LV phone company names chief

Thursday, Oct. 14, 1999 | 11:29 a.m.

Analyst opinion

Goldman, Sachs & Co. initiated coverage of MGC Communications Inc. this week. Analyst Ken Hoexter gave the company's stock a "market outperform" rating and after today's announcement upgraded it to a "recommended" listing. Hoexter posted a 12-month target price of $35 per share.

Of six analysts covering MGC, five have "strong buy" ratings and one has a "moderate buy" listing.

A telecommunications executive who helped turn Rochester, N.Y.-based Frontier Communications into a market leader in long distance, local and data transmission services will lead MGC Communications Inc. of Las Vegas.

Rolla Huff, president and chief operating officer of Frontier, today was named MGC's president and chief executive officer, succeeding Nield Montgomery. Citing the need for a chief executive familiar with technological advancements of the 21st century, Montgomery announced earlier he would step down. He'll serve as vice chairman of the company's board.

The company also announced a new $35 million investment to finance the company's rollout of new digital subscriber line technology in Las Vegas and other MGC markets.

Investors reacted favorably, running the stock price up $2.44 to $31.375 in early trading today.

Huff, 43, is credited with helping engineer the sale of Frontier to Global Crossing Ltd., an undersea fiber-optic cable company, for $11.2 billion earlier this year.

In his two years with Frontier, Huff oversaw a period during which the market value of the company more than tripled.

Prior to joining Frontier in 1998, he was president of AT&T Wireless' Central U.S. division, which at the time had 1.6 million customers in 15 states. He also spent 10 years with NCR Corp.

In a move by MGC to promote itself to investors nationwide, the new president appeared on a CNBC financial television show this morning.

"We're going to make this a national company and we're going to do it very quickly," he said, adding MGC in the next few quarters will launch service in Cleveland and Columbus, Ohio; Detroit; Dallas, Houston, San Antonio and Austin, Texas.

"With one of the most exciting new advanced telephony solutions, high-quality investors and a true end-user focus, MGC has tremendous upside and offers a compelling opportunity for me," he said in a statement.

MGC Chairman Maurice Gallagher said Huff's experience will be valuable to the company.

"Rolla possesses tremendous operating skills with an intimate working knowledge of a wide range of advanced telecom services and has a proven record of creating value for shareholders," Gallagher said. "MGC is at a pivotal juncture in its development as we focus on national deployment of our unique bundled voice and data services to the underserved medium- and small-business market. We believe Rolla is an exceptional choice to lead our management team."

An analyst -- who recently raised her rating of MGC and predicted earlier this week that MGC would soon hire a new chief executive -- said today's announcement was another positive for the company.

Lori J. Alexander of Preferred Capital Markets, San Francisco, said she expects MGC to enter 20 new markets in the next 12 to 18 months and that Huff would bring some of his Frontier management team to handle the growth.

"He certainly has his hands full right now, with the new Ohio and Texas markets that were previously announced," Alexander said. "With this kind of growth, he'll have the need for four or five people. I'd expect him to bring a complement from Frontier."

Alexander said MGC "is a quarter ahead of projections" with Huff at the helm and new financing in place.

MGC said today that Providence Equity Partners Inc., a private firm specializing in telecommunications investments, and JK&B Capital have agreed to invest $35 million in the company.

Providence, MGC's largest shareholder, agreed to invest through an affiliate an additional $25 million, increasing the company's ownership of MGC to about 17 percent. JK&B Capital agreed to invest an additional $10 million, increasing its ownership to about 7 percent.