RE: The reportRE: "He warned that he expects Axia to be in a growth phase for severalyears, characterized by high capital expenditures, negative free cashflow and unpredictable earnings quarter-to-quarter."
My read is the analyst was characterizing Axia as a growth opportunity, but that growth is going to be lumpy. The market hates lumpiness, and isn't inclined to make much of an effort to understand what's driving the variability. Network builds by nature are capital intensive; IMO the key metric to watch post-build (Aberta, France, elsewhere) is bandwidth utilization. Given the long-term nature of AXX's contracts, establishing a utility-style presence in a market positions them ramp up revenue substantially with minimal incremental costs as users' network consumption grows.
RE: "...Axia has received 13 regional contracts in France to buildopen-access fiber networks and is bidding on another 10-15 contracts inthe next year. Once these networks come online, revenue will ramp up inlate 2009 and construction spending will decline, resulting in Francebecoming a material medium-term growth source for Axia similar in sizeto the Alberta project."
This is convoluted and a bit misleading. My understanding is that construction costs will decline as the 13 existing contracted networks begin coming online. While revenue may "ramp up" in late 2009, income generation begins as the soon as the networks are lit. As other concessions are bid and won, overall construction costs in France could remain high well into 2009...and perhaps beyond depending on the number of concessions bid and won. Investors need to look at Supernet for clues to how the model will unfold in France and other jurisdictions. Neither analysts nor the investment community in general are able to get past their quarter-by-quarter measurement mentality. By the time the market sees how the Supernet throws down cash and understands that France is on a similar path, sub-$3 stock will be a distant memory. I've been long on AXX for a while now, and have been buying again at these prices.