Globalstar Telecommunications Limited GSAT Message Board

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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT

GSAT 50.53

+4.7%

Nov 7 9:30 AM EST

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To: Maurice Winn who started this subject	9/24/2000 9:22:50 PM
From: KyrosL	Read Replies (3) of 29986

Globalstar earnings scenarios I made up some G* earnings scenarios, to keep things straight in my mind. I appreciate any corrections or comments. All scenarios assume that G* operates at full announced capacity, which is 10 billion minutes per year. I say "announced" because I believe that the capacity double relatively cheaply without launching additional satellites. Currently each channel uses 9600 bps. But there are compression techniques that transmit voice at acceptable quality using half as much bandwidth -- the quality will suffer somewhat but will still be better than Iridium. Another assumption is that operational and interest costs will settle at $500 million/year. Finally, G* can serve 10 billion minutes today without additional capital expenditures. A realization by the market that G* will achieve full system capacity in relatively short order (2 to 3 years) will result in the price below for the stock fairly quickly, IMO. I make no assumptions about the long term share price, when presumably additional satellite constellations may be launched. The numbers below assume a 30% tax rate (is this right, given that GLP is not a US company?), and a 41% ownership of G* by GTL (GSTRF) and 110 million outstanding GSTRF shares. 1. G* manages to fill the system at the current wholesale price of 47 cents per minute. G* net profits before taxes will be $4.2 billion. After taxes $2.94 billion. GSTF profits: $1.21 billion. GSTRF earnings per share: $11.0. GSTRF share price at 30 p/e: $333. 2. G* fills the system at half the current wholesale price: 24 cents per minute. At this price minutes to retail customers should be around 50 cents. G* net profits before taxes: $1.9 billion. After taxes: $1.33 billion. GSTRF profits: $545 million. GSTRF earnings per share: $4.95. GSTRF share price at 30 p/e: $149. 3. G* fills the system at one quarter the current wholesale price: 12 cents per minute. At this price, minutes to retail customers should be around 25 cents. G* net profits before taxes: $700 million. After taxes: $490 million. GSTRF profits: $201 million. GSTRF earnings per share: $1.83. GSTRF share price at 30 p/e: $55. 4. G* goes bankrupt. Somebody buys it for $1 billion. The bondholders get 25 cents on the dollar. The shareholders get nothing. This will largely eliminate the debt burden and reduce drastically interest costs. Operational and interest costs will be around $250 million/year. If the post-BK G* wholesales minutes at 5 cents, retail cost will be 10 cents, and profit will be $250 million per year before taxes -- a pretty good return for a $1 billion investment. A p/e of 30 is conservative for today's markets, but in line with historical p/e's of growth companies. Kyros

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