Dear G* Faithful investors, help me with my unbelief.
1) Continuing Faith in G* Management: They said they would have 1,000,000 customers by what, 1998? It is 2001 and they have 30,000 customers. What POSSIBLE reason is there to have faith in the people who told us this?
2) The service is NOT underpriced. Regular cellular has something like 1000 subscribers per base station, about $250,000 per base station capital expenditure, something like that. So we get a Capital Expenditure per subscriber of what, $250 in a regular cellular system? And a price per minute essentially north of $0.10. Whereas G* is about $5BILLION Capital Expenditure scaled to handle something like 2Million subscribers. That is $2500 Capital Expenditure per subscriber. That's right, cheap, efficient G* is 10X cost in terms of Capital Expenditure as domestic cellular. If you CANNOT get about 10X revenue per sub, then you are better off investing in terrestrial cellular. Lets suppose the right wholesale price for terrestrial cellular minutes is $0.04 or $0.05, a few cents a minute go to the PSTNs for the interconnects. Then G* wholesale should be $0.40 - $0.50/minute. If they aren't, you paid too much for G* and should buy VOD (or way better, LWIN) instead.
3) New applications. Data. IFN. Wow. Maybe there is a pony in here somewhere. But even if some of those actually turn G* into a going concern, a) its a desparate leap to give the current management any kind of credit, they said it was a gimme just on voice customers, they built out for voice customers, and they were/are wrong.
4) The constant suggestion that G* should get priced at something like ground rates. Well guess what, the system is worth a total of ~$500MILLION in that case, because that's what it would cost to put up a terrestrial system with the same revenues. And that ASSUMES G* gets its 2MILLION customers once it prices equal to terrestrial, which is not at all obvious to me (look at size of phone). But here is the rub: at $500MILLION asset value, G* is bankrupt, its outstanding loans are quite a bit higher than that.
Hey guys, help me with this!
To the moon (or at least low earth orbit),
Ralph
Disclaimer: I still own a bunch of GSTRF stock. I can't decide whether I am greedy or stupid. I can't decide whether I am waiting for the miracle, or if I am just hoping for a "dead cat bounce" up to $2/share before I unload. I am way too irrational to be an investor. |
