Bullish release from G*:
By Steve Rhinds
PARIS (Dow Jones)--U.S.-based Globalstar Telecommunications Ltd. (GSTRF)
expects to break even in its first year of operation, and remains on track to
begin commercial operation of its satellite network in October 1999, company
officials said Thursday.
"We expect to reach the break-even point in the first year of service," said
Globalstar spokesman John Cunningham, adding that the company will launch its
digital communications service in the key revenue territories of North
America, Latin America and Europe. He declined to give any detailed figures.
Globalstar Field Director for European Markets Frank Guinard confirmed that
by October, Globalstar will have between 40 and 42 of its 48 satellites in
place, offering a worldwide digital communications service, despite losing 12
satellites in September 1998 when a rocket failed during a launch.
Guinard said the rocket failure pushed back the start-up date for the
network to autumn from summer as originally scheduled, and estimated the
subsequent loss of revenue at $700 million. The cost of the satellites -
valued at $15 million each - was covered by insurance.
He said funding for the $3.26 billion start-up cost of the satellite network
is now fully in place, but the company will need additional funding to cover the first year of operation. This will be covered partly by the sale of $350
million of preferred stock, and Guinard said 42%-shareholder Loral Space &
Communications Ltd. (LOR) will return to the market to raise a further $575
million.
Globalstar is aiming to have 3 million subscribers by 2002. Exclusive rights
to the Globalstar service are held by different distributors worldwide which
then sign agreements with local telecom companies.
In Europe, Elsacom - a unit of Italy's Finmeccanica (I.MEC) - is the
authorized distributor for Central Europe and Scandinavia, while France's
Tesam - 51%-owned by France Telecom (FTE) and 49%-held by telecoms equipment
supplier Alcatel SA (ALA) - covers France and Belgium, and also holds the
Globalstar distribution rights for Latin America, excluding Brazil. Vodafone
Group PLC (VOD) holds the rights for the U.K., South Africa, Greece and
Australia.
Potential Market Of 30 Million Subscribers
Guinard estimated the total potential market for satellite-based phone
services at 30 million subscribers, but said Globalstar is currently only
targeting 10% of this market. Its main competitors are Iridium World
Communications Ltd. (IRIDF) and ICO Global Communications Holdings Ltd.
(ICOGF). Together, Guinard said, the three companies' combined capacity would
only cover 50% of the potential market. "I think the market is big enough for
three satellite companies," he said.
Between now and the October launch, Guinard said Globalstar will be
concentrating on plugging the few license holes that remain in its worldwide
network - notably Libya, Algeria and some parts of Africa - and carrying out
market test demonstrations.
Globalstar is a partnership of several telecoms service providers and
equipment makers including Qualcom Inc. (QCOM), Alcatel, China Telecom Ltd.
(CHL), Dacom Corp., Daimler-Benz AG (G.DAI), France Telecom, Hyundai,
Vodafone, and Loral Space & Communications.
-By Steve Rhinds +33 (0) 1-53-00-03-10; srhinds@ap.org
(END) DOW JONES NEWS 02-25-99
12:20 PM
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