The IRID news in most peoples minds shows that there is no demand for this type of service. We shall see, but I do think one has to have a very LT time frame here.
I think we will find out in very short order (like a few months) what the demand curve looks like, both subscribers and MOU's. This is an extension of existing technology from the user perspective, not some entire new way of doing things that takes a while to catch on with users, if ever. The demand for the service is fairly inelastic - one either needs it or one doesn't. Kind of like a radical new restaurant concept opening up - you can tell whether it's a hit or a miss pretty clearly early on (people don't have to be educated about the concept of dining out).
So, after being a LT time frame guy in G* for almost two years, today I doubled up as a more of a S/T play. Mr. Market apparently says I just threw another $25+K into the trash, and anyway, voice is unsexy. Color me stupid, but:
1. There is some market out there amongst the population of the planet. For sake of argument, lets say 2-4 million subscribers for satellite telephony (three to six one-hundredths of 1% of the earth's population).
2. Up until recently the most likely scenario was that two carriers (in some form) would be slugging it out for these customers.
3. As is pretty obvious from today's court filings (read paragraph 19 from RS's URL link), MOT wants to kill Iridium unless a real true blue savior shows up by 3/15 (one with $10MM earnest money and DIP financing in place). So, in all probability we are looking at one carrier only for two years.
4. I realize that traditional economics doesn't always seem to work nowadays, but absolute ownership, versus a duopoly, of a relatively price inelastic market (albeit one that's only potentially a "bowling alley") with high barriers to entry looks like a reasonable bet to me.
My take on McCaw is that IRID was too far gone to be saved, and take the guy at face value - the cost of going head to head with G* in the voice businesses for the sake of picking up a difficult to transition customer base, far exceeded the benefit, to him, of utilizing those resources to develop ICO and TELED and target data applications.
The market has intrepreted McCaw's pullout, apparently, as new data that the sat telephony market is limited. Guess what? It is limited, but no more so than a week ago!
So, today looked like a good contrary time to buy again. The upside potential is pretty awesome, the odds of winning just got a whole lot better, and the price of laying a bet is about half of two months or so ago.
P.S. I'm no expert, but seems to me that all the advances in terrestrial high speed data transmission and switching technologies will probably obsolete a proprietary satellite data business by the time it gets fully cranked (in much the same way land-based cellular has diminished the market for sat voice). With the voice business at least there will always be areas where the users can not access alternates. With high speed data, almost all the users will have access to land-based systems. (Would Bill Gates really relocate his MSN servers to the Cascade peaks?). Or will ICO/TELED end up as a commodity priced surplus capacity
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