Austar's country road
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Think of Austar, currently capitalised at around $3.1bn, as a mini Cable and Wireless Optus (capitalisation around $20bn). Like Optus, the company is a player in both pay television and telecommunications. Both companies have overseas parents - Optus is part of the Cable and Wireless empire, while Austar is 72% owned by UnitedGlobalCom Inc, Nasdaq-listed 'broadband communications provider'. Like Optus, the company is a beehive of activity when it comes to developing new products and services.
If you've travelled in the country lately you will have come across the most visible of Austar's product offerings - its Austar Entertainment pay-TV service. The company has a virtual stranglehold over pay-TV outside the capital cities, with around 400,000 subscribers at June 2000. That service should be a big winner if only because there is little competition.
Then there's the exciting Austar United Broadband, which is involved in interactive television, high speed Internet access, dial up Internet services (into which eisa's 84,000 customers are being folded) and mobile telephony, four very high growth areas in Australia.
Important milestone
Dependable earnings growth is some time away, but an important milestone was passed in the fourth quarter 1999, when the firm first recorded positive EBITDA.
Revenues are building rapidly - we expect Austar will be a $500m company in calendar 2001, as against the $400m or so we look forward to for the current year. With $387m in the bank at 31 March 2000, the company has plenty of cash left before it needs to be profitable. The stock ranks as a LONG TERM BUY.
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