MCLD - McLeod USA, Inc. (MCLD)

[jmhollen]

FBR Expands Coverage of the Communications Services Sector
PR NEWSWIRE ARLINGTON, Va., June 29 — Coverage Initiated on Allegiance Telecom, McLeodUSA, and Time Warner Telecom

Friedman, Billings, Ramsey & Co., Inc., a subsidiary of Friedman, Billings, Ramsey Group, Inc. (NYSE:FBR), today expanded its coverage of the communications services sector by initiating coverage of Allegiance Telecom, Inc. Nasdaq:ALGX), McLeodUSA, Incorporated (Nasdaq:MCLD), and Time Warner Telecom Inc. (Nasdaq:TWTC).

Technology Research Managing Director Riyad M. Said identified these companies as positioned to survive and ultimately benefit from the 'Darwinian process' taking place in the CLEC and emerging broadband services sectors.
Coverage of Allegiance Telecom was initiated with an "Accumulate" rating and a 12-month price target of $30 per share. Mr. Said identified Allegiance as a competitive provider of telecommunications services to small- and medium- sized businesses in Tier 1 markets across the U.S. "Allegiance has emerged as one of the true leaders in the CLEC/ICP sector, utilizing a highly capital efficient 'smart build' strategy to provide integrated communications services," Mr. Said stated. "Allegiance has been able to provide service to its 32 markets-growing to 36 markets at the end of 2001-with relatively modest capital expenditure and little debt in comparison to most facilities-based service providers," he added. "In addition, the company's back office and provisioning systems are a key contributor to Allegiance's growth and success in scaling its business," Mr. Said stated.

Coverage of McLeodUSA, Incorporated, was initiated with a "Market Perform" rating. Mr. Said identifies McLeodUSA as an integrated communications service provider that offers telecommunication services to business and residential customers in 25 Midwest, Southwest, Northwest, and Rocky Mountain states. "McLeodUSA has leveraged its early mover advantage to capture significant market share in its target markets. The company is expanding its network and will grow its co-locations by about 50 percent this year, enabling it to expand its addressable business customer base in its 25 state contiguous footprint and drive more traffic on-net," Mr. Said stated. "In addition, McLeodUSA's directory publishing business provides a strong branding platform and generates growing cash flows which help fund the CLEC business," he added.

Coverage of Time Warner Telecom Inc. was initiated with a "Buy" rating and a 12-month price target of $57 per share. Mr. Said identified Time Warner Telecom as a leading fiber facilities-based integrated communications provider in selected metropolitan markets across the United States, offering medium and large businesses broadband connections for data, high-speed Internet access, local voice, and long distance services. "Time Warner Telecom's business model is predicated on building out metro fiber networks, primarily through its strategic relationship with Time Warner Cable," Mr. Said stated. "Consequently, more than 80 percent of the company's revenue is fully on-net, which translated into industry-leading gross margins of 54.5 percent and EBITDA margins of 25.6 percent in its core business last quarter," he added. "We would argue that Time Warner Telecom possesses the best combination of network assets, strategic partners, business model and capital structure of any emerging broadband service provider," Mr. Said stated.

Yesterday, ALGX closed at $14.34 per share; MCLD closed at $4.25 per share; and TWTC closed at $31.15 per share.

Please read the full reports at http://www.fbr.com .

Friedman, Billings, Ramsey Group, Inc. (NYSE:FBR), the parent company of Friedman, Billings, Ramsey & Co., Inc., is a financial holding company for businesses that provide investment banking, institutional brokerage, specialized asset management, and banking products and services. FBR provides capital and financial expertise throughout a company's lifecycle and affords investors access to a range of proprietary financial products and services. Headquartered in the Washington metropolitan area, FBR has offices in Arlington and Reston, Va., Bethesda, Md., Boston, Charlotte, Chicago, Cleveland, Dallas, Irvine, Ca., New York City, Portland, Seattle, London, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. For more information, see http://www.fbr.com .

Friedman, Billings, Ramsey & Co., Inc. is a member of the National Association of Securities Dealers, CRD number 25027.

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