Hedgefund, I can make a case for investing in Globalstar. It's basically a reboot of the old system with a bunch of new satellites.
A new constellation will cost something like $1.1bn. They are ordering 48 new satellites, Message 22894457 which if all successfully launch, will give Globalstar solid coverage..
With 8 satellites due to launch in April, that should rescue the old constellation sufficiently to struggle through to the second constellation launch.
Due to many failed satellites in the first constellation, there are holes, which means sporadic coverage and more dropped calls. The design life of the first constellation was 7 years, but most of them are going to battle through to 10 years. Iridium is still going, although they were launched first and had a shorter design life.
Satellites wear out due to photovoltaic damage and I suppose batteries decline too. There are fatal failures as well as gradual decline, with Globalstar having suffered quite a few in the early years especially.
The case for investing is that with 10bn minutes available to sell, at 10c a minute, that's $1bn a year revenue, which can easily cover the cost, depreciation, and staff. 10c a minute is much less than they are currently getting. I consider 10c a minute the price they need to really sell a lot of phones and car kits.
Once the system is full, they might be able to raise prices to 20c a minute or even 40c a minute and still have a full system, which would justify another swarm of satellites, lots more gateways, and some higher satellites to enable ocean coverage.
Given terrestrial prices, I expect that 30c a minute would maintain a full system. NZ cellphone prices for example are more than that, so it would be cheaper to have a Globalstar phone than terrestrial, if one is driving around a lot, even within terrestrial coverage.
So far though, Globalstar Inc is not showing signs of getting seriously competitive like that. Sure, they have some ... hey, hang on... I've just checked their p-----g and they have given a big discount "for a limited time". globalstarusa.com
<Countdown to the upcoming Globalstar satellite launches by boosting up your minutes! For a limited time only, sign up to any one of Globalstar's service plans and receive a bonus of 50% MORE minutes every month until January 2007 on monthly plans, or for up to a year after activation on annual plans!
Activate today! This offer is for a limited time only. Visit an Authorized Globalstar Dealer or purchase online.
Features:
* Included airtime for calls placed from the Home Service Area of the US, Canada or Caribbean.
* Free Long Distance for calls to the US, Canada or Puerto Rico.
* For service quality maps, see Coverage
* Free incoming Short Messaging Service (SMS)
* Low Roaming and International Long Distance rates for other regions
* Express Data Compression free on most plans
* Voice Mail free on most plans>
Hot diggety dog! Now why didn't Bernie do that back in 1999, but make the minutes free until the constellation was full, getting profits from handset sales for the first year or two?
You are now aware of a change in strategy by Globalstar. I was going to point out that they had already cut prices a LOT from the old $3 a minute MADness, but hadn't realized they have done a big cut recently.
It is simply insane that it has taken 7 years of floundering marketing to figure out that prices per minute should have been cheap until the system was full. Oh well, better late than never.
Unfortunately, that's just in the USA, where Globalstar Inc owns the gateways.
If they can make people aware that the Globalstar service is not now $3 a minute and $2000 for a brick phone, they should sell a lot of that.
Unfortunately, for nearly a decade they have taught anyone who looks that satellite phones are not for regular humans - just the wealthy. It takes a lot of effort to turn that idea around.
What a shame that QCOM didn't buy the bankrupt assets, put in $1bn a few years ago, and make it all happen, instead of wasting their money buying back shares at $44 which are now at $36.
QCOM would now have a $10bn asset and millions of subscribers could be using swanky new multimode, multiband, Globalstar phones, with bells and whistles, produced by QUALCOMM.
$17 a share is a reasonable price as that values it at the cost of a new constellation. Which is about right for the current situation.
I might even have to buy some shares, now that they are finally showing some marketing sense - cutting prices to human levels. But 30c a minute on the "Liberty 1800" is still not cheap enough to really get people going as that's assuming they use exactly their minutes allocation. Extra minutes are $1 each. Ouch!!
Mqurice |
