Spending $6B on fiber technology that will connect to set-top boxes that will be used in conjunction with Sat TV – The Fiber will be used to download movies on demand

· Developing set-top software with Yahoo and with Microsoft

· Microsoft deal is worth $400M and MSFT will deliver content over SBC’s lines

· “TV is a must” – CEO Ed Whitacre – November 2004

· Fiber – By 2007 wants an all digital network (Fiber) reaching 18M homes (one half of SBC’s homes) – Spending $4B on the development

· Announced Alcatel will supply the gear for the build out

· Spending $6B by 2007

· Rolling out fiber only to the neighborhood unlike Verizon which is going directly to the home

· SBC will use copper lines to go from the “neighborhood” to the home

· Currently SBC does not have the technology to pull this off but believes that it will be made available shortly

· Debt – As of January 2003 - $22B

· CEO Ed Whitacre doesn’t even have a computer on his desk. “I’m not a real techie. I have a computer at home but don’t mess with it all that often” – November 2004

· With AT&T acquisition – Ed might even be referred to as a serial acquirer

· SBC and TV:

· SBC wants to sell TV service and has teamed up with Verizon to lobby legislators to open access in Texas by fighting franchise requirements

· Wants to offer TV by the end of 2005 and offer TV to 18M by the end of 2008

· Bill in Texas was shot down for state wide approval – June 2005

· Now they must get local licenses (franchises) to offer TV and may become a lengthy process

· Texas possibly set a precedent, SBC has enormous clout in Texas and tons of lobbyists

· New Jersey is next to vote on state wide access

· Since SBC isn’t using fiber directly to connect the home (they use copper), they claim they don’t need a local franchise agreement with the municipalities to offer TV

SDL Inc. (SDLI) San Jose, CA CEO Donald Scifres http://www.sdli.com/

· Makes packaging modules for laser – amplifier for telecom equipment

· 980 nanometer pump to power lasers

· Acquired by JDSU for $41B – will give JDSU 80% of the market for some types of lasers

Brokerage	Recommendation	Sentiment
Merrill Lynch
Goldman Sachs
UBS

Sprint Nextel (FON) Kansas City, MO CEO Gary Forsee http://www.sprint.com/

· Nations largest provider of PCS services

· Originally founded as Brown Telephone Co. by Cleyson L. Brown in 1899

· Built first fiber optic network and its first transatlantic long distance service began in 1989

· FON Group – Traditional phone and Dial-up Internet

· Local phone lines mostly in rural areas and smaller cities

· Expects full year 2003 revenue to decline 6%-7%

· Global Market Group – Long Distance and Wholesale operations

· 4^th largest in the US in long distance – LD unit called Global Markets

· Expects full year 2003 revenue growth to decline 8%-10%

· Local service in 18 states – Now spinning-off

Sprint Acquisitions, Stakes and Divestitures:

· Spun-off its wireless operations and is now called Sprint PCS – see below

· Mating dances?

· Mid 2000 – WorldCom tried to acquire Sprint – Feel through

· Almost merged with MCI (WorldCom) in 2000 in a $117B deal

· Sold Yellow pages directory to R.H. Donnelley for $2.23B

· 260 Directories from 18 states

· Removes a steady cash flow for Sprint

· Owns 26.7% of EarthLink

· Stake has been reduced to 17%

· Merging with Nextel for $38.5M – December 2004

· Will be the No.3 wireless player with roughly 35M subscribers

· Entity will be called Sprint-Nextel with Timothy Donahue being the Chairman and Sprint’s Forsee to be CEO of the combined company

· Sprint plans to keep their Long Distance fiber network but expected to spin off local dial tone business consisting of 7.7Mlines

· Will move headquarters to Reston, VA where Nextel is currently located

· Expecting 2005 revenue to grow in the low single digits

· Company will be renamed SprintNextel

· Nextel’s CEO Mr. Donahue will become the company’s Chairman

· Selling its cell phone tower business to Global Signal, thought to be in the $1.2B range – February 2005 – Sprint owns about 6500 towers

· Sprint will sublease the towers for 10 years at $1,400 a month per tower

· This was done to help the acquisition of Nextel go through

· Acquiring US Unwired, one of SprintPCS’s affiliates for $1.3B – July 2005

· Will take on its debt of $266M

· 3.4M of SprintPCS’s subscribers using their network in 2005

· Acquired Gulf Coast Wireless for $287.5M and IWO Holding for $427M – Both were Sprint affiliates

· Spinning-off its local landline operations – Announced July 2005

· 80% of Sprints’ revenue will now come from wireless operations

· Acquired Alamosa Holdings for $3.4B – One of Sprints affiliate carriers paying roughly $18.75 per Alamosa’s customer, a 15% premium – Announced November 2005

· Alamosa has 1.5M subscribers in 19 states under the Sprint brand name

· Is the four Sprint affiliate Sprint has bought out to date

Sprint General Info:

· Gets 70% of their revenue from voice 30% from data - 2003

· Companies with stakes in Sprint: Deutsche Telecom has a 10% stake - France Telecom has a 10% stake

· E-Solutions – Unit for web hosting and fast internet connections

· Has 20 new data centers

· Data subscribers:

· 8.1M – June 2005

· ION – Integrated-on-demand-network - their high speed network

· Has spent $1.3B on their network – now scaling back

· Drag on operating costs - $1B a year

· Plagued by technical difficulties

· Scrapped ION

· Expected full year 2002 revenue decline in Long Distance, Data, and Internet of 7%-8%

· Average revenue per user of $63 per quarter

· Sprint & Debt

· Has $21B in debt at the end of 2Q2002

· January 2003 - $20.3B

· Projecting slower growth in 2003

· January 2003 – CEO William Esrey resigned – He has been going through chemotherapy since November of 2002

· Also forced out over use of tax shelters that were set up through the auditors of the company

· CEO Succession:

· Gary Forsee became CEO in March 2003 – Was Vice Chairman of Bell South, and exec of Southwestern Bell

· Gary replaced William Esrey who was CEO of Sprint for 18 years

· Dan Hesse replaced Gary Forsee December 2007. Mr. Hesse was the former CEO of Embarq, a Sprint spin-off and local phone company

· “Packet switched” technology – new technology that they are switching to over the next 12 years – using switches from Nortel

· Releasing walkie-talkie service in 2004

· Alliance with Time Warner Cable to offer wireless service for Time Warner cable subscribers – Test marketing in Kansas City MO – January 2005

· Spinning off its landline operations – IPO will represent the largest landline play in the US – Announced January 2005

· Virgin Mobile – Sprints and Virgin Groups venture that offers wireless service in the US – Looking to spin-off as IPO – Announced January 2005

· Sprint will stop using Nextel’s IDEN service in 2008 to 2010

· Problems for Sprint in 2007:

· Integration with Nextel was somewhat problematic. They wrestled with having two headquarters; one in Overland Park, Kansas and one in Reston, VA which was were Nextel was based.

· Customers have complained about poor customer service and lost 683,000 post-paid subscribers and 202,000 pre-paid customers.

· The deal was a merger of equals and they combined company was valued around $70 billion at the end of 2004. In 2007 the value of the combined company is around $25 billion.

Brokerage	Recommendation	Sentiment
Goldman Sachs
Bear Stearns
Smith Barney

Sprint PCS (PCS) Kansas City, MO CEO William Esrey http://www.sprintpcs.com/

· Wireless division of Sprint

· 100% digital PCS wireless service

· 3rd largest wireless provider

· Sprint PCS Subscribers:

· 14.3M – June 2002

· 16M - 1Q2004

· 16.9M – July 2004

· 23.2M – October 2004

· 24.8M – End of 2004

· 26M – April 2005 – 4.3M were obtained through wholesale agreements

· 26.6M subscribers – July 2005

· 7.9M are from wholesale affiliates

· 54M wireless subscribers - 2007

· Now offering MP3 capabilities on its phones

· Has 11 affiliate companies operating in 43 states

· All affiliates are independent

· Sprint markets their service to these affiliates and uses their network

· Sprint doesn’t take an equity stake but get a fee of 8% of its continuing revenue

· January 2003 – Affiliates have $3B in debt and a few are facing Chapter 11

· If Affiliates run out of cash, parts of Sprint’s network may go down

· Sprint doesn’t want to intervene because it will jeopardize their investment grade debt rating

· Afraid if they make a deal with one Affiliate, they will have to make a deal with all of them

· February 2003 – AirGate-iPCS in Chapter 11- First affiliate to go into bankruptcy – Operates in Illinois, Michigan, Iowa, and Nebraska

· April 2003 – Horizon, an affiliate, may seek Ch.11 – Having liquidity problems

· Horizon filed for Ch11 – August 2003

· Horizon PCS and iPCS merged and now is Sprint’s second largest affiliate – March 2005

· Sprint acquired US Unwired for $1B in July of 2005

· Projecting wireless revenue for 2003 to be in the mid to high single digits

· Sprint has never reported a quarterly profit

· Both Qwest and Virgin Mobil resell Sprint wireless services

· Virgin Mobile has 2M users using Sprint’s Network – November 2004

· Reselling its network to competitors:

· First deal was with Virgin Mobile in 2002 – Virgin Mobile USA

· AT&T – May 2004

· Sprint and ESPN – Sprint will deliver ESPN content to its wireless users under new agreement announced December 2004

· Using EV-DO for wireless Internet capabilities and broadband

• Sprint is using EV-DO technology from Qualcomm
• By 1Q2006 – will have deployed EV-DO in 60 cities throughout the US

· Testing a Motorola’s WiFi technology called “Canopy” – Announced January 2005 and will begin trials in 4Q2005 and early 2006

· WiMax

· Mobile Broadband with speeds of two to four megabits per second – nearly as fast as cable broadband

· $5 billion venture and expects it to reach 100 million customers by the end of 2008

Telebras (Telecomunicacoes Brasileinas SA)

· South American Telecom company

· Brazilian government sold its remaining 21.5% stake in Telebras in auction

· Split into 12 separate companies with its own stock

· Telebras shareholders received shares in all 12 companies, Big Board accepted accounting for companies that have only met requirement for 2 yrs

· Crown jewel was the fixed line, called Telesp, serving 5.4M customers in Sao Paulo

· Was top traded foreign stock in 1990’s

· 3 fixed line, 8 cellular, 1 long distance in spin-off

· Only half of Brazil's phone calls go through on the 1^st try

· Brazilians wait for 11/2 yrs to get a phone line – 1 in 10 people have a phone line

· Market is predicted to triple during next decade

· See Mixed Bag for who got what

Brokerage	Recommendation	Sentiment
Bear Stearns
Lehman Brothers
Merrill Lynch

Telefonica Spain (TEF) Chrmn. Cesar Alierta www.telefonica.es

· Once state run monopoly, controls 73% of the voice traffic in Spain

· Subscribers:

· 103.8M

· Wireless Subscribers

· 55.8M – July 2004

· Broadband Subscribers:

· 3.7M – July 2004

· Latin America:

· Latin America accounts for 40% of their earnings EBITA and more than half of their bottom-line profit

· Has more mobile phone subscribers in Latin America than in Spain

· Largest Telecom in Latin America

· Terra Networks is a subsidiary (Internet unit) – Once called Terra Lycos - See Terra below

· Holdings include: El Salvador – Telefonica El Salvador (195,000 subs), Peru – Telefonica del Peru (1.7M subs), Chile – CTC Chile (1.2M subs), Puerto Rico – Movistar (47,000 subs), Brazil – Tele Sudeste Celular (7.5M subs) and Tele Leste (589,000 subs), Argentina – Telefonica de Argentina (1.37M subs) – all subscriber numbers from 2004

Telefonica Acquisitions and Stakes:

· Buying 5 Mexican wireless operators from MOT for $2.63B – Cedetel, Baja Celular, Movitel, Norcel, Portatel – will give them 1M subscribers

· Telefonica buying the 62.3% of Terra it doesn’t own for $2.05B – May 2003 and finally acquired in February 2005

· Acquiring Bells South’s Latin American Operations for $5.8B at announcement – February 2004

· Will become the largest wireless operator in Latin America with 40M plus subscribers in 12 countries

· Price now at $4.35B

· Bidding for a 51% stake in Cesky Elecom in the Czech Republic for $3.5B – In bidding war with France Telecom

· Acquiring a 3% stake in China Netcom for $290M with the option to increase the stake to 5% - announced July 2005

Telefonica General Info:

· Closed 3G joint effort in Germany with Sonera

· Telefonica Moviles (TEM)

· Spun-off in November of 2000 – spin-off only 15%

· Acquired a 65% ($70.5M) stake in Pegaso PCS – Mexican Wireless company

· With Pegaso, will become 2^nd largest mobile carriers in Mexico with 2.2M subscribers

· Telcel has 77% of the market

· Investing $1.5B in Mexico through 2005

· No.2 operator in Mexico

· Acquiring Chile’s No.2 mobile phone operator for $1.1B – May 2004

· Will make Telefonica Moviles the largest operator with a 48% market share in Chile

· 2002 Loss of $6.16B

· Old Chairman Juan Villalonga Navarro

· Debt of $20B Euros

· Telefonica has invested $47B in Latin America

· Investing $3.61B in DSL Lines between 2004 and 2008

Brokerage	Recommendation	Sentiment
JP Morgan
Merrill Lynch
CSFB

Telefonos de Mexico (Telmex) (TMX) Mexico City, Mexico CEO Carlos Slim Heiu http://www.telemex.com.mx/

Two Divisions:

· Traditional Phone – has 12.07M fixed lines

· America Movil – (AMX) Cellular division – Telcel (Radiomovil Dipsa)

o Has 10.5M subscribers – triple digit growth in Mexico

o Partners with SBC and Bell Canada

o In 11 countries – wants to dominate the US Hispanic and Latin American Markets

o Telcel has 77% of the Mexican mobile market share

o Buying BCP of Sao Paulo, Brazil for $625M – August 2003

o BCP has 1.7M subscribers

· Privatized in 1991 and was sheltered from competitors until 1997

o Biggest local rival Alestra (49% owned by AT&T) and Avantel (45% owned by WorldCom)

o Competitor - Grupo Iusacell (Verizon - Vodafone has a $1B stake) and Telefonica

· Controls 96% of the local markets 18M phone lines, 78% of the mobile market, 73% of the domestic long distance market, 55% of the Internet

· Mr. Carlos Slim controls 30% of Telmex

· Cell subscribers outnumber fixed lines in Mexico

· Only 13 fixed phone lines per 100 people in Mexico

· 26% of their fixed phone lines are in Mexico City

· Bought AT&T Latin America – Currently in chapter 11 for $207M – October 2003

· Acquiring a majority stake in Brazilian long distance company Embratel Participacoes for $400M – April 2004

· Taking a stake in Brazil’s largest pay TV (Net Servicos) for around $250M to $370M

Brokerage	Recommendation	Sentiment
Morgan Stanley
UBS
Goldman Sachs

TellLabs (TLAB) Lisle, IL CEO Michael Birck http://www.tellabs.com/

· Makes fiber optic transmission gear that boosts capacity of fiber networks, allowing carriers to pump more info through pipeline at super fast speeds

· Voice and data for phone companies – strong and long relationship with the remaining baby bells

· Acquired Cohernet (CCSC) – combination will command leadership in the high margin echo canceller business – ¾ of CCSC’s sales from foreign markets

· Won contract from Bell Atlantic for its “digital cross-connect system” that helps to route voice and data traffic through different types of networks equipment – helps manage their networks and boosts capacity

· Helps manage traffic on high speed fiber optic equipment - “Titan Line” introduced in 1991pulled in $617M in 1998

· Tried to acquire Ciena for $6.9B for their fiber optic gear - FELL THROUGH

· Acquiring Advanced Fiber Communications for $1.9B – May 2004

· Uses copper lines to connect to fiber networks

Brokerage	Recommendation	Sentiment
Bear Stearns

Terra Networks (TRRA) (TRLY) Spain CEO Abel Linares http://www.terralycos.com/

· Internet unit of Telefonica Spain

· Sites include AnimationExpress.com, Angelfire.com, HotBot.com, htmlGEAR.com, Quote.com, RagingBull.com, Tripod.com, Wired.com

· Has portals or ISP in every Latin American market

· 2/3rds of its revenue is from access - 2001

· Bought Lycos – owns Hot Bot

· In May 2003 – bought the 62% of Lycos it didn’t already own for $2.05B

· At the time of originally offer and announcement the deal was valued at $12.5B

· Bought Raging bull form CMGI

· Has $3B in cash

· 2003 – 60% of revenue from online ads – rest from access

· Not expected to break-even until 2005

· Sold Lycos to Daum Communications of South Korea for $95M – August 2004

360 Networks (TSIX) Vancouver, Canada Chrmn. David Lede http://www.wwfiber.com

· CEO Gregory Maffei – MSFT’s CFO who left in 1999

· Building a 88,000 mile network connecting major cities in North America, South America, Europe, and Asia

· Missed a $10.9M interest payment in June of 2001

· Now Bankrupt

· Last traded on July 26, 2001 at $0.21 cents a share

· Delisted – now trades in Toronto

US West Communications (USW) (Q) Denver, CO CEO Solomon D. Trujillo

· Splitting from its cable TV US West media group – used to be combined and called US West Inc

· 14 States – only 16M access lines - Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming

· High speed internet to take advantage of their direct connection

· Merged with Qwest in July of 1999

USWest Media Group (Media One) (UMG)

Brokerage	Recommendation	Sentiment
AG Edwards
Morgan Stanley
Deutsche Securities

Verizon Communications (VZ) NY,NY CEO Charles R. Lee www.verizon.com

· Formed through the merger of Bell Atlantic and GTE – nations largest telecom with 25.6M subscribers - 2000

· Verizon Wireless - Bell Atlantic, GTE and Vodafone Airtouch (Vodafone has a 45% stake)

· Verizon Communications control 55%

Verizon Stats:

· More than 125M domestic access lines, in 31 states, D.C., and Puerto Rico

· Reaches nearly 1/3 of the nation’s households

· In 44 countries

· Fixed Lines:

· 54M local lines – October 2004

· From the year 2000 to August of 2004, Verizon has lost 9M land line customers

· All the Bells combined have lost 28M landline in the same period and losing roughly 4% of their residential lines a year

· First time since the depression have they seen this

· Looking to shed more than 15M lines to around 40M in 2004 through sales or spin-off

· Residential – 50.7M – 2Q2005

· Wireless - More than 29.6M (June 2002) subscribers and 325M paging subscribers

· Has 90% coverage in the US

· December 2002 – 31.5M subscribers

· May 2003 – 33.3M subscribers

· January 2004 – 37.5M subscribers

· July 2004 – 40.4M

· June 2005 – 47.4M

· Long Distance - 7.4M subscribers

· Has 1.2M long distance customers in NY – had 16% of the total market

· Long Distance service now in 6 of its 13 states and Washington DC

· Seeking to offer long distance in Massachusetts – MA has a $2B long distance market

· Withdrew its offer in December of 2000

· Now trying to get back in Massachusetts

· LD approved in New Jersey

· 17.6M LD customers – May 2004

· DSL subscribers

· End of 2002 – 1.8M

· April 2003 – 1.83M

· October 2003 – 1.9M

· May 2004 – 2.7M

· June 2005 – 4.1M – Includes fiber

· DSL sees seasonal fluctuations in summer when a majority of the Universities are out for summer and the students turn off their DSL lines

· Debt

· As of December 31,2002 - $54.1B

· March 2006 - $38B

· Churn

· 1Q2004 – 1.6%

· 2Q2004 – 1.7%

· Average Revenue per subscriber

· $48 – 1Q2004

· $50.80 – 2Q2004

· $49.42 – 2Q2005

Verizon Acquisitions and Alliances:

· Acquired One Point Communication

· Acquiring 55% stake of North Point Communications for $800M – North Point’s share price has plummeted and there is a possibility that the deal will be renegotiated

· North Point specializes in DSL and will be the new platform for Verizon's DSL initiative

· DEAL FELL THROUGH – December of 2000 – due to unfavorable market conditions regarding North Point’s share price

· North Point now suing Verizon

· Having to pay a $175M breakup fee

· Verizon Wireless and Vodafone alliance

· In 1998 Ivan Seidenberg (Head of Bell Atlantic) bid on Airtouch Communication (Former wireless operation of Pacific Telesis and US West) but Vodafone out bid them – Vodafone and Verizon then pooled the venture together - During this time Vodafone also was in the process of acquiring Mannesmann which took all their time and let Verizon run the venture

· Verizon Wireless acquiring the wireless unit of Price communications for $1.5B in Verizon Wirelesses’ IPO shares

· Has 500,000 subscribers in 16 markets: Georgia, Alabama, South Carolina, and Florida

· Acquiring a 23.4% stake in Centennial Communications for $236M – has wireless assets in Northern California and Nevada

· Spun off Genuity

· Owns Italian wireless operator Omnitel

· Selling its 5.4% stake in Cable & Wireless for $280M

· Verizon Wireless – Vodafone has a 45% stake in the venture

· Motorola to offer two-way radio (Similar to Nextel’s) ability to Verizon Wireless – late 2003

· Buying the wireless assets of Qwest from $418M – July 2004

· Covering 62 markets with 30.8M people

· Acquiring most of the radio-wave spectrum licenses from Cablevision systems for $700M

· Venture with Vodafone – Grupo Iusacell – Mexico

· No.3 in Mexico in wireless

· Sold venture in June 2003 for $10M – Both getting out of Mexico

· Selling the Canadian version of “Yellow pages called “Super Pages”

· Sold to Bain Capital for $1.54B – September 2004

· Partnered with DirecTV in New York and East Coast to supply digital TV

· Acquired Next Waves radio spectrum in 23 markets for $3B helping to increase Verizon’s coverage to 73M people – November 2004

· Owns 23% of Vodafone Italy

· Sold its 20.5% stake in Telus (Canadian Telecom Co) for $1.9B - December 2004

· Verizon now in talks with acquiring MCI – February 2005

· Deal valued at roughly $6.8B

· Verizon and MCI (WorldCom) have talked about merging before but due to MCI and CEO Ebber’s fraudulent accounting, MCI didn’t want to show Verizon their books

· April 2004 – Verizon acquired a 13% stake in MCI from MCI’s largest shareholder, Carlos Slim Helu for $25.72 a share – Mr. Slim acquired MCI bonds in 2002

· May 2005 – After a three month bidding war with Qwest, Verizon acquiring MCI for 26 a share for $8.44B (Qwest’s offer was for $30 a share or $9.74B)

· Verizon will now be the No.2 telecom provider (SBC No.1) with 53M local lines

· MCI rejected Qwest’s offer four times

· Paid roughly 8.4B for MCI and paid roughly 2B more than their initial bid of MCI

Verizon General Info:

· Verizon Wireless pulls in roughly 40% of Verizon’s revenue – 2004

· Verizon Wireless Data – Pulls in 4.2% of total wireless revenue

· OnStar Network

· In New York – has to pay $1.5M to customers and $200,000 to the government for allegedly “slamming” customers and not being able to show written approval of the change in service

· Creating a multi-national network for large business – spending $1B over 5 yrs to install their own transmission equipment and buy undersea and underground cable capacity

· Flag Telecom and Metro MediaFiber Network will build the network – Verizon owns stakes in both companies

· New unit called “Global Solutions will assemble and manage the network

· Goal to have $2B a year in annual savings, including labor savings

· “DSL won’t be profitable for a few years” – Summer 2001

· Chairman and Co-CEO Charles R. Lee will step down in April of 2002 – Ivan Seidenberg will become sole CEO

· Rolling out “Push to Talk with Vodafone in the US – August 2003

· Launching VOIP (Voice over IP) in the 2^nd half of 2004

· Investing $1B between 2004-2006 on high-speed wireless internet data network

· 3G – Using EV-DO technology for their 3G offering

· EV-DO (Evolution-Data Optimized) – Mobile broadband access for Laptops and PDA’s, and phones

· Only offered as a laptop card in San Diego and Washington DC – all cities by end of 2005

· Speeds greater than DSL (300kbps to 500kbps) – faster than 3G service in Europe

· Faster than AT&T’s Edge which has speeds of 100kbps to 200kbps

· Service called Vcast and launched February 2005 in 32 markets

· Fiber Initiative – Developing rollout in six eastern states by 2005

· Expects fiber and other data connections to bring in over $1B a year by 2007

· Wants to roll out residential video services and be available to select markets in the first half of 2005 to roughly 1M homes – Will expand to 3M homes by end of 2005 ($2.4B Investment) and 10M homes by 2009

· Keller Texas is currently the test model in 2004

· Total bill expected cost - $4B to $6B

· Working with Microsoft for TV services for its fiber initiative

· “We don’t necessarily need more traditional lines – we need more broadband lines and the quicker we convert ourselves to broadband, the better we will do: - Ivan Seidenberg – March 2006

· Fiber will carry up to 100 megabits of data per second – roughly 20 times faster than a cable line – Will allow Verizon of offer much more services with the faster speed

· March 2006 – Has brought fiber to 3M homes

· Roadblock with local laws of each community, the community needs to OK before they can proceed – local permission is needed

· Estimated that the overhead cost to Verizon would be $1400 to connect a home to fiber in January 2005, the cost in March 2006 has gone down to $890 per household

· Bringing the fiber to the home, but once in the home they use coaxial cable

· AT&T in contrast brings its fiber only to the neighborhood equipment centers and uses copper the rest of the way

· Local residential business lines:

· Looking to shed up to 15M local phone lines in 2004/2005

· The sale of the lines could bring in as much as $30B though most likely a spin-off

· Looking to get out of small rural areas

· 3Q2004 – Lost 666,000 local and business line

· With sale of local lines, wants to buy more spectrum and increase drive to being predominated wireless and broadband company

· Partnering with Yahoo to have a portal for Verizon’s broadband customers – January 2005 – Verizon previously partnered with MSN

· Verizon and TV:

· Verizon wants to sell TV service and has teamed up with SBC to lobby legislators to open access in Texas by fighting franchise requirements

· Wants to offer TV by the end of 2005

· SBC and Texas ramification:

· SBC’s attempt in Texas was shot down for state wide approval – June 2005

· Now they must get local licenses (franchises) to offer TV and may become a lengthy process

· Texas possibly set a precedent, SBC has enormous clout in Texas and tons of lobbyists

· New Jersey is next to vote on state wide access

· Since SBC isn’t using fiber directly to connect the home (they use copper), they claim they don’t need a local franchise agreement with the municipalities to offer TV

· Selling its phone directory business that publishes 1600 yellow and white directories with a circulation of 124M

VoiceStream Wireless (VSTR) (DT) Bellevue, WA CEO John Stanton http://www.voicestream.com/

· Formed from spin-off from Western Wireless in 1999

· 6^th largest US wireless concern

· Bought Aerial Communications of Chicago in 1999 for $3B

· Bought OmniPoint of Bethesda MD for $2.4B

· Bought Powertel of West Point, GA for $5.9B in stock, assuming $1.2B in debt

• Will fill in more holes in coverage in Southern US
• Last GSM operator in the US

· Will cover 88% of US with GSM system – total of 3.3M subscribers

· Hutchinson Whampoa has a 23% stake

· Sonera has an 8% stake

· Acquired by Deutsche Telecom for $4.5B

· Swapping some wireless spectrums with Cingular in a tax-free exchange

· Cingular will get some of VoiceStream's spectrum in New York, Detroit, and St. Louis

• VoiceStream will receive spectrums in Los Angeles, and San Francisco from Cingular

· June 2002 – Has 6.3M wireless subscribers

· Changed its name to T-Mobil

Brokerage	Recommendation	Sentiment
Goldman Sachs
JP Morgan
Merrill Lynch

Vodafone Group PLC (VOD) UK CEO Arun Sarin www.vodafone-airtouch-plc.com

· World’s largest wireless provider – has 119.7M subscribers in 29+ countries by sales

· Was once called Vodafone-Airtouch with Airtouch merger

· Now focused heavily on mobile communications

Vodafone Acquisitions and Stakes:

· Acquired Airtouch for $58B – jumped in to breakup talks with Airtouch and a Bell Atlantic merger

· Has a 45% stake in Verizon Wireless – their only US inroad – Has an option out agreement

· Europe:

· Bought Mannesmann of Germany in April 2000 for $158B– controls 74%

· Bought wireless unit of Eircom of Ireland for $4.09B – has 60% of the Irish market with 1M subscribers

· Has a 25% stake in Swisscom (cell unit) which they paid $2.85B

· Giving Vodafone 43% of the wireless market share in Australia (Telsta has 47% and Hutchinson 10%)

· Acquiring BT Group’s 26% stake in Cegetel for 6.77B Euros

· Cegetel owns 80% of SFR Mobil – 2^nd largest operator in France

· DEAL FELL THROUGH – Vivendi purchased the stake

· Acquiring SBC’s 15% stake in Cegetel for 2.3B Euros

· Will own around 30% of Cegetel and 43.9% of SFR Mobile

· From January 1997 to December 2002 – Had $270B in acquisitions, mostly through company stock

· Acquiring Telesystem International Wireless (TIW) for $3.5B – March 2005

· TIW has operations in Czech Republic and Romania

· Previously had a 20% stake in TIW’s Mobifon Romanian Unit

· Rumored to be looking to be acquire Telsim Mobile Communication of Turkey

· Taking a stake46% stake in Polish State owned telecom Pulkometal for $2.55B – Is a joint stake with TDC of Denmark – July 2005

· Company said to be on the hunt for acquisitions in Eastern Europe in 2005

· Selling its German fixed line subsidiary, Arcor, in March of 2005

· Eastern Europe: Subscriber numbers for April 2004

· Vodafone Albania – 100% stake with roughly 500,000 subscribers

· Mobifon (Romania) – 20% stake with roughly 3.7M subscribers and 49% of Romanian Market

· Increased stake to 100% - March 2005

· Polkomtel (Poland) – 20% stake with roughly 5.7M subscribers

· Vodafone Hungary – 88% stake with roughly 1.4M subscribers

· Oskar Mobile (Czech Republic) – 100% stake acquired in March of 2005

· Oskar has 1.8M subscribers and controls a 17% market share of the Czech Republic

· Asia/Pacific:

· Japan Telecom

· Acquired a 15% stake in Japan Telecom for $2.21B (Japan Telecom has a 54% stake in J-Phone)

· Will have a 34% stake in J-Phone

· Now taking a 10% larger stake in Japan Telecom – will give it a 25% stake and a 35% stake in their J-Phone

· Taking an even larger stake – acquiring British Telecom's 20% stake for 3.7B Pounds – stake will now be 45%

· Larger stake now with 66.7% of the company

· Now called Vodafone K.K.

· China Mobile Telecom

· Bought 2.2% or $2.5B in shares of China Mobile Telecom – Stake now increased to 3% (China Mobile has 150M subscribers

· Bought Cable & Wireless Optus of Australia for $11B

· Asia/Pacific

· China Mobile – 3% stake – 150M subscribers

· Vodafone Fiji – 49% stake – 100,000 subscribers

· Acquiring the minority stakes that it doesn’t own in its Japanese Operations Vodafone Holdings KK and Vodafone KK – May 2004

· Other Regions

· Africa – Vodafone Egypt – 67% stake – 2.9M subscribers, Vodacom (South Africa) - 35% - 9.7M subscribers, Safaricom (Kenya) 40% stake – 1.5M subscribers

· Venture with Verizon – Grupo Iusacell – Mexico

· No.3 in Mexico in wireless

· Sold venture in June 2003 for $10M – Both getting out of Mexico

· India – Bought a controlling stake in Hutchinson Essar for $10.9B – May 2007

· Sold it 5.6 stake in Bharti Airtel for $1.6B back to Bharti Enterprises in a move to remove a conflict of interest with it new stake in Hutchinson Essar

Vodafone General Info:

· Subscribers in the UK, Europe, US, Asia and Pacific, Middle East and Africa

· 151.8M total subscribers – end of 2004

· 2004 saw growth in UK, Spain, Germany, Italy and the US

· Japan – 15M subscribers – May 2005

· Vodafone and Vivendi – Vizzavi Europe – European web-portal

· Vodafone KK – Vodafone’s Japanese operations – From Vodafone’s stake in J-Phone in 2001- Unit was formed in October 2001

· Has 15.2M subscribers – December 2004

· Due to poor performance from sales of their new phones, will most likely not meet their annual projections for 2004 – Shiro Tsuda – CEO of Vodafone KK

· July 2004 – Saw its first loss in subscribers

· February 2005 – CEO of Vodafone KK will now share his position with Bill Morrow (Head of Vodafone’s UK operations)

· Unit is struggle with NTT DoCoMo and KDDI of Japan and hasn’t be able to entice the Japanese consumers with cool new phones and is falling further behind

· Net Subscribers fell for the first time in July 2004 (New subscribers minus cancellations = Net subscribers

· 2004 – Vodafone KK pulls in roughly 205 of Vodafone’s overall revenue

· CEO turnstile:

· Vodafone Japan had three presidents within four years

· Bill Morrow claims Vodafone KK will turn the corner in mid 2007 and “run on all cylinders”

· Debt:

· Has 13B Pounds of debt

· Could push its debt to 22B Pounds without losing it current debt rating

· “Vodafone has a balance sheet that allows it to do whatever it wants”

· CEO Sir Christopher Gent stepped down July 2003 - New CEO Arun Sarin

· 3G – Third Generation:

· Plans to use 3G to eat into the fixed line business in Europe – expects the 3G network running full call volume to cost ¾ less than a fixed line operation

· Possibility of a US style price war in Europe

· Launched 3G service in Europe and Japan in November 2004 after a $129B investment

· Service will include video calling, 3-D videogames, and music downloads

· Goal of selling more than 10M 3G handsets by March 2006

· Rolling out “Push to Talk with Verizon in the US – August 2003

· In Vodafone accounting “pro forma” results (Proportionate Revenue Forecasts) – Vodafone incorporates subscriber number from companies that they own stakes in which can range anywhere from a 3% stake to 90% stake. In many of these stakes Vodafone doesn’t even have control of the company. In their “official results” they only list subscribers from stakes in which they control

· Capital spending and growth:

· Vodafone expects capital spending to remain flat over next few years (2005 & 2006) due to its integrations of operation in 16 countries

· Plans to use its market share and clout to obtain better deals and new phone designs

· Ring tones and Bells and Whistles add up?

· Had $2.19B in revenue just from ring tones, wireless Internet access and graphics for the full year ending March 21 2004

· Due to Vodafone’s size, is now calling the shots with handset makers and telling them the features and designs they want

· CEO Arun Sarin – Said to interested in strengthening its position in Poland and South Africa most likely through acquisitions

· Push-email – Announced April 2005 that they will offer a push-email services similar to Blackberry style email for mobile phones. Will first roll out in Germany then the rest of Europe with technology from Visto Inc.

· Phone model problems?

· Vodafone’s strategy had been to use a few generic models through all their markets that they serve in 2004/2005. Strategy backfired, especially in Japan were the market craves special features. Will now build a new phone specific for Japan to help regain market share in that market.

· Collaboration with Microsoft for the use of MSN to communicate with Vodafone phones – Announce June 2005 – MSN has over 400M users

Williams Communications (WCG) Tulsa, OK CEO Howard Janzen http://www.wilcom.com/

· Wholesale networks (backbone)

· Carries cell and internet traffic for other carriers

· Building the biggest next-generation fiber network – has completed 27,000 miles of the 33,000 route mile network

· Only uses or buy equipment from vendors if they let them invest below their IPO price – ex. OmiSystems, Sycamore Net., Sonus Networks

· SBC has a 10% stake

· Bankrupt – in Chapter 11

WorldCom Group (WCOM) (MCIT) Clinton, MS CEO Michael D. Capellas http://www.wcom.com/

· WorldCom Group has two units – WorldCom and MCI Group

· WorldCom focuses on corporate clients, data, and broadband internet connections

· MCI focus on small business, consumer long distance, , and other consumer services

WorldCom Acquisitions:

· Bought MCI for $37B – outbid British Telecom and GTE

· WCOM/MCI was granted go ahead to merger but and had to sell its Internet assets to British Telecom Co. Cable and Wireless

· Tried to acquire Sprint in 2000 for $115B but the FCC did not give approval

· Bought Intermedia Communications for $6B in stock and debt (Deal now worth $1.2B) – telecom provider – has a 54% stake in Digex (web hosting)

WorldCom General Info:

· Pursued business customers with a package of local, long-distance and data service while other long-distance serve a mix of business and residential customers which tends to be less profitable

· Restructuring and MCI

· Spun off MCI as a tracking stock

· Listed on the NASDAQ as (MCIT)

· Includes their consumer, small business, paging, pre-paid and dial –up connections

· MCI business unit has $16B in annual Revs

· MCI’s long distance for 2001 to be flat to (–0.2%)

· Eliminated MCI as a tracking stock

· WorldCom has annual revenue of $23B

· Restated its 2001 projection down by 44% - looking for 7%-9% rev growth in 2001

· Consumer voice and wholesale long distance account for 42% of their sales

· As of Feb. 2002 – has $28B in debt

· March 2002 – SEC launched an investigation into their accounting practices

· Bernard J. Ebbers – Has 1.2M shares at exercise price of $15.63

· Owes the company $366.5M through loans

· Resigned April 29^th 2002 stemming from loans and other internal problems

· New interim CEO John Sidgmore

· February 2004 – Indicted on charges of securities fraud, conspiracy to commit securities fraud and making false statements to regulators

· May 2004 – Now up to nine charges against him

· March 2005 - Ebbers found guilty on all 9 counts involved with WorldCom’s $11B accounting scandal

· Guilty of conspiracy and securities fraud

· July 2005 – Received 25 years to life for his involvement with the $11B in fraud

· Will pay five million of his own money and transfer all his wealth to a trust to settle class action lawsuits

· Michael D. Capellas – New CEO – From Compaq and HPQ

· May 10^th 2002 – debt downgraded to junk status

· “WorldCom had to do Sprint to feed the beast”

· Exiting the wireless resell business

· Has 1M local customer in 41 states and DC

WorldCom Accounting Scandal & Chapter 11 – 2002/2003

· Accounting Scandal - $3.85B of expenses that were improperly booked and now needs to be restated – Did not book expenses immediately but pushed them into the future

· Handles 50% of the nations Internet traffic

· Filed for Chapter 11 – July 21^st 2002

· Has $41B in debt - $35B in annual revenue – 20M customers

· JP Morgan is largest note holder – trustee for $17.2B

· Revising 2000, 2001, and 2002 – will wipe out all profits in 2000

· August 2002 - $7B in accounting problems now uncovered

· September 2002 – uncovered another $2B – total of $9B in accounting problems

· February 2003 - $11B in overstated revenue and profits and masked two year of losses - 2000, 2001

· April 2003 – Changing name to MCI

· April 2003 – Shedding $36B worth of debt in bankruptcy

· Will emerge with debt around $4.5B to $5.5B – Did they get away with murder?

· Will emerge from bankruptcy in September 2003

· Verizon claiming that WorldCom/MCI Chapter 11 is a mechanism their using to launch stolen goods

· Now being labeled as the largest corporate fraud in American history

· Total fraud now calculated to be $11B – March 2004

· Revisions erased $74.4B in pretax earnings for 2000 to 2002

XO Communications (NXLK) (XOXO) McLean, VA CEO Daniel Akerson http://www.xo.com/

· CLEC – Used to be called Nextlink

· Voice and high speed internet connections

· Bought Concentric Networks for $2.9B

· Working on 9 local markets in Europe

· Acquiring three broadband licenses in the UK using fixed wireless platforms

· Has $5.4B in debt – in Chapter 11

· Carl Icahn their new chairman

• Icahn gained control form Theodore j. Forstmann in fall of 2002

· Tried to acquire Global Crossing for $700M

· Acquired Allegiance Telecom for $310M – February 2004

• Allegiance is a CLEC which is in Chapter 11

General Telecom and Communication Equipment Info

Amex Telecom Index (PHN)

· Most cell phone industry growth is not from new subscribers but from upgrades

· Power lines – Siemens is testing delivering internet and data over power lines – Nortel stopped looking in to it saying the business model wouldn’t work

· Current Communications – Company that’s developing technology to deliver broadband over electrical lines

· Google, Hearst, and Goldman Sachs all have invested in the company – Announced July 2005

· Hughes – 65% of North American satellite broadcast market – rival EchoStar

· Genoa – First and only optical amplifiers on a chip – all others are the size of a suitcase – Altera supplying the chips

· Cable Broadband represents 68% of the US’s broadband connection

· Average revenue per user - (Key Industry metric) – for mobile providers

· 81% of US households get TV via cable or satellite

· There are 5.4B telephone numbers available under the current 10-digit dialing system

· In 2031 – we will need to go to the 12 digit system

· “The wireless industry is heading towards an end-game scenario that looks like the air line industry” – The Yankee Group

· More than 60 telecom carriers filed for bankruptcy in 2001 and 2002 – mostly due to price wars over capacity

· ARM processors are in 70% of the world’s phones

· 2002 – Internet calls made up 10% of International Telecom Traffic in 2002

· 2003 – Chicago with a population of 3M, has enough telecom capacity to support 3.6B phone calls

· Telecom companies tend to buy less equipment during the 1^st quarter

· WiFi (Wireless Fidelity) - WiMax – can send data as far as 30 miles

· There are currently 10 high capacity lines linking North America and Europe – 2003

· Orascom Telecom Holdings – Egypt – Largest cell operator in the Middle East

· “The bottom line is that there is very little growth for Bells” – Michael Baum – SoundView Technology

· Companies could sell the same cell phone in 2000 for two years before they needed to update it with a new design, Now, new models are expected every six months to stay competitive

· Wireless portability – November 2003

· EV-DO (Evolution-Data Optimized) – Mobile broadband access for Laptops and PDA’s, and phones

· Only offered by Verizon (April 2004) as a laptop card in San Diego and Washington DC – all cities by end of 2005

· Speeds greater than DSL (300kbps to 500kbps) – faster than 3G service in Europe

· Average cost to sign up a new wireless subscriber in 2004 - $334

· Scale is not considered to help a wireless companies prospects but geographic locations and market penetration is – 2004

· 5% of US wireless subscribers don’t have a land line – May 2004

· By the end of 2006, one half of all the 110M US households will have the option of phone service by a cable company

· Cable phone service is expected to have 12.5M subscribers by 2008

· Broad Band – Broadband is available in 94% of the US zip codes in 2004 – Only 5% of towns with 10,000 people or smaller have broadband

· What Became Of The Seven Baby Bells?

· US West – Now Qwest

· Bell South

· Bell Atlantic – Now Verizon

· NYNEX – Was bought by Bell Atlantic then became Verizon

· Pacific Telesis – Now SBC

· Southwestern Bell – Now SBC

· Ameritech – Now SBC

· Cell phone penetration

· UK, Italy, Norway and Sweden have cell phone penetration of 1005 representing there are more cell phone accounts than people in May of 2005

· Japan – 71% penetration in 2004

· US - 60% in 2005 (Was 50% in 2003)

Wireless and Handsets:

· 3G - Third generation cell service – internet access of speeds 7 times faster than current speeds

o Once called the Universal Mobil Telecom System

o All of 3G is based on some form of CDMA

o “I don’t see the need to move rapidly toward 3G… upgrading 2G technology is exactly what we need to satisfy the customer” Richard Lynch – Verizon Wireless CTO

o Network speed in Kilobits per second

§ 2G – 9 Kps

§ Upgraded 2G 22-180Kps

§ 3G – 144 – 384Kps

o Expected 3G growth in the US and Europe around 10% in 2005 if consumers catch on to video calling

§ Only 5% growth if consumers do not

· GSM

o In 2000 – 7% of US mobile users on GSM standard

o In 2007 – forecasted that 33% of US mobile users on GSM

· Wireless Growth

o 2000 – 27% growth

o 2001 – 18% growth

o 2002 – expecting 12% growth

o Are we at a saturation point?

§ 46% of the US had cell phones by the end of 2001

o Cell penetration rates are approaching 50% - August 2002

· SMS – short message service – text messaging

o Popular in Europe and easy for the networks to deploy over GSM

o US – too many incompatible networks

§ VeriSign and Mobile Spring working on a network called Metcalf for SMS

· Number portability – October 2003

o Will number portability make wireless service a commodity?

o With the ability to take your number to which ever carrier you want – will there be increase in churn and service hopping to the best rates?

Cell Phone Towers:

o American Tower (AMT) - #1 in the US in the tower market which runs and manages cell phone towers

§ Has 13800 towers in North America

o Crown Castle International (CCI) - #2

o Spectrasite Communications (SSI) (SITE)- #3

§ Buying 39,000 wireless towers from SBC for $1.3B (983 M in cash and 325M in Spectrasite stock)

§ Plans to build 800 more towers

Long Distance and Local:

· In the US – Long distance phone market is worth $80B – local service - $100B

· Baby Bells in 2000 – Bell South, Qwest, SBC, Verizon

· The long distance business is 100 years old, and it generally grows about 10% a year

· Verizon has LD in 6 of its 13 states, SBC 5 of its 12, Qwest 0 of its 14

· All the Bells combined have lost 28M landline in the period from 2000 to August 2004 and losing roughly 4% of their residential lines a year

o First time since the depression have they seen this

· 2003 Long Distance Market share:

o AT&T – 31.5%

o Verizon – 11.5%

o SBC – 9.6%

o MCI – 9.0%

o Sprint – 6.7%

o Bell South - 4.1%

o Qwest – 3.5%

o Others – 24.2%

Fiber:

· Other optical companies: Corvis, Kestrel Solutions, Cyras Systems, Tellium

· OC-48 (2.5Gbps)

· OC-192 (10Gbps) – current version of fiber optic technology

· OC-768 (40Gbps) – Is it Worth it? The main question going around – requires special optical and electronic components that make it currently expensive

· Rich McGinn – Once with Lucent and main decision maker for Lucent and its technological path it would take

o Didn’t upgrade Lucent from OC-48 to Oc-192 and gave Nortel all the market share – Was ousted from Lucent

· There are 16 big capacity (fiber) national networks under construction in the US

· The fiber glut of 2001 has been said to resemble the overbuilding of railroads in the late 1800’s

· Underused long haul fiber capacity in the US is 97%

· 2002 – Nationwide – only 2.7% of the installed fiber is being used

· Unused bandwidth sent prices plummeting an average of 65% each year in 2001 and 2002

· Prior to 1985 – Telecom carriers could send the equivalent of 25,000 one page e-mails per second over one fiber-optic line

o 2002 – can send 25M one page e-mails a second – a 1,000 fold increase

· 2004 – estimated to cost a company $2000 a home to hook up to fiber network

· 2005 – 85% of the fiber that’s laid in the US is considered “dark”

Voice over IP (VOIP):

· Converts voice to digits (digital) then sends it in packets across a network (phone/data line) – If goes to a regular phone it is switched to a regular or traditional network, if to another VOIP, then is avoids the traditional network

· Benefits: Flexibility

o Can Program your phone to redirect calls to other numbers

o Take messages only during certain times and give messages to certain callers

o Can send text and email messages

· Players: SpectraLink, Verso Tech, Sonus, Cisco, Syndeo, Cedar Point – Baby Bells will eventually take foot

· October 2003 – only 3% of Global voice calls are VOIP

· Costs about half of the capital per subscriber needed for a circuit switch system

Overseas

· China – Has four telecom companies

o In China – only 10% of the population has cell phones

· ARM Holdings Of England – designs chips for phones – 85% of the digital phones in the world today use their designs

· Jupiter Telecommunications – largest cable operator in Japan (only 1M subscribers) – will be going public

Cable:

· Cable operators generally pay 33% of their subscription revenue back to their program partners like HBO and CNN

· Digital cable VS Satellite TV – Forecast for 2003 – 2007 - Sat TV – 8.3M net subscribers, Digital – 16M net subscribers

· 2002 – First time cable industry lost subscribers – US total about 72M

WCMA VS. CDMA2000

· Nokia Pressing WCDMA – Wideband CDMA in China with China Mobile

· Nokia makes WCDMA network equipment but no CDMA2000 (Ericsson makes both)

· WCDMA is an open standard developed by many companies

· So more devices and services will be marketed

· CDMA2000 – QCOM controls its development

· WCDMA is very expensive and complex to deploy – 100+ companies own WCDMA patents

· European Government mandated the use of WCDMA

· Nokia and Ericsson have 50% of the WCDMA patents

· “Ericsson and Nokia can afford to throw away some licensing revenue…but need WCDMA to succeed at any cost”

Broadband Numbers

Broadband Numbers:

4Q2002

Company	Subscribers
Comcast	3.6M
Time Warner	2.6M
SBC	2.2M
Verizon	1.8M
Cox	1.4M
Bell South	1M
EarthLink	800,000
AOL	700,000

DSL Numbers

2Q2003

Company	Subscribers	DSL Market share
SBC	2.77M	12.5%
Verizon	1.931M	8.7%
Bell South	1.225M	5.5%
Qwest	560M	2.5%
Covad	453M	2.0%

Cable Company Broadband Numbers

2Q2003

Company Subscribers Cable Broadband Market share

Comcast 4.38M 19.8%

Time Warner 2.96M 13.4%

Cox 1.675M 7.6%

Charter 1.349M 6.1%

Cablevision 921M 4.2%

Cable V.S DSL V.S Powerlines V.S Dial-up connections – February 2004 forecast

Delivery Method US Subscribers Est. 2004 Growth

Cable 15.7M 29%

DSL 6.6M 41%

Powerline 0 0

Dial-up 39.5M (9%)

Telecom Debt

Telecom debt as of December 31, 2002

Verizon $54.1B

AT&T $22.6B

SBC $22B

Qwest $20.4B

Sprint $20.3B

Bell South $17.4B

Ratio of Net Debt to EBITDA – Estimated 2003

Verizon 1.7

AT&T 1.2

Bell South 1.1

SBC 0.7

Sprint FON 0.2

Handset Market Share

Cell Phone Handset Market Share

2002 – No. 1 MOT 32% - No.2 Nokia 29%

Wireless Market Share and Churn Rate: 2Q2003

Company Market Share Churn Rate (Avg. Churn in Industry – 2.2% - 26% annually)

Verizon 24.3% 1.7%

Cingular 15.9% 2.5%

AT&T (AWE) 15.1% 2.2%

Sprint PCS 10.7% 2.4%

Nextel 8.2% 1.6%

T-Mobile 8.0% 3.0%

Global Handset market share by units sold (M)

Company 2003 2002

Nokia 34.7 35.1

Motorola 14.5 16.9

Samsung 10.5 9.7

Siemens 8.4 8.0

Sony/Ericsson 5.1 5.4

LG 5.0 3.2

Other 21.8 21.7

Wireless Subscribers

US Wireless Subscribers: 1Q2004

Company Number of Subscribers

Verizon 37.5M

Cingular 24M

AT&T (AWE) 22M

Sprint 16M

T-Mobile 13M

Nextel 13M

Largest Wireless Companies in the World - 2003

Company Subscribers

China Mobile 123.6M

China Unicom 69.6

Cingular/AWE 46

NTT DoCoMo 44.4

Verizon 37.5

Telecom Italia 25.6

T-Mobile (Germany) 25

Vodafone 23.2

Telcel (Mexico) 21.3

2004 Wireless Market Share:

Cingular 28%

Verizon 24%

SprintNextel 21%

T-Mobile USA 9%

Other 18%

Network Market Share

2002 Mobile Network Market Share and Respective Network Revenue

Company Revenue in B Market Share

Ericsson 13.2 29.5%

Nokia 5.8 12.9%

Siemens 5.26 11.7%

Lucent 4.92 11.0%

Motorola 4.5 10.0%

Nortel 4.21 9.4%

Alcatel 2.92 6.5%

Others 4.05 9.0%

Consumer and Long Distance

4Q2004 Market Share based on revenue:

Verizon 23%

SBC 19%

Bell South 11%

AT&T 8%

MCI 4%

Other 35%

Business Services

1Q2005 Market Share based on revenue:

Verizon/MCI 28%

SBC/AT&T 26%

Qwest 7%

Sprint 6%

Other 34%