Dan, Your Big Shot on Wall Street might not be far from the mark. Keep in mind that there are two companies, Globalstar Telecommunications Ltd registered in Bermuda [GSTRF] and the unlisted, privately owned Globalstar LP.
Globalstar Telecommunications Ltd owns 20% of Globalstar LP so they only get 20% of the profits. The business plan is for 3 million subscribers by 2002. We then start guessing at the profit. Say each subscriber provides $1000 per year, which is a nice round number to muck about with and probably not grossly understated [or over], then there will be $3bn per year revenue.
Interest payments will only be $300m or so, staff and other costs a hundred million or two. Depreciation is a big cost. The whole thing is worn out after 7 years so $400m per year for that. So there will be $2bn per year profit.
GSTRF gets 20% of that = $400m
There are about 15 million shares in GSTRF, doubling tomorrow in a share split to 30 million, so GSTRF should be about $27 tomorrow on Nasdaq.
If we guess a P:E as being about 15:1 in 2002, then the market capitalisation of GSTRF should be about $2.5bn at that time. Divvy that up among 30 million shares and you get $800 each. Or, in yesterday's pre-split terms, $1600, which is close the the Wall Street Big Shot estimate.
BUT! There are technical gains continuing apace, demand is rapidly increasing as worldwide economic development continues and they can reduce handset size by launching another 48 satellites, which will reduce handset and satellite power consumption per subscriber by a factor of 4 approximately as the average distance for the signal to travel would be about half the initial constellation transmission distance. Battery life will be greatly improved by reducing power consumption. That will improve handset talktime between recharges and will enable more subscribers to be supported as power output is a limiting factor on satellites.
Technical developments include Gallium Arsenide chips, 20 micron circuit spacing, Indium phospide chips, software developments, aerial technology and more.
By increasing the number of subscribers with no more capital required, the profit dramatically increases as the marginal subscribers are pure profit.
The competitors are looking decidedly unthreatening with Iridium underway but questionable - its replacement already being planned on CDMA terms. With Globalstar's moving into first place even though Iridium is first to launch [and some small or geostationary] they will only widen the gap.
The third and fourth constellations won't be far behind. I don't believe it will take until 2002 to get 3 million subscribers. I think they will be inundated at $0.45 wholesale price per minute. GPS thrown in.
But check those figures, because I might have overlooked something. Maybe competition will erode profits quickly. Maybe somebody will shoot them all down or they simply won't work. If it is all as good as it looks, maybe GSTRF will be $2000 per share in pre split terms. Or maybe $4000. Quite a long way to go from the current $50 or so. There might be something wrong. But I don't know where.
I can get things wrong! If anyone can spot the mistake, I'd love to know where it is. I'm gun-shy and don't want to make mistakes. I want my satellites to stay in the sky.
Maurice |
