Business News - World Access On a Buying Spree: First FaciliCom,

Posted: 02/2000

World Access On a Buying Spree: First FaciliCom, Then
LDI, Now STAR
BY KEN BRANSON

World Access Communications (www.waxs.com) has
announced intentions to buy its third carrier in less than a month: STAR
Telecommunications Inc. (www.startel.com), in a stock
swap worth $650 million.

STAR, like World Access and the former FaciliCom, which World Access acquired Dec. 7,
is a facilities-based wholesale carrier with a European network. Long Distance
International Inc. (LDI www.ldinet.com), whose assets
World Access agreed to purchase on Dec. 17 for $185 million in stock, is a retail provider
to businesses in Europe.

On the face of it then, World Access CEO John Phillips will start the new century with
at least the framework of the Pan-European network he says he’s after, and at least the
beginning of offering retail services over that network. Phillips said he expects retail
service to be 65 percent of World Access’ total business by the end of 2001.

Phillips’ object is consolidating companies, he says. STAR, LDI and FaciliCom are all
part of that effort.

"I expect to buy a lot more [companies]," he says. "I’m going to try to
put together as many as I can."

However, World Access’ recent series of deals is complex and risky. STAR has
significant customers in the Asia/Pacific region (Telstra Ltd., www.telstra.com and
Telecom New Zealand Limited, www.tele.co.nz, among them) and uses its switch locations in
the United States to anchor its international network.

STAR recently closed a $75 million debt-restructuring deal with RFC Capital Corp. (www.rfccapital.com). Its stock price rose modestly at
the news of its deal with World Access, to $9 per share. That may be because investors
hoped for a take-out from a bigger carrier–Telstra Ltd., for instance, a long-time STAR
customer and one with whom STAR recently (Dec. 8) concluded a network alliance. Under that
deal, Telstra will use STAR’s Los Angeles switch as a gateway to the United States, and
Telstra Inc., Telstra’s U.S. subsidiary, will buy capacity from STAR.

In the FaciliCom deal, World Access assumed $300 million in new debt, but made a $75
million private placement and secured a $100 million revolving credit facility. In the
STAR deal, World Access retains the right to pay half the $650 million in cash.

The deal for the assets of LDI is the most complex. LDI, doing business under the name
NETNet, offers retail services to 20,000 business customers in Austria, Britain, France,
Germany, Italy, Norway, Spain, Sweden and Switzerland. World Access has agreed to assume
some of LDI’s debts, though the company’s press release doesn’t say how much.

Of the $185 million in stock to be delivered to LDI at closing, $149.85 million, or 81
percent, goes to the senior LDI note holder, Morgan Stanley Dean Witter & Co. (www.msdw.com), which will become the fourth largest
shareholder of World Access. The rest of the stock goes to NETnet International, the
former owner of NETnet, and into an escrow account covering "certain indemnification
claims."

The LDI acquisition was supposed to close in January, Phillips says. He expects to
close the STAR acquisition some time in May. He doesn’t think anybody else will bid on
STAR. "If anybody wanted to buy STAR, well, it’s been out there, for sale, for
awhile," he says.

And if anybody does make a counteroffer, he says, "I’ll make a
counter-offer for them, too."

Suppose Telstra counter-bids?

"Anybody who wants to put together a larger critical mass, I would try to do a
deal with them, as well," Phillips says.

Phillips says he "has an end game, quite frankly," and would be just as happy
to be bought as he evidently is buying. "If somebody comes along and takes us out
there, and has good currency, that’s fine," he says. "I would open up the kimono
and say, look, here’s the whole thing. If you don’t want it, what do you want for your
piece?"