Subscriber Values: July 2002

ISP-Planet Staff [July 24, 2002]

With faith in the market a serious issue, the major stock indexes have taken a dive. When we last looked at ISP subscriber values in June, the indexes were at the following levels: Dow: 9,120.11, Nasdaq: 1,429.33, S&P 500: 973.53.At market close on Monday, the Dow was at 7,784.58, the Nasdaq at 1,282.65, and the S&P 500 was at 819.85.

Given this universal drop in market value and the fact that many of the greatest scandals—WorldCom (NYSE:Q) and Global Crossing (NYSE:GX)—were in the telecom sector, it's no surprise that the value of the publicly traded companies we track has declined. Of note, are the few subscriber values that have not declined as much, and the one company that has risen in value, which, oddly enough, was in the CLEC group, which also saw the largest losses.

Among the regular ISPs whose values we track, EarthLink (NASDAQ: ELNK) fared the best, dropping from a market cap of $886 million to $828 million. The overall ISP subscriber value fell from $536 to $465, the value without America Online (NYSE: AOL) fell from $165 to $139 as AOL Time Warner shed $7 billion in market cap during a management shakeout that saw the Time Warner wing of the merged company take key positions that had been occupied by AOL management.

Subscriber numbers are from ISP-Planet's list of Top U.S. ISPs and from company reports. Market capitalization data is as of market close, Monday, July 22, 2002, reported on the Wall Street Research Network.

OmniSky, a mobile wireless ISP, was in Chapter 11 when it was acquired by EarthLink in January, 2002. At its peak, OmniSky was valued at $1.6 billion. Forbes estimates that in 2001, EarthLink paid about $150 per subscriber for 36 other ISPs with a total subscriber count of 304,000, a total of $46 million. If Forbes' estimates are correct, the average size of the acquired ISPs would be 8,500 subscribers. This data suggests that EarthLink pays the same price for dialup as it does mobile wireless subscribers.

Go America's (Nasdaq:GOAM) stock continues to fall. We expect to add Motient (OTCBB: MNCP) back to the list of mobile wireless ISPs when it next reports subscriber numbers.

RCN (Nasdaq:RCNC) is adding cable subscribers but losing its dialup base. Its stock fell, in tune with the general trend of the market.

GT Group Telecom has obtained bankruptcy protection and will be placed back on the list when the proceedings conclude. The stocks of the other CLECs have generally fallen in line with the movement of the market.

Louisiana-based Century Tel (NYSE:CTL) and its subsidiaries operated 1,795,769 telephone access lines and had 515,376 long distance customers, primarily in rural, suburban, and small urban areas in 21 states, as of March 31, 2002. This company, the second largest on our list, saw fell from $4 billion to $3.25 billion as it announced the purchase of LEC operations of Verizon (NYSE:VZ) in Alabama for $1 billion in cash and said that it was not currently being investigated by the SEC.

From its base of operations in Little Rock, Ark., Alltel Corp. provides communications and information services, as well as telecom products and telephone directories. Long-distance services are provided on both a facilities-based and resale basis by Alltell's (NYSE:AT) subsidiaries to 10 million customers, including 200,000 Internet subscribers. This company is the largest on our list by market capitalization.

General Communications (CGI) is primarily an Anchorage, Alaska-based holding company. Together with its direct and indirect subsidiaries the company offers diversified telecommunications portfolio, including digital and analog cellular telephone services. CGI (Nasdaq:GNCMA) operates four reportable segments: long-distance services, cable services, local access services and Internet services. All told, GCI connects 90,000 telephone subscribers, 71,400 Internet customers, 30,000 cable Internet customers, 26,000 digital cable TV customers, and 132,627 cable TV subscribers.

FASTNET (Nasdaq:FSST) provides services to 2,164 enterprise customers, 26,276 SOHO customers, and 7,014 webhosting customers. The company closed on the acquisition of AppliedTheory on June 3, 2002. Its market cap fell less steeply than others, and it moved up the list one spot.

Covad Communications Group (OTC BB:COVD) currently has more than 359,000 lines in use across the U.S.

Alaska Communications Systems Group (The ACS Group) is diversified, facilities-based telecommunications provider in Alaska. The ACS Group (Nasdaq:ALSK) currently operates 330,000 access lines, connects 80,000 cellular and 66,000 long distance customers, as well as 47,000 Internet users. The company's market cap fell sharply from $131 million to $87 million.

At last count Charlotte, North Carolina-based US LEC (Nasdaq:CLEC) provided services to 7,500 enterprise customers comprising 208,188 voice and 40,147 data channels, as well as 30,131 ISP clients. US LEC was the only company on this page whose market cap rose this month, from $59 million to $78 million.

The financial reasoning behind these losses and the one gain remains unclear for now but should be explicable once all companies have reported quarterly financial results, and since most do so by mid-August, you'll want to stay tuned, watch this space, and check in next month when we delve into the whys and hows of recent changes.

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