Financing Fast - Growing Telecom Companies IPOs, bank loans, self-financing, private offerings—the region’s telecom companies do it all to ensure continued growth. By Liese Hutchison To say that the stock markets have been volatile lately is just as big of an understatement as saying that Mark McGwire is a good hitter. Telecoms have gone public in an effort to raise capital for network expansion and support, but with the volatility of the market, analysts and telecom executives are rethinking the IPO route for financing. “The telecom stocks haven’t been real players in the market in the last nine months,” points out Juli Niemann, an analyst with RT Jones Capital Equity Co. “The whole sector hasn’t done well.” Niemann would encourage telecom companies to wait until the market and the telecom sector reverses the downward trend. “I would postpone a telecom IPO for a significant amount of time—maybe in the fall,” she advises. A few companies with St. Louis ties have taken the IPO plunge and all have been effected by the market downturn in the short term. Charter Communications, the fourth largest operator of cable television systems in the United States that serves more than six million customers, went public last November. It was the second largest IPO in 1999 at $3 billion. SAVVIS Communications went public in February. The company offered more than 92 million shares and raised $63 million. SAVVIS’ headquarters is in Virginia, but the company evolved from Bridge Information Systems, originally a St. Louis company that is considering going public itself in 2001. AT&T Wireless just went public in April and is the largest IPO ever offered. The tracking stock of AT&T raised approximately $10 billion and 300 million shares. At the time of the offering, AT&T Wireless was the most widely held IPO. “We are certainly proud to take part in the largest IPO in U.S. history,” says Tom Ely, AT&T Wireless general manager for Missouri and Oklahoma. “AT&T Wireless continues its leadership position in the wireless industry as it has in the past in being first to offer digital technology and national flat-rate pricing.” Two other regional telecom companies, Birch Telecom and Telcobuy.com, have postponed public offerings for the time being. Birch is one of the largest competitive local exchange carriers in the Midwest and was scheduled to go public in April. It employs more than 1,000 people in Kansas, Missouri and Texas. The company recently received a $60 million investment from a private investment firm. Telcobuy.com just spun-off from World Wide Technology and registered to go public, but has also delayed the offering. The company filed in March to offer 4.4 million shares. “Everything was moving along in our favor for going public except for the market conditions,” says Jim Kavanaugh, CEO. “Even the best deals going aren’t doing well and we consider our deal to be really strong. So we’re on hold right now.” The company has grown to date through self-financing and $27 million in venture capital funding. The money raised from the eventual IPO will be used to support continued growth. “We’re in a somewhat enviable position—we don’t have to go public, but we want to take a more aggressive position in the marekt place,” he notes Telcobuy.com provides an Internet-based, business-to-business marketplace for the buying and selling of telecommunications infrastructure and services. Numerous telecom companies, many members of the Technology Gateway’s Upstart Committee are self-financing, procuring loans or securing private financing. “Generally what you’re seeing with the volatility in the public market is that companies are looking to private funding,” states Ken Harrington, president of WorkNET Communications. Harrington thinks the Upstart members are on pretty solid financial ground. “I think the telecom companies in St. Louis are in good financial shape, have good business plans and have good access to private funding,” he notes. WorkNET has raised more than $31 million in private financing, but Harrington isn’t ruling out going public. “We have to look at our financial choices, the maturity of the business and the best way to finance it.” Another Upstart member recently raised $600 million in private financing. CoreExpress offers businesses an avenue to move their data across the Internet with end-to-end performance guarantees. The company’s network will be available this fall. It is in the middle of building a high-capacity fiber-optic network of 22,000 miles. Several other Upstart companies, including Gabriel and Omniplex have raised private funds.  Gabriel just received more than $200 million of additional equity financing from its existing investors and underwritten commitments for a $200 million bank credit facility. “The additional capital which has now been committed to Gabriel will support the continued deployment of our next generation broadband networks and DSL facilities,” says David L. Solomon, vice chairman and CEO. “It strategically positions Gabriel to aggressively pursue expansion into additional markets and the introduction of additional data-centric services.”  Another member, Primary Network was sold for $145 with its sister company, Primary Webworks, recently presenting at the InvestMidwest venture capital conference. When it comes to financing telecom growth, Niemann offers one piece of advice. “The only reason to go public is to raise capital. Otherwise you don’t need the hassle—it’s easier to remain private,” she points out. Liese L. Hutchison is an assistant professor in the department of communication at Saint Louis University and a free-lance writer.

July 2000 - - - - - - - - - - - - - - - - - - COVER STORY 2000 Ernst & Young Entrepreneur Of The Year Awards PROFILE Joe Edwards Owner of Blueberry Hill, the Tivoli Theater and The Pageatn; founder of the St. Louis Walk of Fame - - - - - - - - - - - - - - - - - - www.stlrcga.org - - - - - - - - - - - - - - - - - - www.technologygateway.org Taking Technology Personal Stressless Commuting - - - - - - - - - - - - - - - - - -