Fear not, here are Readware's ramblings! Just kidding, but here they are, I'll be back later. The EBITDA table will become part of the FAQ within a day or two. Readware is now on vacation, so he leaves us with these:
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Subject: Iridium Price
Date: Wed, Jan 14, 1998 21:26 EST
From: Readware
Message-id: <19980115022601.VAA13410@ladder01.news.aol.com>
Iridium's price fall is not a reflection of any rumor so far as I can tell. The statement that it is having problems with some of the technology is ridiculous. While we do not follow Iridium from a careful, line by line, research perspective, we do stay in step with its developments. Their technology does work, and most recently they have had "voice calls" successfully downlinked. Their satcom telephony technology has nothing amiss-- the last
remaining major hurdle is the software for call processing.
The reason the stock price of Iridium World has declined, apparently, is the large growth in short interest in Iridium since December. The short interest, according to the NASDAQ, is up over 900% in a month. This was told to me yesterday, and others may want to verify that. As I understand it, the more you short a stock the more likely it will go down until some news reverses it. Then the stock price can rapidly rise when short sellers have to buy
back their stock. If the short interest is due to rumors about the satellite technology not working, it will be interesting to see what happens when that rumor is addressed by Iridium.
I suppose sometime in March we will be hearing rumors that Globalstar's technology doesn't work. And when the Zenit-2 launch occurs, we will probably hear rumors that the Russian military is stealing Globalstar technology. That sounds just as believable as the others in the past month.
Subject: Re: Letter to shareholders
Date: Thu, Jan 15, 1998 23:29 EST
From: Readware
Message-id: <19980116042901.XAA29357@ladder01.news.aol.com>
The Iridium phone is a touch larger than a regular home phone that sits on the phone carriage. The same with the G* phone-- the new G* model is a bit thinner than the first prototype (a redundancy?) For the G* customer in the Federated States of Micronesia, believe me, the phone's "sleakness" is not going to matter that much. The phone "look", the telcos tell me, "is an American thing". I think they are right. The point is you will not be carrying
an Inmarsat suitcase.
The average Iridium call will be some 37% higher than a G* phone (for international calls), after all the markups.
Iridium has had "voice" call successes now for their system. The quality of the voice is very good, according to reports. These should be made public I believe on 29 January 1998.
Iridium needs now to get their software processing programs in order. I am told that their software programing is somewhat more complicated than G*'s because Iridium does not use the local telcos to process the calls. Intersatellite link processing requires a higher sotware bearance.
Subject: Re: Letter to shareholders
Date: Fri, Jan 16, 1998 16:33 EST
From: Readware
Message-id: <19980116213300.QAA03511@ladder01.news.aol.com>
I would pay especial attention to the dates 29 January-31 January for news on Iridium that may help you clarify Iridium's prospects going forward. They are scheduled to hold a conference with Wall Street during this time.
I do think that the spread between G* and Iridium pricing will hold for a significant period of time given the marketing evidence that the demand for both Iridium World and G* will not be able to be met by the service providers. I do not see Iridium needing to lower its prices, if the reports I have seen on its client base are accurate. And I believe they are. I do not see pricing pressures till some time around late 2002, early 2003, when there will
be three major systems and four minor ones (possibly only two-- sc., Alcatel and Ellipso). However, those pricing pressures may not materliaize if by 2003 the actual market for satcom telephony reaches 10 million users. However, that is too far away to make any statement worth considering now.
I do know that there have been analysts who believe pricing pressures will start in the year 2000 because of a surplus to demand. Given the time, expertise, and management savoir required to form a satcom telephony constellation, I do not see any surplus of suppliers in the year 2000. It would appear that Iridium and G* will be well underway by then, making major marketing inroads, with possibly ICO Global about to commence at that time. However, ICO
is behind a signigicant amount of time right now, and I think a realistic outlook on its presence to market is actually in late 2000 or early 2001. Analysts who predict an ecxess of suppliers to the market by 2000 arguably do not understand what is needed to form satcom telephony enterprizes. It is all that is required which makes their existence rare.
As far as Teledesic goes, I do not think Teledesic will ever see the light of day in its present proposed 288 LEO constellation. No one else in the satellite industry does either. The capital cost for such an effort would not see a return for at least the first seven years. I further believe its interlink proposal, as opposed to Skybrdige's ground station proposal, makes no engineering sense at all. It is "overbuild", which is more easily corrected
by the Skybridge proposal submitted to the FCC.
As for the question on the cost of the AT&T orbital slots recently transferred to Loral from the FCC: that information is confidential. Only the FCC and Loral would have knowledge of the prices paid. The prices paid depend on a variety of factors, and are not constants.
Subject: Re: Oppenheimer LOR Report
Date: Fri, Jan 16, 1998 18:50 EST
From: Readware
Message-id: <19980116235000.SAA23888@ladder01.news.aol.com>
For Orion, the margins for VSAT customer usage of its transponders are materially higher than simply leasing a transponder for a nonVSAT customer. Firstly, Orion's transponders generate $2.5 million/year vs. Loral's which do $1.6 million. Each Orion transponder services 150 VSAT sites (revenue of $65,000 per site per year). There are 9-14 customers for each site. Essentially, because of the VSAT distribution your revenues per Orion transponder are
$10 million/year then. Bulk selling (nonVSAT) does not reach this margin because in bulk usage there are not as many paying customers using the same transponder as there are in a VSAT situation. So the report you cite is essentially accurate. The 200% margin for an Orion transponder over bulk selling is due the number of sites its beam can service versus a nonVSAT case.
Orion does not use VSAT's DAMA. It has its own.
Subject: Asia satellites and Loral
Date: Fri, Jan 16, 1998 22:58 EST
From: Readware
Message-id: <19980117035800.WAA11986@ladder02.news.aol.com>
There has been no cutback in planned satellite build out in South East Asia, to respond to a few questions on that. I don't know why these emails don't go on the post here directly. Pacifik Satelit Nusantra, e.g., the Indonesian satellite operator, has stated as late as yesterday, that the government will proceed with satellite build out since, according to PSN, it is essential to the Indonesian economy that a communications infrastructure be at an
optimum level if the country is to move out of its current "debt" crisis.
L-Star, Loral's two GEOs for ABCN in SE Asia, is on schedule for deployment in the first qtr of 1998 (and is already paid for). L Star FM1 and FM2 are scheduled for launch from French Guiana. Ossicom in Santa Monica is supplying ground Gigamux switching infrastructure for that.
Tempo 1, another satellite for SE Asia, is scheduled for launch from Kazakkhstan sometime in July it looks like.
And China Sat 8 is lifting off from Long March in June, it looks.
All these satellites are Loral built for Asia.
Subject: Re: Oppenheimer LOR Report
Date: Sat, Jan 17, 1998 15:01 EST
From: Readware
Message-id: <19980117200100.PAA07703@ladder01.news.aol.com>
ViaSat's Starwire DAMA does not "multiply" the number of sites transponderable. Its DAMA economizes on transponder time in that it allocates GEO satcom time on a "when needed" basis. There is no "dead time" cost to the GEO provider then. That is an important economy when the digital amounts reach the billions. It makes the GEO more efficient, thus providing for greater transponder margins (the percentage which I have not figure out). Right now only
the US military uses DAMA for its UHF satcoms.
Orion's 200% transponder margin advantage over "bulk reselling" derives for the reasons I cited in the prior post.
I believe your question is, Why doesn't Orion or some other GEO company take advantage of ViaSat's DAMA to economize transponder time. I believe the question would be better posed to a company like Lockheed Astrolink or Loral Cyberstar. It is a good question.
Subject: LORAL EBITDA and REVENUE ESTIMATES: 1998, 1999, & 2000
Date: Sat, Jan 17, 1998 21:56 EST
From: Readware
Message-id: <19980118025600.VAA07541@ladder01.news.aol.com>
Below are estimates of Loral's financial profile for 1998-2000 based on a successful execution of its publicly stated business plan. They assume success of its satellite launches on a timely basis, and a rapid execution of its Globalstar program in 1999. By the end of 1998, with an increase in GEOs from 2 in 1997 to 9 in 1998, a much more defined earnings model will be possible. This model assumes a timely
launch of 7 new Loral GEOs by January 1999 (bringing the total constellation at that time to 9). The earnings model here should be considered tentative for now, with each launch success reducing its tentativeness to reasonable probability.
EBITDA
1998 1999 2000
SSL $138M $169M $187M
Skynet 120.6M 300.6M 438.7M
Orion 35M 147M 197M
SatMex (37.2)M (11.6)M (3.5)M
C* --- 15M 42M
G* --- 515M[206M] 1.2296MM[491.6M]
__________________________________________________________________________
Totals: $256.4M $826M $1352.86MM
*******************************************************************************************************
REVENUES
SSL $1.86MM $2.1276MM $2.195MM
Skynet 178.4M 371.9M 522.1M
Orion 137M 314M 331M
Satmex 133M 166M 179M
C* 25M 102M 236M
G* __ 614M[245.6M] $1.344MM [537.6MM}
__________________________________________________________________________
Totals $2273.4MM $3326.56MM $4.007MM
*******************************************************************************************************
Notes:
M= million
MM= billion
[ ] after G* indicates 40% total for Loral of G* operations
These estimates assume "timely" launch of Loral GEOs and G* LEOs, a GEO transponder leasing rate of 96%, and expectations of a total G* subsciption base (mobile, fixed-site, pager) of 432,000 in 1999 and 812,000 in 2000.
The G* estimates take into account launch reschedule for G* from 4 December 1997 to 5 February 1998.
These estimates are Earnings before income taxes depreciation and amortization.Different tax rates for Loral (from 7% to 41%), amortization schedules, tax loss carry forwards (especially in the case of Orion), interest deductions, and the like currently do not provide for a hard after tax profile of Loral operations.
Both Orion and SatMex in 1998 at least shall be an after tax loss entry for Loral in 1998. I believe in 1999 SatMex will be an incremental net loss to Loral earnings, turning net positive in 2000.
Loral has given no guidance on its tax treatment yet of Orion's tax loss carry forward.
Subject: Re: LORAL EBITDA and REVENUE ESTIMATES: 1998, 1999, & 2000-- GEO# correction
Date: Sat, Jan 17, 1998 22:59 EST
From: Readware
Message-id: <19980118040001.XAA26391@ladder02.news.aol.com>
The GEO's launched January 1998 to January 1999 will be 3, not 7, in number for Loral. It will have 9 GEOs in the constellation by January 1999 if launches of the 3 (two for Skynet and one for Orion) are timely. By January 1999 Loral should have 4 Skynet GEOs, 3 SatMex GEOs, and 2 Orion GEOs. I expect the third Orion GEO to be launched in 1st qtre 1999, bringing the total of GEOs in that time for Loral to 10. As we begin 1998 Loral has 5 GEOs in
its constellation (2 Telstar, 3 SatMex). At the end of the 1st qtr, with the Orion merger completed, it will have 6 GEOs.
Subject: Re: LORAL EBITDA and REVENUE ESTIMATES: 1998, 1999, & 2000
Date: Sun, Jan 18, 1998 09:41 EST
From: Readware
Message-id: <19980118144100.JAA16976@ladder02.news.aol.com>
I am just about out the door for a little time off, so email is shut off. Don't want it to build up while I'm gone.
I think the numbers are reasonable and within a 3-5% margin of accuracy for reasons I mentioned. Bernard Schwartz did indeed say that they could triple certain transponder results, as you say. Orion's business plan could expand sharply, as you say. This is true also.Till there is evidence of that being done the numbers here seem reasonable to me.
As for Wall Street's accuracy in gauging eps, I do not think Wall Street has the slightest idea what Loral's business plan is. Its analysts show no knowledge of it. One analyst from a very prominent large NYC based brokerage told me G* will not sell. When told G* had filed for a second generation add-on 4 years earlier than originally expected, her repsonse was "Oh". She's making $500,000/year easily.
This is intelligence?
Beginning in February 1998, Loral has a program for launching in the year 1998 44 LEOs, and 2 GEOs. In 1999 its program, to be completed by the 2nd qtr, is to launch 12 more LEOs, and 5 more GEOs.
At the end of 1999, Loral ends up with 12 GEOs, and 56 LEOs. In 2000 it launches 2 more GEOs (Cyberstar). As a multiple to 2000 AD EBITDA Loral is trading at 9 times and yet, by its own business plan, will be growing 222% 1998 to 1999, and some 60% from '99 to 2000. Even if G* were a total flop, Loral will double EBITDA from 1998 to 2000.
Meanwhile Wall Street investors buy Yahoo, "and whatever moves".
Off to vacation. |
