Carrier1: Building the Infohighway in Europe

When I traveled to Europe several months ago, there was lots of excitement
for Internet ventures. However, there was a common complaint: inadequate

The fact is that the telecom infrastructure in Europe has been heavily
regulated. While this is lessening, it will take some time to catch-up to
the U.S., which has been undergoing much deregulation.

But there are European companies that do not want to wait and are building
out the infrastructure to help boost the Internet revolution. One such
company is Carrier1 .
A recent IPO, the company’s stock has had lots of problems. After
reaching a high of $35, the stock sunk to a low of $7-15/16. Now, the stock
trades at $9-1/2.

The company is in the process of building an inter-city fibre network, which
spans more than 11,000 kilometers connecting 20 European cities in 12
countries. On the network, Carrier1 offers such services as voice, access
solutions, and bandwidth. There are also state-of-the-art data centers, so
as to host large-scale Web applications.

In the most recent quarter, Carrier1 had revenues of $57.5 million, which
was a 185% increase from the same period a year ago. Losses were moderate,
at $12.8 million (losses have been declining steadily). What’s more, the
company has about $509 million in cash, which is healthy enough to continue
with the infrastructure build-out.

Recently, Carrier1 completed its German fiber optic network (known as a
ring), which covers 2,370 kilometers. The ring has a maximum transmission
capacity of 320 gigabytes per second. That is, the ring can handle
278,691,840 simultaneous ISDN calls. Interestingly enough, with its
contracts with StarOne, Tesion and 360networks, Carrier1 has already
recouped the investment it made in the ring.

No doubt, the Internet is starting to revolutionize Europe. As European
businesses adopt Internet technologies, there will be huge demand for
infrastructure services. As Carrier1 adds more rings and also reaps
substantial revenues from existing rings, the company will make it a habit
to post strong earnings.

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