BUSINESSWEEK ONLINE : JUNE 22, 1998 ISSUE
INSIDE WALL STREET

Viatel: A Cheap Telephone Call

In late April, when the Dow Jones industrial average dived more than 150 points, a lot of institutions went bargain hunting. One of the stocks bought heavily by Credit Suisse First Boston and Lehman Brothers was Viatel (VYTL), a little-known provider of long-distance services to small and midsize businesses, mainly in Europe. One investor, George Soros, has a 7.6% stake. Fidelity owns 7.5%.

''It's one of the most undervalued bets in the deregulation of communications in Europe,'' says one money manager in New York, where Viatel is based. Then trading at around 7, the stock has since risen to 11. He notes that for a long-distance carrier with a market cap of just $235 million in a $70 billion global market, Viatel trades at a huge discount to its peers. He thinks the stock will hit 40 in a couple of years.

Morgan Stanley Dean Witter analyst Stephanie Comfort, who projects that Viatel will produce revenues of $128 million this year and $318 million next, has a yearend price target of 18 for the stock. She figures Viatel will post earnings before interest and taxes (EBITDA) of $15.1 million next year, vs. a loss of $29 million in 1998. On a per-share basis, however, she says Viatel will be in the red through 2001 due to interest on its high-yield debt. By 2002, the analyst sees Viatel earning $2.68 a share.

Viatel is building a fiber-optic network called Circe that would link its switch in Britain with switches in Belgium, France, Germany, and the Netherlands--thus creating one of Europe's first cross-border optics network.

BY GENE G. MARCIAL

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