KSAT Satellite Networks Inc. (CDNX: KSA)
And
Gilat To Home-China
Since 1994, KSAT (under the name of Xenexi Telecom prior to March 98) has developed its business of satellite communication networks in China with Gilat Satellite Networks Ltd. (NASDAQ: giltf) as a partner. In March 1998, at the closing of a reverse-take-over, KSAT was listed with VSE. At that time, Gilat converted its investments of 7 million USD in China joint ventures to shares in KSAT. Keppel, a Singapore company with 17 billion USD assets, invested 15 million USD into KSAT, becoming another major shareholder (under the name of Global Space Investments) of KSAT.
For six years, KSAT has developed a niche communications market in China with VSAT satellite technology provided by Gilat.
VSAT, or Very Small Aperture Terminal, is a communications technology that allows for the use of small fixed satellite antennas in providing highly reliable communication between a central hub and almost any number – tens or thousands – of geographically dispersed sites. VSATs are taking on an expanding role in a variety of interactive, on-line data, voice and multimedia applications.
KSAT has been providing, through its joint ventures and a wholly owned subsidiary, VSAT satellite communication systems and services to private network customers in China, including national flood warning/water information acquisition network, national paging network, etc. In 1999, KSAT achieved sales of 10 million USD in China.
Gilat has grown to a world leader in satellite communication industry. In 1999, Gilat achieved 51% of interactive VSAT market share and 71% telephony VSAT market share in the world. In 1998, Gilat fully acquired GE Spacenet, the largest VSAT service company in US and Europe, becoming a full scale satellite communication service provider. GE Capital got 30% Gilat shares in return, becoming the largest shareholder of Gilat. Since its IPO in 1993, Gilat outperformed every quarterly target. In 1999, Gilat was selected as one of 20 best small companies by Forbes.
Since 1999, Gilat has developed SkyBlaster VSAT, the broadband satellite technology, to provide first two-way, always-on, high-speed Internet access services. From the central hub to each remote satellite PC, the transmitting speed can be as high as 40 Mbps.
This year, Gilat formed Gilat To Home Inc. (now changed its name to StarBand Communications Inc.) with MicroSoft, EcoStar and ING Furman Selz as partners. Gilat, through Spacenet, owns 45% by contributing its business plan, technology and equipment. MicroSoft contributed $50 million and MSN services for 19%. EcoStar contributed $50 million and its established Dish Network (direct satellite TV) of more than 4 million subscribers for 19% of the new company. Recently, Gilat To Home (StarBand) successfully launched its services to US consumers through 7,100 RadioShack retail stores. For about $60 per month, customers will have satellite access to several hundred TV/audio channels and two-way, always-on, high-speed (download speed up to 600K) Internet access.
Gilat To Home (StarBand) is a true revolution in satellite communication industry, expanding from traditional private data networks of limited numbers of sites to IP based broadband Internet services of millions consumers. On October 11, soon after its successful launching in the US, StarBand filed for NASDAQ IPO to raise 288 million USD with Merrill Lynch, CS First Boston, Salomon Smith Barney and CIBC World Markets as underwriters.
Gilat has decided to target China and Brazil for Gilat To Home ventures after the US market. For this strategic purpose, Gilat, Keppel and Steven Wan entered into a new shareholders agreement (a binding MOU) on September 29 with the following highlighting points:
Gilat shall establish Gilat To Home-China (GTH-China) with both Gilat and KSAT as "the two initial founding parties of the venture". "The terms of participation of KSAT in GTH-China to be negotiated between Gilat, KSAT and Keppel."
Gilat and Keppel (Global) immediately invest 10 million USD into KSAT. Immediate upgrading of existing VSAT systems for GTH-China demonstrations is under the way.
After this round of restructuring, each of Gilat and Keppel has 37% shares in KSAT. Steven Wan has 19%.
Gilat now has full control in KSAT management, including appointing Chairman and CEO.
On October 4th, KSAT made related new release in Vancouver (see attached).
There is a great demand for high-speed Internet services in China due to existing poor terrestrial infrastructure and services, particularly for high-end customers including multinational corporations, Taiwan / Hong Kong joint ventures, hotels and office buildings, etc.
The value-added telecom service market in China is expected to open to foreign participation very shortly upon China’s entry into WTO at the end of this year. Internet users in China have rapidly increased to 20 million from 2 million in 1998.
The Ministry of Information Industry newly issued a first VSAT license for Internet access services to a Chinese satellite communication company affiliated with Gilat / KSAT on September 15 this year.
With proven leading technology, strong management from Gilat, developed operating base and experience / connections in China and the opening market of huge potential, Gilat and KSAT are committed to penetrate the high-end vertical market and consumer market for Internet services in China at a high speed.
It is envisaged that Gilat and KSAT will follow the model of Gilat To Home-US (StarBand) in China. Gilat and KSAT, with their technology, business plan, VSAT equipment and established China base and experience, shall have a controlling stake in GTH-China. Other investors will bring in capital investment (at least $50 million) for a minor stake. GTH-China will then form a partnership with a chosen telecom party in China for delivery of Internet services. GTH-China will seek for IPO after launching the broadband Internet access services.
Gilat came to Vancouver for VSE listing in 1998 with the plan of eventual dual listing of KSAT, its China venture, on NASDAQ. Now under the new plan, actually CDNX investors have a window of opportunity to participate in future's GTH-China, which will be valued around $200 m upon formation and which will further go public on NASDAQ as planned. Therefore, Gilat To Home-China shall provide significantly added values to KSAT shareholders. |
