Hi Mike:
My point was that shakeouts are extremely beneficial for
the survivors. If one looks at the picture of satellite
telephony and data LEO and MEO constellations, there is
now a good chance that I* will be bankrupt within a year,
and that ICO and all other constellations will not be
built, at least for a very long while. This means that
if G* makes it (we still don't know for sure whether
it will have a market), it will be vastly profitable.
In fact, to a large extent, the future of satellite
telecommunications rests on G*'s fate.
At the opposite end, the huge valuations awarded without
any distinction to all fiber companies encourage
overbuilding, which in the long run means very poor investment
returns.
You are right in indicating that many of the overpriced
companies can use their shares to by assets cheaply.
In the case of Internet companies (Yahoo, AOL, Amazon),
they are essentially buying trash with trash, so nothing
of value will emerge from these combinations. In the case
if the fiber companies, we have recently witnessed some
interesting takeovers (takeover of LCI by QWST, even
though LCI was much larger in terms of revenue,
and takeover of FRO by GBLX, even though GBLX remains
to a large extent a project in its infancy). Both of
these takeovers certainly strengthened QWST and GBLX,
but they did nothing to slow down construction by
other competitors (LVLT, WMB, NXLK, ...) In fact, they
probably encourage the creation of new competitors.
Best regards,
Bernard Levy |
