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To: gdichaz who wrote (32387)	6/15/1999 8:35:00 PM
From: Rick	Respond to of 152472

Globalstar mentioned in Financial Times See page XI of the U.S. edition, Monday, June 14th, 1999 Commercial Satellites by Christopher Price in London String of Setbacks hold down stocks. "Amid the rush to put more satellites into space to support the explosion in television and telecommunications traffic, one area of the industry is learning that profiting from the frontiers of technology is far from easy. The notion of a hand-held mobile phone that could be used anywhere in the world seemed a good one when first mooted by Motorola, the US technology group, 10 years ago. At a stroke, it overcame the issues of coping with different operating standards and roaming restrictions. Several other satellite-related groups were also inspired enough to begin developing the multi-billion dollar systems to support the idea. However, escalating costs led to consolidation so that by two years ago, only four global systems were left in development. All had big backers: Mdium and Motorola, Globalstar and Loral, ICO Global Communications and Inmarsat, and Elipso and Boeing. Iridium was to be first to market in November 1998. Yet even before then, the fledgling industry was hit by a series of events that began the downward pressure on their share prices that they have never recovered from. The first setback came last summer when Globalstar lost one-fifth of its satellites in an explosion on the launch pad at Khazakstan. This in turn hit a fundraising attempt by ICO, which was forced to scale back an offering on the Nasdaq market. Matters were not helped when Iridium was forced to delay its launch by a month. When it finally did so, it was with a whimper and not the bang its $140m advertising campaign promised. Firstly, software problems with one of Iridium's two handset manufacturers meant that there were very few phones available for sale at launch. At the same time, the market which Iridium was designed for had changed. Mobile phones had become smaller, cheaper, and smarter in the time it had taken to come to market. Iridium launched its service with tariffs as high as $7 a minute. The handsets retailed at around $3,000, and looked and weighed like a house brick. In addition, the GSM European standard had opened up roaming across the continent and beyond. The company's service partners, who were responsible for selling and marketing the service, complained that the pricing structure was too complicated and expensive. Iridium criticised them for not trying hard enough. The result, however, was nothing short of disastrous for the company and its $6bn system. By the end of March - five months after launch - just over 10,000 subscribers had signed up. This meant that the company had missed subscriber and revenue targets for $800m of its $2bn of debts. It was forced to enter talks with its bankers, while first the finance director and then the chief executive officer subsequently resigned. The company has since initiated a recovery plan. The marketing effort has been bolstered through a reorganisation, with Motorola sales channels taking a more active role. A capital restructuring is also under negotiation with the banks. Iridium's shares came to market two years' ago at $20 and hit a high of $72 a year later. Recently they have slumped to around $7. Globalstar is keen not to make the same mistakes when it launches its $3bn service later this year. It promises marketing will be central to its strategy and claims that its service partners have more credibility and more vested interest than those of Iridium in Globalstar succeeding. It is also stressing that its prices will be considerably cheaper. It intends to sell capacity to its service partners at between 35 and 50 cents a minute. With their margin taken into account, Globalstar expects most calls to cost callers under $1 a minute. Handset prices are likely to start at $800. However, with service provider discounts and subsidies, Globalstar believes these could fall to as low as $350 - almost one-tenth of the price of Irridium phones. ICO Global Communications and Elipso, due to launch over the next two years, are also promising to be low-cost operators. All four companies, while claiming to be different from each other, are targeting the same markets, namely the business traveller and the developing countries. The latter, few of which have a telecoms infrastructure, are seen as ideal recipients for a system that would by-pass the expensive investment a conventional telecoms system would require. However, the irony of the so-called "Village Voice" market coming to the rescue of the multi-billion dollar cutting edge technology systems has not been lost on Wall Street analysts. Other competitors are also waiting in the wings. Inmarsat, Intelsat and Eutelsat, three government-owned organisations, are in the process of becoming private companies ahead of public offerings. This will give them the freedom to move into various commercial satellite markets, not least of-which will be telecoms. In an unproven, crowded market, the jostling looks set to get worse yet with success still a far-off prospect." Fred