THREAD--Two points: On Charged Rates--Having just gone back and spent a good deal of time on the 10K and the conference call, I now understand better how the charges will be made. G will receive their stated 35 cents to 55 cents per minute, regardless of the amount received by the local service provider. G is a pure wholesaler. That is why they are concerned with getting handsets into the hands of users. They are taking the leap of faith that phones in people's hands will lead to minutes on G's satellites. And that is why the handsets are apparently to be sold with no markup from manufacturer through distributor.
Second point: Handsets. There will be 300,000 handsets available in Sept. 40-45,000 will be made per month by year end. That only adds 600,000 more by the end of 2000, possibly. That gives say 750,000 phones in the hands of paying customers by year-end 2000. Will that number of handsets generate the minutes necessary?
Some costs: The local gateways are owned and operated by the service providers, I understand. G's costs are limited to maintaining the GOCC and the SOCC's, and the satellites. The costs of the GOCC and SOCC operations really very low in the scheme of things. G will go into operation having to service $1.7 bn in debt at 11%, or thereabouts--say $200MM interest expense. Someone on this thread put up a number of $100MM for operating costs (I haven't seen any reliable figure). That's $300MM in fixed costs.
$300MM divided by (say) 750,000 handsets churning out billable minutes. That's $400 in wholesale dollars generated per phone annually. Or, about $1,000 on a retail level to be breakeven by year-end 2000.
The issue here therefore is how fast Qualcomm, Telitel and Ericcson can ramp up production of handsets. 40,000 per month won't cut it. As the service is rolled out, a lot of those made will remain in the channel as a kind of dead weight. Does anybody have any idea how many handsets can be produced and delivered in short order by the mfrs? How long will it take Q to ramp up to triple production, for instance? |
