contracts and survivability of telecom sector

Patrick Giagnocavo patrick at zill.net
Mon Oct 6 22:45:15 CDT 2008


This evening I looked over the telecom companies that are my suppliers,
or who supply my suppliers, etc.

I noticed that all of them, including Level3 (stock symbol LVLT) have a
lot of debt (finance.yahoo.com numbers):

Company Name | Cash | Debt
ATT | 1.63B | 80.13B
Level3  | 666M | 6.84B
Verizon | 2.07B | 43.11B
Cogent | 129M | 330M

Obviously there are other, important numbers and ratios, but I won't go
into that here. 

As you know, there are supposedly huge problems with companies, even
top-rated ones, in borrowing from the usual channels.

If you assume for example, that Verizon has notes of 10-year terms, then
(if the notes are spread evenly) they will need to borrow some $4Billion
in the next 12 months.  If the terms are a lot shorter, then the amount
to borrow goes up significantly of course...

My question:

Are there any recommendations from an operational perspective, should
one or more of these or other telecom companies have such problems? 

My belief at the moment, is that the risk is low, as operations will
always continue running even during bankruptcies (as some may have
already seen with other companies).

I am not interested in financial prognostications, I am solely focused
on operational issues that might affect e.g. connectivity.

Cordially

Patrick Giagnocavo
patrick at zill.net




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