ACeS Competes With Bigger Rivals With Satellite Phones in Asia ,G* discussed
By Natalia Olynec
ACeS Competes With Bigger Rivals With Satellite Phones in Asia
Moscow, Feb. 14 (Bloomberg) - Asia Cellular Satellite
International, which just launched its first satellite atop a
Russian rocket, said it's nearly ready to challenge bigger rivals
in Asia with cheaper service and more extensive local service.
The company, known as ACeS, launched its Garuda-1 satellite,
on a Russian Proton rocket on Saturday, which will allow satellite
telephone service across Asia. Shares of ACeS shareholder
Indonesian satellite company PT Pasific Satelit Nusan traded in the
U.S. rose 14.3 percent on Monday, or 3 1/4, to 26, after the
satellite's launch.
ACeS will keep costs lower than those of rivals by initially
focusing on providing comprehensive service in a region not fully
covered by others, requiring less capital investment. ACeS needs
just one satellite to start service, while Globalstar
Telecommunications Ltd. and Iridum LLC, which are aiming for global
service, launched more than 40 each.
``We can compete easily with rates for calls of 200 kilometers
upward,' said Adi Adiwoso, chief executive of ACeS, in an
interview. ``We would be extremely profitable taking 1 percent of
that market.'
ACeS estimates the Asian market for calls of more than 200
kilometers at 280 billion minutes per year.
Most of the $750 million cost of the project was covered by
shareholders Lockheed Martin Global Telecommunications, Philippine
Long Distance Company, Jasmine International Public Co. Ltd. of
Thailand and Pasifik Satelit Nusantara of Indonesia.
Lower Costs, Prices
The company's first payments on its $160 million in debt comes
due in 2002.
``They will have significantly lower prices than their
competitors,' said Thomas Watts, an analyst at Merrill Lynch & Co.
in New York, who rates PT Pasific Satelit a near term buy.
``They've chosen the most populous markets to enter first.'
ACeS will offer the most extensive coverage of Asia, while
Globalstar and Iridium offer services in just a few of those
countries, Watts said.
Globalstar, with a network of 48 satellites providing service
in 11 countries, expects 450,000 subscribers worldwide by yearend,
while Iridium, with an estimated 20,000 subscribers and a 66-
satellite network, filed for bankruptcy protection in August after
defaulting on $1.55 billion in bank loans.
The ACeS project will break even with about 120,000
subscribers and revenue of $35 million.
Some areas in Asia will turn to satellite communications even
before land lines are installed, Adiwoso said.
Guaranteed Connectivity
The number of telephone lines in Asia ``is ridiculously low,
somewhere in the region of 4 percent to 8 percent, with the
exception of some countries like Singapore, Taiwan, Japan and
Korea,' said Adiwoso. ``There are two targets: a person who needs
insurance they will never lack communication, and people who have
no connectivity.'
The company will offer limited service for selected users in
May and then offer full commercial service after testing for
several months.
``We will set a date when we are extremely comfortable that
the customers will reach satisfaction,' Adiwoso said. ``The
spacecraft can live 17 years. Trying to (start) one month earlier
and have a blemish in our clean, clear record is not a very wise
decision.'
The company will probably be ready to offer services in
August, he said.
After the first satellite is in operation, ACeS will set a
date for the launch of a second satellite to expand service
westward.
``We will probably use that to expand our coverage to the West
to London, including Russia, the Middle East, Eastern Europe and
most countries in North Africa,' Adiwoso said.
Strict Regulations
The main obstacle to the company's growth is the strict
regulation of the telecommunications industry in some Asian
countries. The satellite service may be priced cheaper than land
line and cellular calls.
``There is no difference in cost in calling from Jakarta to
Mumbai or Jakarta to Beijing,' Adiwoso said. ``If regulatory
bodies allow us, we will probably price it with no difference, but
certainly it's going to cause a lot of commotion.'
Vietnam has the tightest regulations on the telecommunications
industry, while Singapore is the most liberal, Adiwoso said.
ACeS aims to attract between 150,000 and 200,000 subscribers
in the first 12 months of operation. The company expects to make a
profit in the second or third year of operations and will consider
going public to raise more capital to expand.
``If we go to the public market, the public will not see us as
a major risk,' Adiwoso said. ``First we want to be strong.'
Merrill Lynch rates the stock a ``near-term buy,' while ING
Barings rates the stock ``buy.'
Regards, Dave |
