8/30/99 CNN Moneyline transcript. Is Globalstar a Rising Star in Satellite Phone Industry?
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Aired August 30, 1999 - 6:55 p.m. ET
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STUART VARNEY, CNN ANCHOR: A look now at an industry that may
be in some trouble: the satellite phone business. This month, two companies
filed for chapter 11 bankruptcy. With services that are technical marvels and
marketing disasters, the question now: Is this an industry-wide crisis or just
two companies that are not succeeding?
Joining us from Washington, we have with us Bernard Schwartz. He is the
chief executive of Globalstar, the lead competitor of Iridium and ICO.
Mr. Schwartz, welcome to MONEYLINE.
BERNARD SCHWARTZ, CEO, GLOBALSTAR: It's nice to be here,
Stuart.
VARNEY: I want to wade right into the negatives, if I may. You're spending
billions on a satellite phone system that's going to be used in remote areas
where cell phones simply don't reach. I put it to you that it's not a big enough
market to recoup the billions you've already spent.
SCHWARTZ: Stuart, it's a market that has 3 billion people in it. There are 3
billion people in the world who've never had a telephone opportunity. And
one of the distinguishing features about the telephone as an instrument is
there never has been a time in the 120 years that we've been using
telephones where there have been too many telephones. There's always
been too few phones to serve to the man.
People need to communicate, They want to communicate, and the only way
those people in the world beyond those areas that are now served will ever
joined the 21st century is through satellite telephony.
VARNEY: But can those 3 billion people afford the kind of prices you want
to charge? As I understand it, when your service kicks off on October the
1st you're looking at $1.25 to $1.50 per minute. Accurate?
SCHWARTZ: Of course. But the interesting thing is that our capacity is only
for 7 1/2 million people. And we don't have to sell phones to 3 billion
people. If we did that, I wouldn't have to be here. I'd be sitting in the Riviera
somewhere.
VARNEY: But, sir, may I interrupt? Because as I understand it only 20,000
to 40,000 phones have been ordered for October the 1st when you go
online, on service with the U.S., France, China, Italy, Brazil, Korea, South
Africa and Ontario. That's not many phones.
SCHWARTZ: No, that's not true, though. There are 340,000 phones that
have been ordered by France Telecom, Vodafone, Airtouch, China
Telephone, and thereafter they'll be producing them at least 40,000, 50,000
a month. So our immediate order is for 340,000 instruments, and we hope
to be able to have at least 130,000 out by December. And by the middle of
next year in the many hundreds of thousands.
VARNEY: I stand corrected. Will you tell us then, sir, what you are going to
do with Globalstar that they did wrong with Iridium and ICO?
SCHWARTZ: Well, just about everything. We're different kinds of services.
First of all, our technology is different. It's much less expensive than
particularly Iridium. The one that they put in was a very complex, different
kind of system, limited capacity. All of those things work in our favor rather
than theirs.
In addition, our market is different. They were looking for the VIP roamer
who could afford to pay or was less sensitive to pricing than our customer
will be. We're looking for those within regions that have established
requirements.
And most of all, our distributor, our customer, is the telco customers around
the world. They are already in the service of serving cellular. Those are our
partners. Our cellular telcos are our partners. They're also our customers.
VARNEY: Mr. Schwartz, I'm awfully sorry to interrupt you there, but we're
out of time. But we thank you for joining us here from Globalstar.
Bernard Schwartz, thank you, sir.
SCHWARTZ: Thank you.
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