It has been rather busy over on the LOR board, so I am falling behind a bit. Here are Readware's posts. Very interesting set, and I included one extra post by someone other than Readware. Unfortunately, I have not had the free time to participate in the LOR discussion over there for a week or so, and do miss posting. Anyway...
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Subject: Re: Motorola's new programs
Date: Fri, Oct 17, 1997 16:51 EDT
From: Readware
Message-id: <19971017205101.QAA10575@ladder02.news.aol.com>
Teledesic program: 288 LEOs, costing $9 billion, providing point-to-multipoint data delivery and IP Multicasting, worldwide. Start-up: 2002.
Loral's Skybridge will do the same at a cost of $3.4 billion.
Right now Teledesic has received rights to the spectrum, with Loral-Alcatel having applied to share that spectrum.
I think the Teledesic system is not cost efficient, and am baffled by the need for 288 LEOs. It is doable, but it simply makes no sense from an engineering standpoint. It simply does not.
Subject: Re: Miscellaneous
Date: Fri, Oct 17, 1997 16:58 EDT
From: Readware
Message-id: <19971017205800.QAA11098@ladder02.news.aol.com>
You are doing your homework. I will not comment on the Iridium China question, so you probably by that know my answer.
Yes, Agilua has been sold out, and the 9 transponders owned by Loral are for C* purposes. As far as transponder pricing goes, the low end is $1.2 million/transponder for C band, and up to $3.2 million/Ka-Ku. This pricing will be going up over the next four years at a rate of 4-7% annually. In the Mexico slots, the tranponders average revenues are about $2.7 million/year as reported by SatMex through Price Waterhouse two weeks ago in their published
report.
Subject: Re: The economics of a "sure thing"
Date: Fri, Oct 17, 1997 17:03 EDT
From: Readware
Message-id: <19971017210300.RAA10683@ladder01.news.aol.com>
1. Answer to # 1 is Yes.
2. Breakeven for G*/call is hard to calculate since it depends on the number of overall users of the system (supply/demand-- the more users, the lower the breakeven/call).
3. I do not believe there is price inelasticity. At some cost "x", there would no longer be an incentive to use the service.
Subject: Re: Motorola's new programs
Date: Fri, Oct 17, 1997 19:48 EDT
From: Readware
Message-id: <19971017234801.TAA24697@ladder02.news.aol.com>
You are correct on part one of your observation-- McCaw made money by getting rights to the spectrum first. However, that is not an issue with Loral-Alcatel now, because the communications bandwidth will not be resold in this case. It will have to be shared. McCaw did not have to deal with the International Telecommunications Union when he started Nextel. He now does. If the situation of accessing spectrum rights was the same as it was when Nextel
was founded, Loral or some other entity would have preceded Teledesic in the application to the spectrum. There was no need to this time because of the ITU regulations.
Also, as CDMA finds more bandwidth, the Teledesic spectrum rights will mean less and less.
Beyond that, Teledesic has two problems that Loral does not: it has to come up with $9 billion. It is going to have to launch 288 LEOs. The Skybridge system costs $3.4 billion, and will use only 64 LEOs.
Subject: Int'l phone rates and G*
Date: Fri, Oct 17, 1997 20:06 EDT
From: Readware
Message-id: <19971018000600.UAA25369@ladder01.news.aol.com>
The question of competition driving down costs of G* phone calls (and thus profits) is misstated: int'l phone calls and their current plus further decline in costs have no relation to the G* cost structure since G* will be offering telephony where terrestrial infrastructre dependent telcos cannot. Int'l phone rates could be cost free, and still G* would be unaffected because it will be offering services where the telcos cannot now. Only with G*, in
fact, will land based telcos be able to conduct business in places (3/5 of the world) that it currently cannot. That is, Globalstar represents increased business for domestic telcos (resellers, wholesalers).
As for the issue of G* vs. Iridium: Iridium is a system that costs twice as much as G* with less than half the G* capacity. The technologies of both will get telephony service to their customer base. Iridium chose to avoid ground based telcos for traffic, preferring in-orbit processing of calls-- and that is the reason their system costs twice G*'s. The comment that the "bent pipe" architecture (Globalstar's) is inferior to Iridium's, or that both
systems have yet to be tested (and so one cannot comment yet on either), is without foundation. The bent pipe architecture has been used since at least 1984, and Iridium has already conducted two major tests on its system with results that overwhelmingly bore out the effectiveness of their system.
The notion that gateway maintenance for Globalstar's system. is equivalent to the costs of having in-orbit consoles, as Iridium does, and thus that the gateways represents a "future cost" to G* that Iridium does not have is simply inapplicable to G*. G* is not paying for the costs of the gateways or their maintenance-- the local telcos are.
A lot of things are said about the economics of both systems, but it is probably a good idea to have the data correct becfore comparing the two systems economies.
Subject: Globalstar Subscriptions
Date: Sat, Oct 18, 1997 11:56 EDT
From: Readware
Message-id: <19971018155600.LAA17508@ladder01.news.aol.com>
1. Globalstar has seven worldwide/regional wholesalers of its satellite time for telephony access : AirTouch, Vodaphone, Sime Darby, Thaisa, Itochu, Hasan, Rostelcom.
2. Rostelcom (Russia) has approximately 83 local resellers.
3. Globalstar is receiving a far higher reception for its mobile and fixed satcom services in the People's Republic of China than originally anticipated.
4. In estimating Russia satcom services, at this time only industrial usage (usage by heavy industry users, such as petro riggers and heavy trucking) is a feasible number to post given the 83 resellers of Rostelcom.
5. In an estimeate sampling of 32 countries (which excludes the US, Canada, Europe {exlcuding Iceland} and the Phillipines [where Globalstar licensing is still awaited]), that traverses from Andorra to Yemen, and includes, among others, Fiji, Madagascar, Macau, Marshall Islands, Qatar, Solomon Islands, and Uganda), with the highest subscription number being 460,000 for one country, the lowest being 4,000, and keeping in mind that Russia, because of
all its resellers can only be calculated from an industrial usage profile, the subscription numbers for 2002 appear from these 32 countries (these are estimates):
Mobile-- 1, 582,200
Fixed: 309, 500
In 32 countries, then, with the exclusions noted above (Russia being the most important), Globalstar appears to be able to expect 1, 812,700 users in the year 2002. Note that Russia does not include the Ukraine, and for this sampling excludes Estonia and Latvia.
That leaves 53 countries, in which, for example, all of South America (excluding Brazil) and Central America mobile and fixed site satcom demand have have to be numbered, and have not in this sampling. Also, almost all of Africa has been excluded from this sampling, as has been the Middle East. The only large countries included in fact have been the PRC, Brazil, India, Indonesia, and Mexico (recall that Russia is difficult to calculate for the
reasons above).
If you extrapolate from the 53 lands (excluding Russia again, along with the US, Europe [excluding Iceland], and Canada, Globalstar appears well poised to exceed our original 2.2 million subscriber number for 2002. Again, these are estimates which readers can test against their own readings of teledensity scarcity. Again, these estimates for 2002 assume that Globalstar is fully operational by the end of October 1998, as is its intention, which
it has publicly stated in its business plan brochures to Globalstar shareholders.
Finally, the mix of Globalstar subscription appears to be roughly 75% mobile and 25% fixed.
Subject: Re: Miscellaneous
Date: Sat, Oct 18, 1997 13:56 EDT
From: Readware
Message-id: <19971018175600.NAA26889@ladder02.news.aol.com>
G* is GSM compatible, and again you must remember that G* is for areas not GSM accessible.
Subject: Re: Capacity and growth
Date: Sat, Oct 18, 1997 14:22 EDT
From: Readware
Message-id: <19971018182201.OAA28002@ladder01.news.aol.com>
If your question is relative to my G* Subscription posts, let me say this: this post represents a 31% increase over original estimates. The mix of G* subscriptions is very hard to identify at this point. I would think that Globalstar management has a far better handle, obviously, on that than researchers from the outside. Globalstar management itself has told the public that subscriptions will come from a broad cross section of all business entities.
I can tell you that our number for India (a country of 900 million) assumes almost no penetration (we cannot get hard numbers actually yet), our number for Russia represents .000019 of the Russian population, and our number for China is probably way too low (but we have to go on what we have at this time) . In fact, China is not the country where we have internally here on our table the largest G* subscription. But, again, it is always better to be
on the low side, assume every calamity and negative variable possible, ratchet down what a reseller or survey tells you, and then come up with an estimate that is on the pessimistic side.
No one on the planet can gauge the growth of satcom telephony over the next 10 years. When Globalstar was Loral Qualcomm Services, the estimate for the addressable market was 8 million . It is now close to 80 million for the year 2006. The world population will grow almost 1 billion in the next fifteen years, most of it in the area where satcom telehony will be present, and not terrestrial based telephony. So these numbers today, 18 October, may be
totally miniscule in four, five years. Unless investors in these systems whose shares publicly trade on the US exchanges travel to different parts of the world (and I can tell you no analyst on Wall Street studying these companies does-- we do, however) and talk to different businesses and commercial enterprises currently without telephony they will not have any idea at all what the growth looks like. And this does not even include the so-called
"business traveller". It is clear to me, e.g., that individuals who throw out questions on cellular and int'l phone rates, reduced roaming charges in various areas of the world, and the like are missing the point that satcom telephony provides services where these questions have no application. If satcom telephony gets 2% of all new telephony subscriptions worldwide in the next four years-- just 2%, it will have eight million users in 2002.
Regarding capacity, that will have to be adjusted upwards as the market demand indicates, which for G* and Iridium has already occurred since both have filed for second generation systems already. If TRW does bring Odyssey to market, the only major competitor appears to be ICO Global, which is a GEO stationary system, which includes the problems of signal delays etc. ICO, however, will not be operating till late 2000. Ellipso to me is a question
mark given the long process of licensing in all the countries in which it will operate which it still needs to undergo. The Hughes telephony system for the Middle East is a GEO stationary one, and will require at least four years in the future before it makes a significant presence there.
Subject: ATTENTION: Loral and G* Naysayers
Date: Sat, Oct 18, 1997 17:23 EDT
From: SteveR338
Message-id: <19971018212301.RAA12331@ladder02.news.aol.com>
ATTENTION: Loral / G* Naysayers,
Please enlighten us with your concerns, doubts and forecasts of doom for Loral / G*. Although this is a great message board, it is dominated almost completely by the cult of Readware. I can almost see Readware now, dispassionately typing a message re Loral at the computer puffing at his / her pipe. Readware is touting the superior technology, operational efficiency and management of Loral / G* while reassuring us about the inevitability of
exponential growth of the share price. The posts from Readware's Hallelujah Chorus assure us that the most popular name of any pet or child in the next decade will be some derivative of the name "Readware." We all hold hands across the Internet and are about to sing the first verse of Kumbaya when....
Really folks, as much as I am impressed and influenced by Readware, this board should have insightful bearish views on these stocks since there is short interest in Loral / G*. Aren't there any ANTI-Readwares out there with sixes on their skulls and gnarled fingers who can round out this board? Surely there must be more information about Loral / G*'s shortcomings or knowledge that Bill Gates will soon announce the launch of a 10,000 satellite
system with all manner of LEOS and HEOS. Believe me, I hope Readware's views will prevail, but I feel the average stock investor who looks at this board is getting only one side of this story.
Subject: Re: ATTENTION: Loral and G* Naysayers
Date: Sat, Oct 18, 1997 19:51 EDT
From: Readware
Message-id: <19971018235100.TAA23538@ladder02.news.aol.com>
Good post-- the only risk in satellite predictions today are catastrophes in the launches. A launch failure would push back any G* program by about four months a failure.
There is no market demand risk for satcom services.
An observer from the outside can of course question all this, as well as the combined expenditures in the past three years by Loral, Alcatel, Lockheed, Motorola, ICO Global, Hughes, Hyundai, and Daimler of $24 billion-- not to mention those by smaller satcom companies, with Motorola's proposed $14 billion more for Celestri, and Teledesic's $9 billion all by 2001, and Motorola's $5 billion for M-Star (not to mention SkyBridge's own $3.4 billion) --
let's call it $58 billion from 1996-2002-- one on the oitside can question this expenditure amount and in his/her expertise wonder whether all these companies just mentioned are run by madmen intent on grinding their companies and those company's shareholders into the shifting sands of debt. Who knows? Perhaps it's all a conspiracy by satcom powers to commit financial suicide.
Not, again, to mention (1) all the rocket launch services scrambling to meet the launch date demands of these madmen, with venture capital being raised monthly for increased launch services-- even to the point of Boeing (don't forget them) of establishing for the first time in history a moving frigate launch system on the sea called Cyclone to help in this launch fraud fiasco, (2) all the petitions being filed at the FCC for spectrum and the
unbelievably fierce and vicious legal wrangling with charges and countercharges made by satellite companies one against the other, and the fees being paid by satellite companies to lawfirms specializing in frequency territory to get any piece of the spectrum-- this is all a fraud of course. This part of the conspiracy is to get lawyers all paid just wonderful fees as satellite powers waste their shareholder monies even more.
Do not forget also the salaries now being paid to electrical engineers-- suddenly there is a scarcity of technical expertise, which is a further part of the fraud that satellite companies are perpretating on the universities. They are asking that universities like UCLA and the U of Georgia bolster their engineering curricula in the hopes that universities will spend so much money on engineering courses to meet this illusionary satellite services
demand of the future so that these universities possibly, just possibly, may go bankrupt along with the satellite companies.
Sure, one who is not familiar with global developments-- or maybe more familiar with real, actual global business developments than most-- can suggest, after all this, that the whole satellite market phenomenon has been miscalled, improperly perceived. If it is all a fraud stever338, I certainly would appreciate your input showing exactly where it is. I would like to know now before the year 2000 so that I can become the guru consultant for
all these satellite companies mentioned above and save them from the greatest financial boondoggle in the history of mankind.
I do not take anything you wrote personally-- I would like to know exactly where the risks in satellite investments are outside of launch risks. If you can provide leads on that-- like technological shortcomings, mistakes on market demand, it would be helpful. It would be important that you also get a hold of the corporate management of the companies mentioned above and let them know also. That is assuming, of course, that they are spending $58
billion honestly.
Maybe you can tell the satellite analysts on Wall Street, who never worked in satellite firms or ever studied engineering/physics, who are so knowedgeable, where those risks are too so they can call their clients and tell them to sell their satellite stocks. "The systems don't work, there is no demand for this fantasy technology." I am in particular thinking of that Wall Street analyst who in August-- two months ago-- wrote in a report to his
employer's clients that the shares of Iridium were going to $250/share in the year 2002 (from $23/share at the time of the report's being written) and just three days ago, with the stock at $54-- exactly $196 dollar below his "projected price", told his clients to sell the stock because "it has moved too far, too fast". I would definitely want to listen to him, no question about it.
Subject: Re: Globalstar Subscriptions
Date: Sun, Oct 19, 1997 15:59 EDT
From: Readware
Message-id: <19971019195901.PAA05513@ladder02.news.aol.com>
No, it does not. G* telephony subscriptions are unrelated to Skynet's business in Mexico.
Subject: Launch on schedule
Date: Sun, Oct 19, 1997 16:14 EDT
From: Readware
Message-id: <19971019201401.QAA05827@ladder01.news.aol.com>
In answer to nine emails: the G* 4 December launch is on schedule. SIOT (Systems Integration) is proceeding apace, Final Acceptance Tests (FAT) should be done by mid-November, Ground Operations Control (GOCC) is on time, and the G* birds are at the Cape. As I have indicated before, the Zenit-2 launch vehicle (three launches for G*-- 2nd, 3rd, 4th qtr, one launch each, 12 birds) has an 87% launch sucess. I already mentioned a few weeks ago how the
Zenit-2 is not new, it is simply a mimick of launches of 10 nuclear warheads (which are far heavier in weight than the G* 12 sat payload) at a time by the Russians in the 1980s. Someone here posted that news later on about Teledesic using a similar launch mechanism. I also have written that a launch failure would be a 4 month setback to G* for each launch. No one can guarantee any launch success. If, however, you know all the variables and
technology involved in a launch vehicle, you can set your chips high with a high degree of confidence.
Subject: Lazard Freres Research Report
Date: Sun, Oct 19, 1997 21:22 EDT
From: Readware
Message-id: <19971020012201.VAA04804@ladder02.news.aol.com>
It is a surprize, although rumored for some time, that Hughes' chairman is going to AT&T. That's if the Wall Street Journal report you mention is in tomorrow's edition is accurate, and not stated as a rumor. How does anyone know what the Wall Street Journal on Sunday is going to say the next day? So, one really does not know yet if the Journal will have the story.
How, if it is true, assuming, a change at Hughes affects the SatMex auctions I don't know. It is puzzling, as El Financiero/Infolatina reports (and which I had suspected and posted here would be the case), that Grupo Televisa and Televiso Azteca backed out of the bidding with PanAm Sat. Televisa wanted the satellites (Soladaridad 1 and 2) to broadcast Spanish language programming to 1,000,000 viewers in the southwest. In fact Televisa fought
hard in 1996 for those CONUS rights, which the FCC granted them. So anyone who gets those slots has a footprint privilege in the US which up till now they could not have. DirecTV certainly wants those slots since they have no more transponder space, and everyone wants the 77 degree slot for that purpose. It would give them 32 more transponders, and probably another $50-60 million in yearly revenues over and above the current revenue stream. If SSL
got the right to build the fourth satellite with a Loral auction win, it would be another $400 million in total revenues for Loral over a three year period. So, I don't know what this means for PanAmSat and the auctions and Loral's bid.
The bids are all in, but the fact that no commercial Mexico TV network went in with PanAmSat, after all the fanfare that they would, does leave one wondering exactly why they did not and what it means for PanAmSat's bid, just as the change at the top at Hughes, if the report is true, leaves one wondering what it means for the PanAmSat versus Loral bid.
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