Personally, I think G* could be huge. As the LOR leadership says... a cash cow.
The numbers used in the business model are quite reasonable. They are only counting 10% of the market which the studies say are available to them.
I may not remember the number exactly, but for example, in rural China I believe they are counting only on providing service to 200,000 customers. When you consider the population of China as a whole, and even the population in China without hope of phone service, this number is vanishingly small.
The naysayers often attempt to point out that many in areas which G* thinks it has a market will not be able to afford the service. The truth is that in some cases, G* will be subsidized.
Governments feel that it is not economic prosperity which allows individuals to afford communications, but rather communications which allow economic prosperity.
Many of the markets that we investors imagine as important to G*, are probably not. What will likely be very profitable for G* are markets like China and Brazil... average people having phones for the first time ever.
Almost 80% of the world's population is without phone service of any kind. No amount of terrestrial expansion or service provider mergers will make an appreciable dent in this... not for decades.
And even if they had such expansion in mind, the availability of G* may reduce the incentive to spend the money on such terrestrial expansion.
Vodaphone Australia has already said that G* will allow them to provide phone service to the vast areas of the continent currently uncovered without having to spend the money on expansion.
To me, they sound very much like they will slow such expansion, and simply sell G*. Vodaphone Australia will be in a position to provide uninterrupted phone coverage over the entire country overnight.
This is where I believe the real money is.
If G* does achieve what we think it might, it will certainly be a rocky start. We are entering what Bernard Schwartz sees as the difficult part... not the technology or launches, but finding out whether this business plan will really work. |
