Mq, all. Lost in all the noise about a meaningless quarterly number is the CDG's confirmation yesterday that 6/30/99 worldwide subscribers had reached 35 million, as well as Perry LaForge's confident prediction of topping 50 million by calendar year-end. Some may not realize that these numbers confirm the subscriber growth rate, which drives handset, ASIC, and royalty volumes, is now running at an annualized 131%. This is pretty amazing given the size of the subscriber base these days vs. a few years ago when we were under 5 million. A few numbers to put in perspective;
YEAR END SUBSCRIBERS(millions):
1996=1
1997=7
1998=23
1999E=53 (est. based on 6/30 35M and continue 1st half growth rate)
NET NEW SUBSCRIBERS/ESTIMATED HANDSETS SOLD(millions)*
1996 1/1
1997 6/6.25
1998 16/17.75
1999E 30/35.75
*handset sold est. based on number of new subs plus 25% of previous year-end subscribers.
The year to year deltas are very large and it should surprise no one that something like tight component supplies could show up from time to time. Much as Wall St. might wish it otherwise, the real world is lumpy, not quarter to quarter smooth, and production volumes are a stepfunction, not some smoothly rising curve. We should rejoice in a component shortage [well maybe that's a bit strong] to the degree it reflects growth exceeding suppliers' expectations.
Meanwhile, new cities in Mexico are going commercial soon, Brazil is in a rapid nationwide buildout, Australia has gone commercial on one system with more on the way, Japan going strong and rolling out data services (as is Korea), data services to turn on this month with Sprint and others, Leap will be building out its new spectrum at some point, and half a dozen countries in Asia and Latin America are expanding their systems.
Is there anyone, anywhere, who thinks there will not be at least 40 million new subscribers during calendar 2000? Can Wall St. see what this means for handset, ASIC, and royalty volumes? We are not talking 3 or 4 years out here. We will be in the middle of all this in less than 10 months.
The mindless shorts and day-to-day squiggle watchers may be having some fun right now, but they had better be very nimble as we move to absolute deltas like 10 million new subs per quarter. There's a lot more operating leverage left to be revealed.
Best regards,
Jim
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