Maurice and the thread, I would appreciate your comments on the following summary which I prepared and sent to a friend today about GSTRF's prospects. Thanks in advance, djane
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Your GSTRF primer as requested. I'm going to buy my 2nd large portion this afternoon (1st portion purchased at $25). I see GSTRF at $50 by 12/31/98 and a potential 10-20 fold rise in the next 5 years.
I'll assume you're familiar with the concept - global phone service except for both poles. GSTRF is projected to be operational in mid-1999 (originally late 1998) with 48 satellites and 8 spares. I prefer it to its main competitor Iridium (IRIDF) for reasons listed below. But, its appears demand will be more than enough and both IRIDF and GSTRF will prosper.
Current Weakness reasons. Down from $37
1. 8/24/97 GSTRF launch of 12 satellites from Kazachstan. Stock always trades nervously before launches. 24 more satellites to be launched before mid-12/98.
2. 9/23/98 IRIDF operational date in question due to software delays.
3. Profit taking after nice gains over last 1-2 years.
4. ICO (other competitor to be operational in 2000) IPO is diluting money available to this sector.
5. Possible hedging/put buying by Soros after recent 5% investment in GSTRF
6. Hyundai withdrawal as partner due to Korean economic problems. Need to replace India partner.
7. General worldwide economic problems
8. LOR political problems. Possible Fall 1998 US Congress investigation of China payments to Clinton campaign.
What Do I Like About GSTRF
1. Better/cheaper CDMA technology (from QCOM) than IRIDF technology. GSTRF cost/minute to the user will be much lower than IRIDF. Thus, it expands the potential demand for the service.
2. GSTRF strong worldwide partners, e.g., AirTouch (ATI) in the US. QCOM provides CDMA tech and owns 12% (?) of GSTRF. Other partners include ALA, Daimler-Benz Aerospace and France Telecom.
3. Fall 1998 IRIDF becoming operational will hit the major TV/media and capture retail buying enthusiasm. IRIDF ad was in recent Wired mag.
4. LOR owns 40+% of GSTRF and provides proven satellite tech. Bernie Schwartz (LOR head) is a genius and has done very well for shareholders in the past. I also own some LOR for my IRA. You might consider LOR as a safer play with many other non-GSTRF interests (e.g., Cyberstar data satellites).
5. Soros just bought 5% of GSTRF (not IRIDF). By inference, it confirms that his analysts have confirmed the GSTRF technology, strategic plan and risk/reward ratio.
6. Once operational, GSTRF will be a cash generation machine. Check the SI thread for projections. To my knowledge, GSTRF has raised all the approx. $3B funding necessary to get all satellites operational. 1995 IPO, subsequent secondary offerings and junk bond financing.
7. GSTRF aimed particularly at over 3 billion of people currently without much phone service, e.g., China, India, Brazil, SE Asia, Russia, Africa, etc. Nice demographic play. Stated projections are 3M subscribers by 2002. As cellular phone projections have proved, GSTRF's actual numbers may be much higher.
Main Risks
1. Satellites fail, solor flares/asteroids, launch failures, etc. Inherent problems with any satellite venture.
2. Economic/political problems in developing/western world
3. IRIDF failure or operational date delayed many months beyond 9/98. Although, IRIDF failure could jack up GSTRF price beyond anything we could imagine. This nice potential upside which I believe hasn't been adequately reflected in the current price.
4. User demand lower than expected.
5. Competitors become operational and drive down cost/minute. But, not expected until at least after year 2000.
As you can see, GSTRF is a high-risk investment with potential very high rewards. Comments are appreciated as usual. I'm sure I've left out many key points. I wrote this off the top of my head without referring to any research materials. |
