Hi Valueman, welcome on CDRD board!
If I remember right, about half a year ago on the LOR thread
you have been a bit skeptical about CDRD. Posting such a
bullish report from ING Barings here (thanks!), does that mean
that you like this company now?
Let me make a few remarks on this report.
>> Market research conducted by the Yankee Group suggests
>> 42 million total digital audio radio service (DARS)
>> subscribers by the fifth year of service. We have pegged
>> our projections to the actual growth of DBS, which leads
>> us to a total DARS market of 20 million subscribers in
>> the same year.
Arbitron, Critical Mass Media, Strategic Marketing and
Research confirmed a potential market of of 35M - 45M
subscribers by 2004. A study by MITRE Corp., a defense
and communications research group, figures satellite radio
could end up in 50 million homes and 100 million vehicles."
The subscriber expectations of ML are much more conservative.
For 2004 they predict about 16 million DARS subscribers,
and 2008 they expect 42 millions.
>> 2. Potential DaimlerChrysler Contract.
These rumors are alive since about six months. If they come
true, Ford and DaimlerCrysler together have a market share
of about 40%. On the other side XMSR has made an _exclusive_
contract with GM until about mid or end 1001, so this is a
big advantage for CDRD to get OEM contracts with other
automotive manufacturers in the meanwhile.
>> 3. Announcement of Firm Launch Date. ...
>> 6. Successful Launch and Test of Satellites ...
I wonder why they didn't make any comments about the Proton,
of whom the second stage has failed two times during 1999.
Now for the first time they try a new, modernised second stage.
Though the delay because of these failures, it looks like even
the Russians have abstained from using their priority rights to
lift their contribution to the international space project in
time. Probably there will be a first launch without any payload,
and then might come the Garuda and CD1.
>> 5. Approval of Elliptical Orbits by FCC...
Just like CDRD has changed their concept of two GEOs to
three sats with an elliptical orbit about 18 months ago, there
is no garantee that XMSR would not do the same. (just a thought!)
Remember that a few days ago XMSR has announced to change their
technology, and now Lucent is making their chips of the same
technology as CDRDs.
>> Sirius forecasts that it will break-even at
>> only 1 million subscribers.
As far as I remember David Margolese said about one year ago
that the break-even is reached with 1.7 million subscribers.
After that, each subscriber would contribute with about 70%
of his $10 fee to the profit.
But these numbers are much too optimistic. Just look at the
financing of the system: In the prospectus of the last
Secondary Offering in September one can see that the whole
system ($1.18 bill) is payed by bank financing and selling notes
and preferred stocks for in total $866 million. In addition
they might fund another $200 millions to go through the first
20 months. So all together CDRD must pay interest for about
$1,070 billion. If we assume a 12% interest rate this results
in an average interest expense of about $128 million per year.
(ML makes a more detailed interest statistics: the interest
expense plus preferred dividends increase from $141 mil in
2001 to $207 mil in 2004 and declining thereafter to
zero in 2008.)
I guess with one million subscribers (as stated above) it
would not be possible to pay all these interests AND run
the programmings: Of one million subscribers CDRD gets
$120 millions revenues, and if we take another $50 mil for
advertising, CDRD can perhaps just pay the interests,
nothing more.
In summer 99 ML made a break even prediction of about
3 million subscribers, and they raised this number in
September to 4 million, if I remember right.
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