Telecom Issuer Expands Globally

Metromedia Fiber International announced last week a massive $1.4 billion expansion that a number of market sources said will parlay into future trips to the high yield market.

The full $1.4 billion expansion is expected to be completed by 2003, while $500 million of that amount is earmarked for the company's European networks. The European portion of the expansion is expected to be complete by the end of this year, analysts said.

Company officials did not return phone calls seeking comment, but three portfolio managers said they expect to see the telecom issuer back in the high yield market this year.

Metromedia has $1.4 billion outstanding in high yield debt in two separate issues, as well a ^250 million issue.

The current expansion program, which is expected to be complete in the next 12 to 18 months, will stretch Metromedia's European and U.S. network to add capacity for corporate customers, Internet service providers and content providers. And it's the content providers that are especially key, according to industry analysts.

Telecom issuers are becoming more homogenous, almost to the point of being a commodity, said Gary Jacobi, an analyst with Deutsche Banc Alex. Brown. And when that happens, the companies must either compete on price - which is indeed happening, illustrated by falling prices - or by getting into new areas of business, namely those that generate traffic.

The move also has a bifurcated effect on the company's strength, analysts said. It definitely makes it more attractive as a possible takeover target, but at the same time, it makes it a riskier credit simply because of its increased debt burden.

White Plains, N.Y.-based Metromedia is 10% owned by Bell Atlantic.