Nice reminder of G* vs. I* costs (via G* yahoo thread)
Top>Business and Finance>Stocks>Services>Communications Services>GSTRF
(Globalstar Telecommun.)
Crypto re: Market
by: RcktScntst2
6123 of 6126
When you're not making chauvinistic cracks about headhunters, you articulate a position worth discussing,
unlike many of your fellow shorts, so I'll take your post on its merits.
First with respect to G* vs Ir... I believe you're compareing Iridium's (old) prices (as opposed to costs),
assuming G*'s costs are 50% of this number and then comparing that to a terrestrial cost you estimate as
.015$/minute. There are several flaws in your argument.
Suppose we just talk about costs, not prices. G* and Iridium both have three main elements of cost:
Depreciation, debt service, and operations. These can be estimated to a first order from SEC filings.
For Iridium depreciation is a 3.6B$ asset over five years=700M$/yr. Debt service is about 10% of 2.9B$,
call it 300M$/yr. Operations is a major subcontract to Motorola to the tune of 600M$/yr. Total, about
1.6B$/yr. According to Iridium management, it could sell 1.2B call minutes per year. Implied cost/minute of
a fully loaded system: $1.30.
For Globalstar, depreciation is about 3.5B$ over 7.5 years, call it 500M$/yr; Interest is about the same
300M$; Operations (G* mainly does it itself, plus pays a mgmt fee to Loral/Qualcomm of a couple percent
of revenue on a sliding scale), let's say 200M$/yr. Total 1B$/yr, management says it has 10B call minutes
per year to sell; Implied cost/minute of a fully loaded system: $0.10.
Now IRID fans have argued that capacity and system life comparisons above are unduly favorable toward
G*, but these are the numbers each company has published, and nobody on these bulletin boards has
convinced me they're unfair.
Now, you say that terestrial costs are "commoditized" at .015$/minute. I don't know if that's true (can you
provide a reference?) but suggest to you that such a number might be achievable in first world regions with
high population densities, but not elsewhere. If terrestrial cell service could be rolled out in rural areas, and
areas with difficult topography at such a cost, I believe it would have been done long ago. Sat systems reach
those areas instantly at a uniform cost. That's why some of the "poorest" countries, like India and the
Phillipines were among the first to implement national geo comsats for fixed telephone systems--space
provided cheaper access to all their populations. Global LEO systems will do the same thing on a world
wide basis for mobile, wireless users.
Posted: 05/19/99, 1:35AM EDT as a reply to: Msg 6114 by cryptoathome |
