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Four analysts and top management from twenty-two sector firms examine the comunications services sector in this special 98-page Comunications Services issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info470.htm.

TWST: And consumers have become much smarter about working out the best deals. You’ve told us in the past that it’s appropriate to have a basket approach to these stocks. Which stocks would you be including in a basket of emerging communications stocks today?

Mr. Grover: I’d start with WorldCom. WorldCom (Nasdaq:WCOM) is fully funded. They should turn free-cash-flow positive in six months. They basically are a summation of the best-of-breed assets of emerging communications providers. They own the world’s largest Internet backbone, UUNet, which has a 25% market share; the largest competitive local exchange carrier (CLEC) in terms of their MFS Communications and Brooks Fiber Properties; one of the largest international competitors with their pan-European network and undersea assets to the Pacific and also Latin American interests in Embratel (NYSE:EMT); and they have one of the largest enterprise data businesses. They have 80,000 buildings wired with fiber around the world, and best-of-breed hosting assets in terms of control of Digex (Nasdaq:DIGX). They’ve completed their restructuring, divested MCI (Nasdaq:MCIT) and most of the low-growth/high-cash-flow businesses to focus on their enterprise portfolio. And I think expectations are relatively low, which, on Wall Street, is the most important of all the things I’ve said. I think the Street has basically lowered the bar to a very achievable level, so I don’t see the company missing numbers because of its outlook. Some companies have not properly revised their outlooks, but I think WorldCom has been conservative. Then of course, if you believe the economy will recover in the second half of next year, this company is well positioned to really benefit from enterprise spending because they have the leading share of the enterprise data market. So that would be a core position. If I had 100, I’d probably put maybe 20% or 25% in WorldCom. I think there’s a basket of smaller companies, some of which your readers probably are not aware of. One of them is EQUANT. They’re a global data services company, as I think I said earlier, founded in 1949. They were born out of the airline industry needing a data network, so they built a network over 50 years that spans 220 countries. They have just acquired Global One from France Telecom in a very significant series of transactions that now gives the company 3.1 billion in revenues. A company with positive EBITDA, they have 1 billion in cash, they have 220 country networks, 3,700 of the world’s largest corporations, and 80% plus of the Global 5000 as customers. And they’re trading at an enterprise value of about 1.3-1.4 times revenue, which is relatively cheap.

TWST: Why doesn’t the market recognize this?

Mr. Grover: Because the Street has thrown everything out! That’s kind of the point of this interview, that “emerging” and “telecommunications” have become dirty words, and the Street has just shot everything. That’s why I think investors must be discriminating. Fortunately for me, I think I’ve stock-picked the right companies in general. I’ve made some mistakes, but I think in general the companies we’re talking about are the real winners here. And the Street has crushed the stocks anyway, so some of these stocks are at bargain basement prices.

This special issue includes:

1) Communications Services & Equipment - In an in-depth (4,500 words) Analyst Interview, Rick Franklin & Gary Mobley, both Senior Industry Analysts at Bank of America Capital Management, examine the outlook for the sector and share specific stock recommendations.

2) Emerging Communications - In an in-depth (4,100 words) Analyst Interview, Vik Grover, Managing Director at Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

3) CLEC & Incumbents - In an in-depth (4,300 words) Analyst Interview, Thomas Morabito, First Vice President/Senior Telecom Analyst at McDonald Investments, Inc., examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of twenty-two sector firms examine the outlook for their firm and the sector.