Maurice - Iridium had 14 000 subscribers after its first quarter. Analysts seem to expect that Globalstar finished its first quarter with 3 000 - 4 000 subcribers at most.
This would mean that Iridium was about 3-4 times more succesful in launching a satellite phone service than Globalstar. So people saying that it is unfair to compare Globalstar to Iridium are right - it is unfair. But not towards G*.
Now - here comes the trap: it's called "Jam Tomorrow". People backing Globalstar will argue that the first quarter wasn't really the first quarter. And even more - the second quarter isn't going to be the "real" first quarter, either. We need to wait for results from Australia, China and Russia before evaluating the "real" performance.
I guess we all agree that 1.5 million subs by the end of 2001 is the bare minimum Globalstar needs to succeed. However; expecting the new markets to be dramatically different from existing G* markets is an extraordinary assumption. Highlighting USA and Australia as "special" markets where demand is much greater than in average markets is also problematic.
This would mean that a 1 million subscriber expectation is suddenly being placed on 4-6 markets (assuming that 40-60 countries can make up the rest). It takes a big leap of faith to assume that USA, Brazil, Mexico, Russia, India and Australia can each produce more than 150 000 subs within two years. And they need to do this, if dozens of countries where the service already exists will continue to disappoint.
If for example Russia and India disappoint as well, the burden on USA, Mexico, Brazil and Australia skyrockets to above 200 000 subs per country. This is what makes it so dangerous to talk about "selected" markets. Globalstar needs global success to survive - not success in "selected" countries. If you write off Europe, Middle East and South-East Asia as underperformers, G* needs to be a runaway smash in the markets that are left.
Maurice - you argue that Vodafone or Qualcomm may be on the verge of taking over Globalstar - probably based on the Australia/China/Russia outlook. And that's cruel. It's cruel, because it offers an artificial glimmer of hope.
Both Vodafone and Qualcomm are currently facing share price trouble. The last thing these companies need is to muddy their earnings outlook by shackling the companies to Globalstar. Nobody knows how much it will cost to keep Globalstar operating through 2001. And then 2002.
This is an element of uncertainty that Wall Street now really, really hates. We're not in December 1999 anymore. May 2000 is a different ballgame entirely. After the European 3G auctions are over, Vodafone will not be in the position to assume extra risk. It has all it can handle and then some.
The very instant Iridium turned into an earnings outlook problem, Motorola knifed the baby. It did not wait around to see how Wall Street would handle a permanent drag on future earnings; it just pulled the plug. Despite all those billions sunk into Iridium. Motorola had this insight into the black little hearts of Wall Street analysts; they can handle enormous one-time write-offs. What they can't handle is suspense.
Tero |
