I don't think Huber wants a buyout. Not at these prices anyway.
So I don't put too much thinking about why he mentioned that number. Maybe he wanted to brag. Or he wanted to enlighten Wall Street as to how undervalued the stock is (looks like someone paid attention). Or maybe he had nothing else to say.
It doesn't matter.
You will hear that nobody cares about replacement values and it is market that decides what it worths. The problem with this argument is that market is irrational: the same network was worth $100 mln two years ago and will be worth $10B if people realize there is so much capacity and the demand is unlimited.
Take oil for example: say you owned an oil fields with 1 billion barrels of oil underground with cost of extraction of $10. It is year 2000 and oil is trading at $10. So you won't make any profits if you start pumping. And all the talking heads tell you that oil is never going to trade above $12. Market would value those fields at , say, $2B. Fast forward 5 years: oil is at $60 and all the same talking heads predict it will only go up. So market values the same fields at $60B.
Same with Broadwing. It was impossible to make money up until now so the network was worth a little. If the demand exploads (and it will) , prices will improve and the network will be a money making monster machine.
Also you might hear that equipment is cheap now and if someone want to build the same network it will costs only $200 mln.
What they don't realize that expertise is priceless. They invested millions of hours to fine tune the network and make it the most efficient one. Yes, the equipment might cost $200 mln, but the performance of such network won't be cost effective and problems will occur constantly. And after they spend $200 mln for equipment and installation and $5 bln for millions and millions of hours of work to make it work, they will have the same network. Like buying an old car for $500 and then spending every weekend fixing it.
I don't know percentages of lit fiber, but it is very high. Highest in the industry. So if they need to provide extra badnwidth , they won't have to lit anything for some time.
I think that 4% you mentioned is not percentage of lit fiber, but percentage of utilization of the network. Maybe it is 10% now, I dunno. They can increase revenues by 1000% and most of that money will go directly to the bottom line. You can calculate what the share price will be if that happens.
I can give you a hint: if they grow revenues by 100%, they will be earning some $300-500 mln a year. $5-8 per share. Which will translate into $200-$300 share price.
And if they will grow revenues by 15% annually, it is just 5 years away.
