<LWIN shares beginning to look very attractive down here. How low can it go? >
Al, I have heard that some share values can go to zero. A vicious rumour perhaps, but the trend seems clear. If you were to pick an asymptote for the share price curve shown here, siliconinvestor.com where would you put it; at $10, $5, $2, $1, 50c, 25c, 10c, 5c, 2c, 1c or somewhere else?
Another principle of investing your principal is that whether you pay $100, $50, $20, $10, $5, $2, $1, or 1c and it goes to zero [as Globalstar seems likely to do] ALL of the principal is lost. One doesn't lose less by buying low. So, Leap is not cheap if the final result is asymptotic to zero. I like using the word asymptotic [Gregg Powers misled people into thinking that asymptotic means 'going up really, really fast' - old-time readers will remember the discussions]
Meanwhile, Leap's vendor financing is first in line for any income with rapidly increasing interest rates over the next 4 years, to 30% per year if I remember rightly. Which is a very expensive source of capital in a market where minutes and megabytes will be sold at "what the market will bear" prices by creditors-in-possession, who will do what should have been done originally by Globalstar et al = fill the system fast with 'what the market will bear' customers.
That means very cheap prices until system capacities are reached.
I don't believe 'all you can eat' pricing will be the end result of telecom pricing. The claim is that subscribers want simplicity and therefore, goes the simplistic reasoning, they want flat rate pricing. That's wrong. It's true that subscribers want simplicity and don't want to sort through complex stupid buckets of minutes plans and get 'gotcha' bills when the end of the month comes. What a hassle all that is.
Simplest and cheapest of all is 'Here is the current price - hit SEND if you accept that price'. The phone could keep a running tab so people know how much they've spent. Payment could be authorized on line from the phone - with accounts kept in credit to avoid deadbeats causing the 'f' word to be a problem.
Somebody will figure it out. They'll figure it out because the company which figures it out will be the company which gets all the business from people who don't want to subsidize yakkity yak types who gobble 1500 minutes a month and cause busy signals, cellsite suffocation, dropped calls and poor voice quality.
When some company offers such a pricing service, they'll also get the business from the flat-rate companies because the total monthly bill will be quarter that of the yakkity yak plans. Actually, it would be less than quarter because people would reduce the total time they talk since there would be a small marginal cost to continued yakking, so total number of subscribers could be higher before capacity was filled.
How would Leap go against a company offering a monthly bill of half, or a third, or even a quarter of Leap's, with the proviso that calls at overload times would cost more than calls off-peak, which would be free?
The summary of which is that I haven't bought Leap shares [yet] and would be more likely to buy the debt.
Mqurice |
