IDT Corp (IDT) 2002 Q3 法說會逐字稿

Good afternoon. My name is Heather and I will be your conference facilitator today. At this time I would like to welcome everyone to the IDT Corporation conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you'd like to ask a question during this time, simply press star and the number 1 on your telephone key pad, and if you'd like to withdraw your question, press start and the number 2. I will now turn the call over to Mr. Courter, CEO. Thank you, sir, and you may begin your conference.

Good afternoon. I would like to welcome you to IDT's third quarter conference call covering the months of February, March and April, 2002. Soon you'll be listening to Marty Lichtenstein, CEO of IDT Telcom, which as you know represents about 91% of our revenue. He will be followed by Mitch Burg, CEO of IDT Media, and then following, Brian Finklestein, the CEO of Winstar, and finally Steve Brown, our CFO.

First, I have to unfortunately put you through the following. I would like to caution all those listening about any forward looking statements you may hear during the course of our conference call today. Over the course of this call and the presentations by each of the executives and then the question and answer session that follows, we may make forward looking statements, either general or specific in nature. These statements could include but are not limited to discussions of anticipated future financial results, industry market trends, and details of IDT's future strategy.

These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from results that we anticipate. These risks and uncertainties include but are not limited to general economic conditions in the global telecommunications markets and the state of US and international markets generally, disruption of our facilities and operations due to a variety of causes including, without limitation, terrorism, war or acts of God, risks and uncertainties discussed in our annual report on form 10-K for the period ended July 31st, 2001 and other factors that generally affect the business of telecommunications and other communications companies.

I remind you that we assume no obligation to update these forward looking statements or to update the factors that may cause actual results to differ from the results forecasted in the forward looking statements. Having said that, let me go on.

Because of the events that have unfolded during the last few months regarding some of America's largest companies, I feel compelled to talk about IDT, its management and its governance. I frankly agree with Henry Paulson, CEO of Goldman Sachs, when he said that US business deserves much of the approprium released upon it. The actions of some CEOs and other top management has given a black eye to us all.

We at IDT have always been sensitive to ethics and the issues of proper corporate governance. On our three boards, soon to be four with Winstar, the number of outside directors approximates the number of directors from management and entrenched here is to increase the number of independent directors as we go forward.

The outstanding directors we have chosen to serve on our boards are people of character and reputation and real independence. I will name a few, Bill Weld, former Governor of Massachusetts and former US attorney, Bill Collen, former US Senator from Maine and Secretary of Defense, Paul Axelt, former governor of Nevada and former US Senator from the same state, Ronald Reagan (inaudible), Admiral Bill Owens, former Vice Chairman of the Joint Chiefs of Staff, Congressman Jim Kemp, former Senator Frank Rosenberg from New Jersey, who is the founder and former CEO of Automatic Data processing, one of the most successful companies in America.

These people and others on our board have huge reputations, strong wills, and independence of thoughts and action, and they are very happy to serve on our boards because they know who we are and how we manage our affairs. The United States Congress, the FCC, the New York Stock Exchange are addressing corporate governance issues as we speak. We welcome that. We think it's appropriate. IDT will continue to believe in ethics, transparency, strong independent directors and solid accounting practices. As CEO of this company I felt the hat to spend a few moments addressing what is on everybody's mind, and so I did.

Now, the results of the quarter. This is the seventh quarter in a row that we have had a balance sheet featuring over 1 billion in cash and cash equivalence. Also during those seven quarters, we've increased our revenue by 45%. By purchasing Winstar and other Telecom assets during this precedented time in the telecommunications industry and at the same time by preserving our cash position, we have acted responsibly, allowing us to take advantage of further weaknesses in the sector.

We are pleased to report record Telecom EBITDA this quarter, three consecutive quarters of profitability for our Telecom division that just seems to get better and better each quarter. I mentioned it before and I will mention again, at the appropriate time in the future in an effort to maximize shareholder value and bring in additional cash, we will be offering Telecom shares to the public.

We are making progress integrating Winstar, a company that not long ago had a market cap of over $10 billion, gives us CREX status in every major population center in America.

I still believe what Howard Jonas said when we announced the acquisition that this would be the best deal since the Dutch bought Manhattan from the Indians. IDT media, you can expect some exciting news from ITD media. This is a source of pride to us, and Mitch Burg is doing an outstanding job preparing this division for a profitable future and now, to you.

Thank you, Jim. Good afternoon, everyone. Once again, I'd like to spend a few minutes giving you an update on the state of the Telecom industry, IDT strategy on some highlights of our operations.

I'll start with the industry environment, but frankly, there still isn't much positive news to talk about. I don't really need to detail the industry's problems. Anyone who reads the business news is already keenly aware of the situation; however, I will say once again that what is most frightening to me is the fact that even the biggest names in industry are struggling. It is not uncommon for every industry to go through a weeding out process, for those companies at the bottom of the industry's barrel fade away; however, when companies like Worldcom and Quest, are facing liquidity issues and even AT and T has seen its credit ratings downgraded significantly, and when the largest international Telecom providers, some of them former PTTs are struggling, you know this is no ordinary industry downturn, but that is just what this is, a downturn. It does not spell the end of the Telecom industry. I've said it before, but it bears repeating. I continue to believe that Telecom remains one of the world's most promising industries.

Continued deregulation, increased teledensity, and technological advances will drive growth in the world's telecommunications markets for years to come. These fundamentals have never been disproved, nor have their potential scale or scope. Rather, the timing of these fundamentals has been thrown into disarray. Simply put, it's taken longer for certain things to bear themselves out.

In the case of highly leveraged Telecom companies, it's taking too long at securing a course as their debt decays too much to bear. On that topic, I'm often asked about when the Telecom industry will bottom out and what it will take to recover.

Let's take those issues in reverse order. In order for recovery to come about, there must be a massive reallocation of capital and assets. Billions of dollars of assets will be transferred to the industry's stronger hands via sales or bankruptcy auctions. Capital will also be reallocated quite painfully in some cases with bond holders and banks losing their investments and assets and capital to be controlled by the companies that will emerge from bankruptcy restructuring.

Some of these assets will be relegated to the scrap heap. Thousands of miles of fiber will remain unlit forever and scores of companies will become nothing more than obscure answers to trivia questions; however, although this process is definitely under way, the rationalization of the industry, both from the standpoint of assets and capital, has only just begun and has a long way to go.

This is why I believe that an industry turnaround is still more than a year away. Granted, the first steps have already been taken in the form of numerous bankruptcy filings in the industry, but we now must witness the structuring and eventual re-emergence of some of these companies in order to get a clearer picture of the renewed global Telecom industry competitive landscape. One thing is certain, the Telecom industry, which emerges from the current downturn will be very different from that of the past. In an industry where costs and prices are declining, scale will be more important than ever, particularly as a means for becoming a low-cost provider.

The PTT and RBUCKS will be as powerful as ever, despite the continued clamour from every corner of the industry to further the course of deregulation. In addition to those companies that survive, there will be several companies who emerge from bankruptcy stronger than ever, still possessing important assets and unincumbered by the debt which had previously forced them to the sidelines.

Where does this leave IDT Telecom? For one thing, we know that we cannot afford to rest on our self-constructed pedestal looking down at most of the rest of the Telecom industry. Now is the time for us to prepare for this upcoming era of renewal in the Telecom industry. This is our game plan.

In reviewing our strategy internally, I recently put forth a plan entitled, "Conquering the Telecom customer spectrum." On one end of the spectrum is a budget conscious credit challenge in the grid market which we serve as the industry's leading provider of the prepaid calling cards. This market, featuring an enormous amount of international long distance demands continues to represent our most profitable niche.

On the other end of the spectrum are the world's largest Telecom companies such as AT and T, BT, Telecom Italia, Digitelecom, et cetera. We serve these customers through our wholesale carrier business. There several customer segements that cater between the previously mentioned extremes on the Telecom spectrum, and we're working to serve those customers as well.

Our consumer long distance business serves the traditional post-paid residential and small business customer, while our new enterprise business has been selling services to the large business customers they have traditionally not served. In addition, we're continuing to expand into enterprise business to include the government sector.

By accomplishing these tasks, we will fill in all of the holes in our Telecom spectrum and be able to offer high quality competitively-priced telecommunications services to all of the industry's major market segments. Within our major market segments, we plan to offer more products to our existing customer bases. For example we'll offer termination of international cellular call and in turn keep debit programs to our existing wholesale customer base. We'll offer local and other calling plans to augment our existing consumer long distance service.

We will bring a host of additional products, both Telecom and on Telecom related to our millions of prepaid calling card users. These products will include, among other things, prepaid cellular products and money wiring services.

Therefore, we are looking for horizontal integration on two planes, the first plane offering our products to a greater range of customers and the second plane offering a greater range of products to these customers.

For years, we have talked about how retail and wholesale businesses complement each other and how we remain committed to both, even as so many of our peers chose one or the other, most often discontinuing their wholesale businesses in order to focus on their retail divisions. The relationships and termination agreements we have developed on a wholesale side allow us to be a low-cost provider of long distance services to our calling card customers.

At the same time, the minutes we generate through our calling card business and the significant amount of business we generate through our consumer long distance units give us the buying power to negotiate better rates for our wholesale providers. This stable cycle has long been a core of our Telecom business and I expect it to drive our status as low cost provider into the future.

Although our Telecom strategy has remained quite (inaudible) at times, seeking out underserved niche markets, our approach has varied in keeping with industry changes. When I say approach, I am referring to the specific steps we take in order to implement our strategy, a means to an end. In this regard, things have not remained constant.

For example, a couple of years ago, we would not have viewed acquisitions as a good way to grow our business. Asking prices were too high and we did not see enough real differentiation on the part of the potential acquisitions to want them. The bills versus buy debate was firmly decided on the build side of the ledger; however, needless to say, things have changed significantly.

With so many assets and companies now available at pennies on the dollar, it has in some cases been cheaper to buy rather than to build, especially when you consider the benefit derived from moving up your timetable for implementation of a particular element of your strategy to the acquisition of a particular asset or company.

Almost everyday, companies are knocking on IDT Telecom's door viewing us as a potential acquirer in an industry so direly in need of a consolidator. I believe that we owe it to our shareholders to seriously consider some of the more promising opportunities. Toward that end, we have put together a team of our best people from our major business units, (inaudible) engineering, and other groups in order to properly evaluate these opportunities.

At the same time, however, I believe with every bit as much conviction that we owe it to our shareholders to be cautious in our approach weighing both the potential return on investments and execution that's involved. We're not a bunch of reckless cowboys just looking to make acquisitions to put our company's name in the papers, you have my word on that.

Another thing, in exchange for IDT Telecom, is our current access to inexpensive band width, both through the industry drop in band width prices and our extensive ownership of fiber on the Highcome Global Network. This has had and will continue to have a profound impact on our network strategy as we build out to accommodate our explosive minute's growth.

Whereas we might have at one time shunned band width hungry strategies, we now embrace them.

In the future, we can continue to expand our operations into areas outside the US, like Europe, Latin America, and Asia, and instill in our network in some ways as though everything was in close proximity. We can take a minute from anywhere to anywhere in an attempt to terminate that minute at the best cost for IDT Telecom. This will take us a long way towards our goal of being the industry's low-cost provider.

Ultimately, it will be our ability to understand the industry's inevitable cycle that will guarantee our success. The Telecom product goal still lies at the end of the rainbow and it's ours for the taking. We must become the masters of a Telecom cycle and to this point we have demonstrated our ability to do so.

As far as our operating results are concerned, this quarter was a very gratifying one for us at IDT Telecom, as represented the realization of several of our most important goals. Our sharp focus on cost reduction has really paid dividends for us, especially in light of the continued drop in long distance pricing throughout the industry. Even as our price realizations decline, we have lowered our permanent costs at an even faster rate, thereby driving improved margins for both our retail and wholesale divisions.

At this point, let me provide a brief update of our major lines of business. Our debit card business continues to grow both in the US as well as overseas. In the US, despite offering several aggressively priced new cards during this past quarter, which tends to feature lower margins at first, we managed to improve in our margin performance over the second quarter.

We are now a truly nation-wide business with operations outside our traditional northeast strongholds. We continue to grow operations in major markets like California, Florida and Texas. Looking ahead, we plan to dominate these markets as we've done on the east coast, by offering products that are in demand by our target customer base.

Our expansion will continue until we have a leading position in every major market in the US. Our European debit card business continues to grow as well. We reached a significant milestone in May with minutes of use exceeding 100 million minutes during the month for the first time. This indicates that we are moving closer to critical mass as we achieve a scale necessary to drive real profitability in this business.

Our core UK market continues to grow at a healthy rate as we further establish our status as the leading pre-paid calling card provider in that market. In Spain, where our experience is terminating enormous volumes of minutes to Latin America has proved to be a valuable advantage. Debit card revenues increased by approximately 50% over 22 levels and we see further strong growth into the fourth quarter.

Our European major strategy will gather further moment uhm in months to come with the potentially lucrative German market expected to account for a large portion of increase in revenues.

In South America, where we have only recently begun our calling card operations, we continue to put in place the infrastructure required to meet our ambitious goals in that region.

Looking ahead to the fourth quarter of fiscal '02, I anticipate revenue growth in the mid single digits with growth in both the US and international regions. Margins are expected to remain favorable at their current levels.

Our wholesale carry business posted another quarter of growth, rebounding in several quarters of decline as we continued our transition to a more stable, financially secure customer base. The growth in this business was made all the more impressive by a fact that we continued to restrict our revenues through our strict credit policies. Gross value margins have increased by over 350 basis points since the early part of fiscal '02 and I believe that these margin levels are sustainable as we have improved efficiencies and have decoupled the traditional inverse relationships between revenues and gross margins. In other words, we are adding those incremental minutes at the same marginal levels that we are experiencing in our base revenues.

I expect a third consecutive quarter of solid revenue growth in our wholesale business in the fourth quarter. As we've been discussing for some time now, a key element of growth in our wholesale business will be providing international long distance to RBUCKS, (inaudible), and entrance to the long distance markets throughout the US. Although this entry has been delayed, we continue to believe that it represents a huge opportunity for us and we expect our revenues from RBUCKS customers to rise significantly in fiscal 2003.

Additionally, we moved forward on our global access service which will allow international calling by cellular phone users. We see this as a major revenue stream going forward as we provide service to several of the major cellular companies in the US representing an aggregate base of over 100 million customers, but let me be clear about this. We are not struggling as we await the full entry of RBUCKS into the the long distance market or for increased acceptance of international cell phone usage.

On the contrary, our wholesale carrier business has now recorded a second consecutive quarter of revenue growth. Sure, our per-minute price realizations are lower but our costs have fallen even faster.

The consumer long distance business continues to be a greater source of pride for us as we head toward the 500,000 customer milestone and we're going to put the pedal to the metal as we drive toward that 1 million customer mark and beyond.

As part of our increased marketing budget for the consumer long distance business, we are in the process of launching some targeted marketing programs, including a long distance service targeted to the Hispanic market as move aggressively to up so our large prepaid calling card customer base to the higher margin consumer long distance service. Most importantly, this business remains solidly profitable for us consistently generating operating profits in excess of $1 million per month.

I remain excited about the prospects for our private label business, which offers cards to the major retail chains and other large national business customers. This business, which takes advantage of IDT Telecom's existing debit card platform infrastructure and expertise will provide us with incremental distribution point for our calling cards at higher margins.

Summing up our results, the third quarter of fiscal 2002 was a strong one for IDT Telecom. Against the backdrop of a faultering industry, we delivered more minutes of use, increased revenues, improved margins and higher profits fueled by our first ever month of more than one billion minutes. Our minutes of use for the quarter rose to 2.9 billion, up 10% from last quarter, and representing a rise of 44% from the third quarter last year.

I expect minutes of use to rise at least another 5% in Q4. Steve Brown, the CFO of IDT Corp. will offer greater detail on our numbers during the discussions to follow.

Finally, in order to offer some perspective on how far we've come in the past three quarters, let me relate the following anecdote. Shortly before the beginning of fiscal '02, I jotted down some goals for our different business lines on a piece of paper detailing what I hoped to be by the end of fiscal '02. My intention was to share these goals with the managers of the respective business units and ask them how they plan to proceed over the next fiscal year in their pursuit of these goals.

While looking at this paper a second time, I decided that perhaps these goals were a bit too ambitious, especially in light of the industry's difficulties in our commitment to maintain strict credit controls.

I put this paper away in my desk drawer and proceeded with setting more moderate goals. As the third quarter came to a close, I came upon this piece of paper which detailed my originally lofty goals. Interestingly enough, it we it actually already achieved many of these goals and we still have another quarter to go.

For example, in March, as we've already announced, we've achieved our first billion minute month. In fact May represented our third consecutive billion minute month. In addition, our consumer long distance business has now generated more than $10 million per month in revenue.

I must say that I've been very impressed and pleased by the stunning progress my team has made to date, impressed and pleased but by no means satisfied. I will soon be sitting down with my management team to communicate goals for fiscal 2003. I can guarantee you, we're going to really push the envelope this at time. The timing of the industry's recovery might remain difficult to predict but we've already demonstrated that we can generate profits amid the industry's turmoil and we'll prove it again in the fourth quarter of fiscal '02 and into fiscal '03 as well. Thank you.

Thanks a lot. I'd now like to turn the call over to Mitch Burg.

It's been a productive three months at IDT media since our last conference call, and I would like to share some of the progress we've made during this period of time. At our talk America syndicated radio network, we are making strong progress towards becoming the leade rin intelligent, informative and entertaining content.

We've added important new personalities, increased our affiliations, will launch a revamped web site and have consolidated our operations. Mort Crim is our renouned broadcaster, and we are pleased that we've added his short form (inaudible) and second thoughts programs to the Talk America Radio line-up.

This is an important acquisition for us, as Mort is a proven radio professional, name recognition, more than 800 new radio stations, and improved advertising sales to our network.

In addition to Mort, we have also added 90 new stations to the Talk America lineup since February. The net result of our efforts is that we've had double digit increases in our average order hour audience over the last three months.

We continue to be increasing Talk America's footprint and audience. We have reached agreements in principle with two other on-air personalities, and we will be announcing these agreements as contracts are signed. We will continue to search for America's best talent and we've identified and conducted initial test programs with two other potential on-air personalities.

An important element in servicing our partner radio stations is a move of AM Talk America's website. Marketed and designed for station programming and sales management, the new web site will allow our partners to sample programming, download audio bumpers, station ID's and sales materials as well as to allow stations to provide us with feedback and accountability functions.

With the closure of our Las Vegas facility in early May, we completed consolidating operations at a brand new state of the art and digital broadcast facility in Newark. This facility includes studio as well as production areas and our affiliates and listeners have commented on the dramatic improvement in talk America's sound quality. IDT's purchased, pending FCC approval, our first owned and operated radio station this spring, WMET 1150 AM in the Washington, DC market, a top ten market. The station was an attractive acquisition as it has a construction permit to build the station out to a 50,000 watt daytime facility. I've completed the hiring of a sales staff, acquired office space in downtown Washington, and hired engineers to complete the buildout of the station.

We are proud to announce that the Bill O'Reilly program will be exclusively airing on WMET and the Washington, DC market, and that Fox News will be our programming partner as well.

We are actively negotiating with other top talent for this station and the station will become a significant voice in the nation's most powerful market.

At our digital production solutions unit, we have great news for GAS, our global animations studio. This studio can produce Pixar quality, 3-D animation at prices that are comparable to TV animation. We just announced that we signed our first feature production contract for our 26-episode series, which is called "Monster by Mistake " a program that is currently airing in Canada as well as across Europe on RTL.

We expect that it will clear in the US in the next broadcast year. We have an equity stake in this venture that should allow us to participate in the back-end video and retail distribution.

We have also reached an agreement in principal for a direct consumer video project with a team of writers whose work is prominently featured on the Disney Channel. As we mentioned earlier, we will announce this project when the contract is finalized.

We are aggressively marketing DPS to major videos, advertising to promotional agencies and publishers, as well as directly to manufacturers. This follows the successful completion of a project for Chock Full of Nuts and the New York Yankees. We expect to share more exciting news from this unit with you shortly.

Development of our Winstar TV network continues. This TV offering will provide broadcast quality TV signals to the desktop across the Winstar platform footprint. We have negotiated for the key news and businesses content that research shows us that executives desire. From an operations perspective, we will complete the construction of a broadcast center at our Newark headquarters this summer. We will conduct operations in September, 2002, and have market tests scheduled to begin by the end of the year.

Business is improving at our CPM brochure distribution network. This travel-related business was suppressed as the industry was impacted by the events of September 11th. Revenue was up in the last quarter by almost 3% versus the previous year, and we continue to work to improve top line as well as bottom line performance at this unit.

We are also looking at opportunities to build marketing relationships with customers who call IDT's call center. We recently completed the first segment of a project with a leading financial services company, and the results of this work are encouraging.

Publishing, entertainment and educational companies are also interested in building a relationship with the IDT call center, and we are carefully building marketing relationships that will create a new revenue stream in this area. It is important to note that IDT's media properties are generally startups, that are less than a year old, and exceptional, energetic and innovative at making solid progress, and we look forward to bringing this division to profitability over the next three quarters.

Thank you, Mitch. I would now like to turn the call over to Brian Finklestein.

Thank you, Jim. Good afternoon, everyone. When I last spoke to you, we had just announced the strategic plan for Winstar that included exiting the fixed wireless business in some smaller markets, terminating the wire line resale business entirely, consolidating certain operations in facilities with IDT and reducing head count at Winstar.

I am happy to report to you that we realized all of these goals and several others over the last quarter without any disruptions to our core businesses.

First, both the wire line resale business and the fixed wireless business in some smaller markets were terminated. Over 3500 customers were contacted and had service transfer to other carriers. While this had an impact on top line revenue of close to $3 million per month, the savings realized from a cost perspective and the benefits derived from focusing on our core businesses will far exceed that amount. I will address our progress on cost reduction more specifically in a few minutes. We are also leveraging IDT's resources where possible, to gain efficiencies in cost savings in our operating environment, while improving the services we provide to our customers.

A prime example that I'd like to highlight relates to MIS. As of last month, approximately 65% of Winstar's customers are being billed by IDT's leading edge proprietary billing system. The remaining customers currently spread across three other billing systems will be migrated to IDT's billing system during the current quarter.

The immediate migration of the various systems not only allows us to enjoy significant cost savings but will also provide better visibility to management and ultimately improve service to our customers.

Yet another instance where the Winstar IDT synergy has come into play is through IDT's product offerings. During the quarter, the Winstar sales force began to market IDT domestic and international long distance services as part of its product line. Given IDT's extremely competitive pricing for these services, Winstar is bringing added value to its customer base.

The successful implementation of the various initiatives I've mentioned so far permitted us to follow through on a painful yet necessary step in reorganization of Winstar. During the quarter, Winstar's nonsales personnel decreased approximately 50%, giving the further opportunities for consolidation that we've identified but have not yet implemented. We project a further reduction of 15% by the end of the current quarter. This second reduction brings total payroll savings of approximately $2.8 million per month.

By no means were we satisfied to stop here in terms of reducing costs. As per the bankruptcy order, we had until April 17th to assume or reject contracts executed previously by Winstar. We used this opportunity to review and then reject or renegotiate thousands of contracts with software vendors, consultants, landlords, carriers and a variety of other service providers. As an example, we lowered real estate rental costs through the rejection or renegotiation by approximately one and-a-half million dollars per month. We also lowered consultant fee services by about a quarter of a million dollars per month.

However, big initiatives in conjunction with the termination of the wire line resale business was to improve the efficiency of our network and announce our several key components. We identified over 9,000 circuits to disconnect and should generate monthly savings of approximately $6 million in cost of revenue or COR costs on a go-forward basis as a result of this effort.

As a result of all of these initiatives, we expect to see a monthly cost reduction of approximately $11 million by the end of this quarter.

I would like to take this opportunity to thank Jeff Rockwarger, our Chief Operating officer, and his team for the extraordinary effort they've put forth overseeing and executing this plan. Putting a plan together on paper, albeit challenging in its own right, is relatively easy when compared to the difficulties involved in actually pulling it off. Jeff and his team labored diligently to translate this plan into positive action.

While we were extremely pleased with the results we've achieved on the cost side of the business, we know that cutting costs alone will not lead us to prosperity. I've made it very clear to our management team. Now that we've rationalized our business and created an intrastructure to build upon, the focus has to shift from an emphasis on cost reduction to an emphasis on revenue growth. To that end, I'd like to share with you the progress we've made and some of our plans for increasing revenues.

We continue to expand and upgrade our retail sales force. We now have over 100 sales people covering our 22 cities of operation. Our new building center commission plan was introduced last month that assigned specific responsibility for buildings to each salesperson and provides the sales force incentives to not only generate new revenue but also focus on revenue attention to assigned buildings.

The commission plan was extremely well received by the sales force and we are expecting to see its benefits in the immediate future. We have also assembled a large accounts group that will number 15 by the end of this month to focus exclusively on the larger enterprise customers.

In an effort to differentiate ourselves from the competition, we are currently in the process of staffing a substantial customer management team that will support the sales group by working on regeneration, scheduling sales visits, providing post-sale follow-up, as well as a high level of customer support.

Another initiative we are excited about is the restructing of our real estate group. In the past, this group dealt exclusively with negotiation of leases and service related issues in our buildings. We are now expanding this group's responsibility to include the development of partnerships with building management. We have begun to show landlords how we can make their buildings more attractive to potential tenants and we are also looking to partner with landlords in certain ventures.

In terms of offering specific guidance, we are still anticipating a monthly cash burn rate of about $5 million by the end of the current quarter, July 31st, and to be at or around breakeven by calendar year end. As I mentioned to you at our last call, our goal is not just to break even. That is simply the first major step. By mid to late 2003, we anticipate solid profitability at Winstar.

Our current model is one that features significant benefits of scale where incremental customers will be highly profitable at the margin. I should also mention that we are currently in negotiations with various buyers who have an interest in some of Winstar's nonessential assets and we expect to see proceeds from such sales this quarter. These proceeds along with our continued success in collecting receivables will go a long way toward offsetting working capital contributions by IDT.

Saving that, I believe we've taken huge steps over the last quarter executing a strategic plan that will lead us to profitablity, and while a lot of great work has been done, we realize there is much more to do and we are committed to doing it.

Our purchase of the remaining 5% of Winstar holdings LOC on April 17th underscores our commitment and belief in Winstar's potential. We realize there will be obstacles and temporary setbacks, such as the delay we're experiencing in negotiations with the RBUCKS, but the fact they clearly feel threatened emboldens my strong belief that Winstar is going to be a tremendous success. I look forward to sharing quarterly updates of our progress at Winstar as we move towards building a truly great and profitable company.

Thank you. I would now like to turn the call over to Steve Brown.

Thank you, Jim. IDT once again stands proudly above all of our peers in the Telecom sector, whereas our Telecom friends continue to disappoint their investors and advise estimates downward, IDT stands proudly above the fray with continued improvement in its Telecom revenues, gross margins, net margins and EBITDA.

Operational highlights outside of our Telecom business included the streamlining of Winstar's operations as detailed by Brian earlier in this call. While the streamlining is not he reflected in this quarter's numbers yet, the results will start to be reflected as soon as next quarter. Also to be reflected in future quarters are the results of the maturing ventures of IDT Media, most specifically from the radio broadcast side and the global animations studio as detailed earlier by Mitch Burg.

As we've done in the past, in order to enhance shareholders' understanding of our results, we have included in our earnings press release today a pro forma financial statement alongside with the GAP prepared financial statements that will be filed in our 10-Q. The pro forma financial statements do not include the results for Winstar, as well as certain mostly non-cash items included below the line in an other income and loss line, as spelled out on the pro forma financial statements in detail.

As usual, I will now go into the detail by segment and compare this quarter, Q3 of 2002 to last quarter, Q2 of 2002. First and foremost, IDT Telecom, which accounted for over 90% of our revenues in Q3. Overall, Telecom revenues increased 4.4% from $349.1 million to $364.4 million. Wholesale revenues increased 6.2% from 74.4 million to 79 million.

Retail revenues increased 3.9% from 274.7 million to $285.4 million. The driving factors of the increase in retail Telecom revenues was a 12.7% increase in domestic long distance revenues from 26.3 million to 29.7 million and a 3% increase in debit card revenue from 247.8 million to 255.3 million.

Looking forward, we continue to expect wholesale revenues to increase quarter to quarter over the next few quarters but at a slightly lower growth rate and we also expect retail revenues to grow at a 2 to 4% rate quarter to quarter for the next few quarters with domestic long distance revenues continuing to grow faster than debit card revenues, thereby making up an increased proportion of overall retail revenues.

Regarding gross margins, overall Telecom margins increased 240 basis points. Wholesale margins improved 220 basis points from 10.6% to 12.8%. Retail margins improved 260 basis points this quarter from 24.8% to 27.3%; however, if you remember retail margins had a $4.5 million hit last quarter, our one time hit for the cancellation for certain band width contracts, so removing one time effect of this cost last quarter, retail margins would have increased 90 basis points from 26.4 to 27.2%.

We expect margins to be fairly stable on each of these business lines over the next few quarters, but overall margins may increase slightly due to the increase of the revenue mix, especially taking into account the fast-growing domestic long distance revenues and European debit card revenues.

SG and A as a percentage of Telecom revenues increased 30 basis points from 16.9% to 17.2%, or in dollars, from $59 million to $62.6 million. Similar increases will probably be incurred over the next couple of quarters due to the increased SG and A costs related to the two fastest growing segments that I mentioned before, domestic long distance and European card revenues.

Depreciation and amortization remain flat at 13 million, and decreased 10 basis points from 3.7% of Telecom revenues to 3.6%. EBITDA for IDT Telecom rose 210 basis points to $25.6 million, or 7% of revenue, compared to 17 million and 4.9% last quarter. We're also proud to announce this is the record highest EBITDA for IDT Telecom.

Income from operations rose 230 basis points to 12.5 million this quarter or 3.4% of revenues from 4 million and 1.1% last quarter. Overall, IDT Telecom's third quarter continued to show marked improvement as did its first and second quarter with increased revenues, increased gross margins, increased net margins and increased EBITDA.

Regarding IDT's other divisions, IDT Media's loss improved by 12.9% from 5.7 million last quarter to $5 million this quarter, despite lower revenues of $4.2 million this quarter compared to $5.7 million last quarter.

The reduction in loss was due to the streamlining of its existing businesses, most of these businesses which are still in the startup phases. In the next two to three quartsers, IDT Media expects significant growth in both its radio broadcast division, its radio station division, as well as its global animation studio business, which will all bring IDT Media into the black.

Corporate SG and A expenses decreased 5.8% from $6.2 million last quarter to $5.9 million this quarter. These costs, which include general corporate expenses of the parent, as well as the costs of running the treasury and investing functions should remain fairly constant over the next few quarters and should stay into the 6 million per quarter range.

IDT Winstar this quarter had revenues of 33.1 million, direct costs of 42.1 million, SG and A and costs of 31.9 million, depreciation amortization costs of 2.9 million, and a loss of 43.9 million. Going forward, all of these numbers will be significantly reduced again as outlined by Brian earlier in the call.

Financial highlights this quarter include as detailed in our pro forma financial statements released today our first profitable quarter in years with a combined net income of $5.7 million or seven cents per diluted share and EBITDA of 14.9 million or 17.7 cents per diluted share.

Equally as impressive or maybe even more impressive, despite purchasing Winstar and funding its loss from operations, IDT today still has cash and liquid securities in excess of one billion twenty million dollars as of April 30th. Once again, management takes great pride in the continued strong financial performance of the company, and management is optimistic that we will continue to show growth in operational improvement in the foreseeable future. I now return the call back to our CEO, Jim Courter.

Thank you, Steve, and now we'll go to questions and answers, and for them we'll be joined by Norm Rosenberg, the CFO of IDT Telecom..

At this time I would like to remind everyone in order to ask a question, you may press star and then the number one on your telephone keypad. We will pause just a moment to compile the Q and A roster. First question comes from Peter Gourge from Car and Capital.

Hi, congratulations. A question for Jim. Jim, you mentioned in your opening remarks, you quoted Howard Jones as you talked about purchasing Winstar, how cheap it was purchasing it. Just over the past quarter, it looks like you actually purchased the last 5% at a much higher price. Can you just comment on why you actually paid the higher price for Winstar?

Yes, what has happened in the past number of weeks and months with regard to Winstar is that people are recognizing that we're turning the company around. It's a huge opportunity for us and it gives us C-REG capability in all 50 states and we have been approached by people wanting to take an equity position for more than we bought it, so we thought it was an opportunity to buy it cheap and that's the reason we did it.

Next question comes from Andrew Sidoti from William Smith and Company.

A couple of questions on Winstar. You've proved, eliminated about 3500 accounts and a couple of things. First of all, how many accounts remain, and then if you can give us some indication on the average monthly revenue per account that has remained there.

Sure, Andrew. We have currently close to 24,000 customers in the system. Bear in mind it is quite a spread between the smaller customers and the larger customers. We even have some small dialup customers and we're certainly pursuing some larger enterprise customers as I mentioned.

Right now, the average billing across the board comes out to about $300 a month, but it's actually very deceiving. If you look at our on-net business that we're really focusing on, which consists of about 8,000 customers, there the average billing is approximately $600 a month. We also anticipate with the expanded customer management group that we've assembled that the average billing is going to go up substantially.

Brian, what's the gross margins associated with the on-network business.

In the neighborhood of 40%. That will depend from market to market, it also depends across various services, but on average, it is about 40%.

Can you walk us through the value proposition is that Winstar can offer a perspective customer versus say the RBUCKS.

Number one, the very fact that our competition, the RBUCKS you mentioned is a strong advantage that we have to begin with. First of all, we're literally the only Telecom that can offer across the board all of the needs of the small business, you know, small, medium and the large sized business. We can offer everything on the voice side as well as the data side.

As I mentioned, we have expanded an we continue to expand our customer service group, our customer management group, and there's follow-up. Our goal was that every customer should be contacted on a monthly basis to make sure that their business needs are being met.

We're also working very closely with building management to make sure that everything is taken care of from a customer perspective that we're aware of the infrastructure and the needs of the customer in many cases before they even move into the building. We feel it's a higher level of the service, the fact that we can handle all of the business needs.

Do you believe you have any advantage on the price side as well?

Absolutely, and I'm not going to tell you we're the absolute cheapest around, but we're substantially lower than the RBUCKS, anywhere from to 20 to 30% cheaper. Depending on the product, there's always upstarts and there's always competition. The competition can be very fierce, especially on the data side.

We've recently actually just gone through a thorough study of all of the prices throughout our products and we feel we're extremely competitive.

Last quick question, Brian. Are you starting to get some traction from your sales force, you know in terms of getting penetration in existing buildings are you starting to see that come through?

Yes, beyond a doubt. I'm a firm believer that people have to be incented properly and as I mentioned, we have a commission in place which I think is the absolute state of the art when it comes to a commission structure. As a matter of fact, it was kind of interesting to find out about a month after they rolled out our commission plan, Quest rolled out a commission plan which is actually quite similar.

The key element of the commission plan is that it really focuses all of the sales people on the entire customer base and not just simply to, you know, sell a few items and move on to the next customer because of the fact that a salesperson is penalized if there's any turn in the buildings that they're responsible for, and the fact that the sales people are responsible for the revenue that they bring in. I'm talking about real revenue as opposed to projected revenue. It ensures that number one, we're not overpaying. Also ensures we're not underpaying, and more importantlily, it makes sure we're attaining our customer base and we have a firm base to build on and we're seeing clear improvement over the last two months.

Marty, a quick question, that would be on the wholesale business, how close is that business to break even and what would it take to get that business to break even?

I anticipate the starting '03 to be to the at breakeven level and it will require a growth between 5 and 8% on the revenue side and improving efficiencies over a couple of points but I see it in reach.

That's 5 to 8% on sequential basis?

Correct.

Thank you.

Next question comes from Tron Johansen from Court Cobenick.

Congratulations on being the fastest grower this quarter among all the Telecoms out there. I have a question on the Winstar, which of course is the favorite subject of everybody. When the Winstar was closing down, there were 50% margins, and you are reporting 40, I believe now, and you also lost a lot of revenue compared to what Winstar booked at the height of the, their operation. What can you conclude, did you lose more customers than you anticipated

I can address a couple of things. I don't know - the number 50%, I can't say I'm terribly familiar with, but I can tell you that my understanding was that after, at or around the time that Winstar went into Chapter 11, and I guess you could call it a panic move, they severely increased prices so the margins went up. The problem was they really priced themselves out of the market.

Our prices are extremely competitive, but they afford us an opportunity because they have reduced cost of the margins I mentioned in the neighborhood of 40%. As I mentioned last quarter, it was made very clear to us that we have to focus on our core business. We can't be, as I mentioned last quarter, all things to all people and I think that was part of the undoing of the old company, and the bottom line is, in order to get there, we had to make certain painful decisions, including walking away from certain revenue streams and that's exactly what we've done and beyond a shadow of a doubt, not only are we seeing the positive results now, but I'm absolutely confident that when we speak next quarter, you'll see once again dramatically results.

I might just add looking at IDT all across the board, 40% sounds awfully good. I wish it was the case in every one of our offerings and products. You can make a lot of money at 40% gross margins.

Sure, I was basically looking at this in December when you took over basically projecting this improvement on your overall from the contribution that Winstar and of course you had taken care of at least a better part of that.

The other issue that, it seems that when you talk about the Winstar business, it's very much Rohanna speak, build an eccentric plan and so forth, it sounds like very old hat to me. When are you going to make your customer centric plans?

Well again, I'm not -

Have you changed anything that basically, the softer part of the, you know, the culture part of Winstar seemed to be a very spending machine, you commented very adequately on how you've reduced the cost structure. The revenue side seems to be built to be built so to speak.

Let me go on and interrupt Brian for a second. It's Jim Courter talking, and say we're approaching this from a totally different perspective than the prior executives. They were basically, wanted to expand the network. They wanted to hook up buildings and as soon as they did, they'd move on to the next building. They weren't concerned about deep penetration within the building because they were being financed by debt and equity financing, and what impressed Wall Street at that time was the footprint that you had, the number of buildings that were on your network, and so they were interested in expanding the network. We're interested in expanding the number of customers we have within the building, so we're approaching this thing far differently than the prior management.

If I could add to what Jim said, I speak a couple of languages but Rohanna speak is not one of them. Building centric models just to elaborate a bit, can mean two different things. The old Winstar, it meant lighting as many buildings as possible. There were buildings that were lit and there were essentially no customers in those buildings, and it was really growth - true, the model was building centric.

It revolves around how many buildings you could light, but the fact of the matter is that the penetration rate both in terms of the percentage of tenants in that building that used Winstar services and certainly in terms of the revenue base within those buildings, the penetration rates were incredibly, incredibly low. So when I speak about a building centric model, focusing on the buildings dramatically increasing the penetration of those buildings, filling the pipes while keeping our expenses down. So again, we are focused in a sense very much on the buildings but in a very different way.

I wonder if you could comment on the $26 million writeoff then in Winstar, since that seems to be the weight around your foot at this point.

Sorry? You're referring to the $26 million that Winstar affected P and L this quarter; is that what you're asking about?

Yes.

I think Brian already spoke to this. It's a transitional period. Basically we were, you know, we were restricted to the contracts that we had until April 17th to get out of the contract. I think this is the first quarter that Winstar - our plan of Winstar is under our control, and Brian spoke to, you know, that the cash burn will be significantly reduced and he also spoke by January hopefully to break even and sometime next year the middle of next year and calendar year we expect some nice profitability there.

Understand the 120 days that we were given to reject or assume contracts, there were over 8,000 contracts that were involved and while that required a tremendous effort, it also gave us a tremendous opportunity, as I said, to be able to either reject certain contracts, to be able to renegotiate others and again you're not really going to be able to see the benefits of that until this coming quarter.

And is that then, you know, that process basically terminated so you won't have other special charges of this magnitude?

That's correct.

I have a last question that goes on this sort of transparency thing. It's a little bit the fashion of, I guess with this quarter the first times the fiscal actually produced the cash flow statement, the three complete financial statement, your sort of four-line balance sheet and not including Winstar and their cash flow statements, wouldn't you think that this is a time when perhaps we could see some more complete financial statements when you present this so we could have a closer look at what, how it all hangs together?

Certainly for the fourth quarter which is the year-end the earnings release will have much more detailed cash flow statement. I mean as you can see, you know, even from the crib down and dirty, we're still sitting with over a billion dollars in the bank, and I - you know, there will be, whatever we can do to enhance shareholder understanding, really we will put out information to release. I mean that's one of the reasons why we give the pro forma. As far as putting more detailed cash flow, certainly you'll see that next quarter.

I'm also going to add that it's important to take a look at the calendar, because one thing you should bear in mind for people who follow the company and faithfully been listening to these conference calls quarter after quarter and reading or press releases, we used to actually simultaneously issue a press release and our filings, 10Q or 10K, as the case might have been. The way we looked at it this quarter is that we're in fact announcing our results earlier than we have generally speaking in the past.

So we think that getting those kinds of results out to the shareholders is actually enhancement and as Steve pointed out we're definitely moving to a point where we'll be able to move both the 10Q filing up perhaps with the press release, but right now you should look at we're getting the numbers out earlier than in the past.

Okay, I look forward to seeing the 10Q and good luck.

Thank you.

Our next question comes from Peter Derose from Account Management LLC.

Hi. The spinout of the subsidiary, did you comment on that before I got on? I was about three minutes late getting on the call. Were you still, is the timetable chained at all on that?

This is Noel, the subsidiary in question is Telecom?

Right, along the -

Yeah, that's Telecom. Again, I think the number one item and we've said this all along. The biggest dating item as far as timing concerned is going to be the market conditions. We have done our background work to the extent that we can to analyze and to gauge where the market is for this and we're also going down the dual track of looking at outside to see if the market is ready and preparing ourselves for that eventuality.

I'm low to put a particular date on it. We could be ready and the market can't be ready but let's just say we think we've achieved the scale we need. We're doing what we need to internally and when the market is ready we think we'll be doing okay.

Thank you.

Next question comes from Bill Smith with Smith and Company.

Hi. There was an article recently in the Wall Street Journal about the cell phone companies offering prepaid calling cards. Could you comment on what you're doing along those lines and if that's something that's in the business strategy going forward for IDT?

Sure. Presently there are six major cellular companies in the US which have 100 main subscribers. Coming this July, Cingular will be penetrating the New York market and Verizon and voice a large market. We are in conversations with all the major providers to start offering our cards. This past month we've launched cards for the major providers and next month, in other states their cards will be issued as well so we are aggressively pursuing this opportunity and IDT being in the best position for this opportunity because we are a leader in the prepaid market distributing over 200 million cards a year throughout the community. There's a proper launching pad or best launching pad for the prepaid cellular market, so yes they are knocking on our doors to offer their products to our consumers.

This is a pretty positive article talking about the growth rate being fairly robust. What do you think the size of that market could be?

We look at that market from two perspectives. We look at the prepaid market on the domestic side being very high, but more importantly, by creating stickiness with that consumer to capture the international calling, there's even a bigger opportunity.

The domestic cellular companies are looking at the opportunities to capture additional domestic revenues. We're looking at this to capture the international revenues as well and coming July, our global access which we mentioned in the past enabling the cell phones to have international capabilities will in fact be launched.

Okay, thank you.

Your next question comes Noel Kimmel from Ship and Capital.

Hi, two questions. First question, could you talk a little bit about the revenue trend of the Winstar business since the acquisition and the second question is, how exactly can you describe to me the synergies on how you leverage off of Winstar's network of building an existing network and how that connects to the IDT existing backbone network?

Sure, as far as the trend of revenues, as I mentioned, we lost about $3 million a month due to shutting down, first of all, terminating service in certain cities that we thought strategically didn't make sense for us to be in, as well as getting out of the off-net business for the smaller and mid size accounts. So it was turning down, and the pickup has actually started.

In other words, we're trending - the burn has gone from the on average, about 13, $14 million a month trimming down to what we see in July to be about five and-a-half million dollars a month. As far as leveraging off of IDT, it's not just a question of IDT's backbone. There's a tremendous amount of Telecom experience, a tremendous amount of talent within IDT and that's more than anything, I would say, is the value of what we've been leveraging. Nationally, as I mentioned, both from the long distance perspective and and international long distance perspective, it's been a no brainer. We're also looking at various other initiatives in terms of being able to provied local connectivity for IDT, but as I said, the true win here is the fact that the entire Telecom has mobilized and is really really helped us, developed the foundation that we really need in order to develop and grow in the future.

Thank you.

Next question comes from Robert Bett, Greenlight Capital.

Hi. I didn't really understand the answer to the question about what the sort of discrepancy and valuation between the first 95% and the second 5% of Winstar.

I'm not sure what you don't understand about it, but we, we spent as you know $42.5 million and acquired 95% of Winstar. Then by virtue of the work that we have been doing with Winstar, the fact that we have reduced the burn, the fact that we decided to target 22 cities, the fact that we are going to dramatically increase the penetration rate within the buildings that are on net from a measly 1% to as high as we can push it, there's a number of strategic investors that wanted to buy a piece of Winstar.

There is going to come a day that in all probability we will sell part of Winstar to a strategic investor, but at a higher amount than we just paid for, so basically, we saw some of the offers coming in and decided to pick up the balance of 5% at a rate and an amount less than what was privately being offered to us.

What's the benefit of owning 100% over 95%?

The benefit is that when you sell 5% for more than you invested, you're making money; that's the advantage. There's nothing magical about 95 or 100%. We just thought it was an opportunity for IDT to make another smart investment at a low valuation.

We bought back for $15 million something that we think we can sell significantly higher. It was - the longer we waited to buy back, the higher that amount would have been, and 5% is a significant part of that company.

It seemed like a better investment than even buying back your own shares?

Well, first, -

We have a lot of our own shares. We thought it was a smart move, and I think within a relatively short period of time you'll agree with us.

I hope so.

I'm sure you will.

Well, thank you very much.

You're welcome. I have no doubt.

Due to time constraints, we will be taking one final question. Your final question comes from Roger Sox of Cafe Financial.

Thank you, and congratulations on a nice quarter. Just a few questions, comments. One, I actually agree with a previous caller that it's possible to get some better disclosure next on the year-end on the quarterly statements, at least a balance sheet, if possible, but my questions actually are, on Winstar, what sort of penetration rate for a building are you targeting, and I know it's a little tough because there are various sized buildings obviously, but is the strategy to ramp up penetration in a building before you would light a second building?

And the next question would be on the cash balance, the billion plus or so, you know, what are the plans for that billion plus, I mean do you envision a share buyback or did you buy back shares during the quarter, and I didn't see on the release, but how large is that for a tax liability in another quarter. Thank you very much.

Roger, let me address your Winstar question. As a rule, you're correct. We're certainly going to look to increase and substantially increase our penetration rate both in terms of the tenant penetrations and the revenue penetration rates within the buildings but I will give you one exception. As I mentioned, we're looking to aggressively partner with landlords and in general with building management.

If there are opportunities, we're certainly committed, we have about 900 buildings that, while not fully lit, they're certainly close to being lit both in terms of they're been line of sight to a hub, there's a certain amount of critical wiring that's been done and completed in the building but yet there's a bit more work that has to be done. To the extent that we're working better to partner with building imaginement and they're able to line up tenants, potential clients for us within those buildings, we're certainly committed to do that, number one.

Number two, we certainly feel that in the large accounts business, you know, we're not looking to just simply grow within the on net business but we're very committed to lighting up additional buildings as well both for primary service as well as stand by services.

Is there a target for the penetration rate that you're looking to achieve in each of the buildings?

Well, right now, from a tenant perspective, we're at 8 to 9% and we're looking to move that to approximately 15%, but much more importantly, from a revenue perspective, we're below 2%, and we certainly feel that we need to get and we're certainly capable of getting to 4 to 5%, if not higher in terms of the Telecom revenue spent to the buildings.

Regarding your balance sheet question, the third tax liability is $314 million as of April 30th. Regarding our cash balance, these are questions we address every conference call.

Yes, we do evaluate. We do have the ability to buy, you know, from our board of directors to buy back shares. We have bought back over 15 million shares to date. We do evaluate from time to time. We also and more importantly I think are looking at a very distressed market right now. We're looking for the right to M and A opportunities such as Winstar.

Having the billion dollars in the bank enabled us to get Winstar because the court often and creditors are often looking at companies that have very strong, are in strong financial condition, so it's not, it's our best interests to always have a very strong balance sheet and always have a very strong cash balance that will lead to some major opportunities down the road, but we are evaluating the opportunities. We are evaluating when would be the right time to buy back shares, and the only thing we will promise to shareholders is that we will be very conservative and we will not be reckless with the cash.

What is the right time that you would buy back shares if that is one potential Rousse for the cash?

The right time would be if the stock collapsed I suppose and it was a good financial deal for IDT, but that so far has not been the case. If you look at where our stock is trading today, although it's off the highs of I think a month ago, if you compare us to most everybody else in the industry, we're doing quite well, so we don't think it's the appropriate time to initiate a buy back right now.

I agree, although I think the market certainly doesn't give you full credit for the operating businesses and if you were to back out the net cash per share from our current stock price, then the multiple that you're trading in is extremely low compared with the distressed prices of a lot of Telecom companies out there, and one can make the argument your stock is dirt cheap right now and you should be buying some of that back if you believe your stock is in fact undervalued.

The market cannot deny reality all the time. The market is denying reality right now because Telecom stocks are depressed, so I think the stock price being down is a reflection of market conditions. You know, our feeling is as soon as the market turns around, people will understand what value is here, and on the other hand, what we can do with this cash in this depressed market is extremely significant, and it would be a little short sighted to think that if we need the cash two years from now, we can go back and get it. We saw how quickly the market crashed so we have to, we understand this and we're always evaluating but we have to do it in a conservative fashion.

Thank you very much and again, congrats on a good quarter.

Thank you.

Thank you, Mr. Courter. Do you have any closing remarks?

No, just we're very, very pleased with this quarter, as you can tell and we anticipate even a better one next time. Stay tuned.

This concludes today's teleconference. You may now disconnect.