WinStar slashes work force

(Telephony) Broadband wireless provider WinStar Communications said it is immediately cutting 43% of its work force, or 2,000 employees, and is halting its international network expansion for the remainder of the year.

The layoffs will be in WinStar’s network construction units and occur primarily in the U.S., but some international operations will be affected. The company is also eliminating some redundancies in marketing, finance and administration.

A WinStar spokesman said the company is likely to incur a charge against earnings to cover the costs of the layoffs, but no additional details were available.

Going forward, WinStar will focus on penetrating its existing 5,400 on-net buildings and addressable market of about 150,000 businesses, said the spokesman. The moves were made to reduce WinStar’s capital expenditures while it tries to arrange additional vendor financing or land deals to sell excess capacity on its local building network to other carriers.

According to analysts, WinStar has enough cash and vendor financing available to maintain operations through 2001 but will need additional funding to survive beyond that point.

Both Moody’s Investors Service and Standard & Poor’s, the top two credit rating agencies, downgraded WinStar’s secured and unsecured debt this week after WinStar postponed the filing of its yearly 10-K report. The agencies are concerned the company will run out of money and leave bond owners holding the bag.

“Even if the company could obtain funding, we do not expect it to generate free cash flow prior to 2003,” said a Moody’s report.

At the end of 2000, WinStar had cash and equivalents of $315 million on hand, in addition to $800 million in available vendor financing. But the company also has $3.6 billion in long-term debt.

After rumors and inquiries from investors about a tie-up with WinStar, Qwest Communications issued a statement saying it has not intention to acquire, purchase the assets of, or invest in WinStar or “any other fixed wireless company.”