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Four analysts and top management from twenty-two sector firms examine the communications 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: 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. On the fiber operators, that’s where it gets a little dicey — I think that’s the contrarian call; most of the Street has given up on them — but I like Level 3 (Nasdaq:LVLT), Williams (NYSE:WCG) and Global Crossing (NYSE:GX). Williams — again, some people would say their capital structure is an issue; they have 5 billion in debt. They have SBC (NYSE:SBC) as an anchor tenant and also an investor, which is driving a significant amount of traffic, and every time SBC gets 271 approval for long distance in a state, you can basically equate that to traffic growth for Williams. To that end, SBC is looking to get 271 approval in California in 2002, and that’s a 14 billion long-distance market. So if you run the math, that market alone for Williams could be worth 300-400 million of annual business. So they have an anchor tenant. They have 3 billion in backlog, and I think they’re fairly well funded. They have a very smart CFO and management team, and I think the company’s strategy is credible.

TWST: One more question, then. When you put it together, what would your overall message be to investors who are wondering whether this is the time to jump back into the space or to investors who have not been in it but realize that they need to have some exposure to emerging telecommunications services?

Mr. Grover: The message would be don’t believe the hype. I think there is a glut of bandwidth. Telecommunications is not going to zero, it’s not going away; it’s a very tangible business. You don’t need to be a genius to know that teledensity around the world is very low and rising. Markets are deregulating. Competitive carriers have less than 10% market share worldwide, and in the US the CLECs have only 8% market share. So this is a growth industry. And if you can pick the right basket of companies and have the right horizon, I think there are going to be some very big moves that come out of this group as the market growth starts to trickle down to these winners. It’s going to take a lot of courage to invest in the space. But if you invest using a basket approach and don’t just put it all on one horse, I think you can prudently play the growth. Anybody who puts it all in one company, I think, will lose some sleep at night. I wouldn’t recommend that. And I would add that in the context of investors seeking safety, there has been, I think, a false thesis perpetrated on the Street that investing in incumbents, including the regional Bells and some of the entrenched carriers abroad, provides some sort of safe haven. If you look at the regional Bells, for example, most of their growth has come from dubious practices. They have negative in-region line growth. They’re very exposed to attrition. There are still some very well funded emerging carriers, ones we’ve just talked about, that are eating away their market share daily. They (the RBOCs) are replacing their lucrative, local-end data product revenue streams that are being eaten by the competitive carriers with very low-value consumer long distance products and really uncoordinated international activity. So I think you’ve got a set of companies here (the RBOCs) that is very exposed to the economic downturn and should have negative performance relative to the market for the foreseeable future.

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.