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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: Rocket Scientist who wrote (7021)	8/30/1999 10:40:00 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 29987

<Clearly, it needs to attract the users for whom the value of connectivity (individually or collectively) is highest. I think Maurice's analysis is flawed, because in many circumstances and for many people the information exchanged during a short phone call can make or break the results of countless man hours of effort spent off the phone. By Gs own analysis, 99% of the world's population either doesn't need or can't afford G service. The problem will be finding the 1% that do and can. IMO no one knows what the magic price is that will maximize G* RoI> RS, you are absolutely right for a system which one uses only infrequently to make or break the results of countless man hours of effort spent off the phone. That's why those hugely expensive Inmarsat phones have sold [a few thousand only]. But Globalstar is moving from that super high priced model to one more like wireline phone services where a mass market is supplied and people just pick up the phone when they feel like it. Not every call is a "Wow, thank goodness for the phone" type call. Anyone who has a cellphone can think for themselves the value of their calls over the past year. Very few of them are of the "I'd have paid any price to make that call" type. Most are in the nature of "I earn $25,000 per year and I don't want to spend at more than that rate on a phone". Globalstar can't earn a living from the "Omigosh! Saved by the phone" minutes. It has to be more in the nature of business as usual and that is a MUCH lower rate. I stand by my pricing model for what a call is worth. Since there are only 6 million subscribers to fill the system, we could ask how much are the top 6 million people on earth worth on an hourly basis? We need to think of not the average, of that group, but the lowest priced ones in that group. Maybe some economists have that figure, but it must be not much more than $300,000 per year. Then, three quarters of those people wouldn't want a luggable phone, and are happy with their terrestrial coverage, so we need to dig a bit deeper. So we need to get the top 30 million people and see what the lowest of them get paid. There are about 1bn people living in Japan, USA, Western Europe. So, 30m of that 1000m, is about 3%. I suppose about 1 person in 30 in those well-off countries is worth over $100,000 per year, though that might be a bit of a stretch. Of course there are a lot of people in China, Russia, Argentina and even New Zealand who are around that $100,000 level but they are far fewer than USA/Japan/Europe. Adding up the OPM government buyers, military intelligence, and high value people, we are stretching to get 6m at $100,000 per year who will buy the phone. Of course there are only a few handsets available initially, so the higher value people will buy first and they'll be over the $300,000 per year. But they need to feel confident that the system won't do an Iridium on them, so a high level of demand will be needed to give them confidence. The good thing is that with a breakeven of only 10c per minute for Globalstar LP, it is a question of how much money we make rather than whether it will survive or not, but bad initial marketing could make a really ugly mess and delay mass adoption for a year and Valueman has pointed out the financial consequences of that. We need serious subscriber interest and a clamour of people trying to get the handsets. That won't happen in the over $300,000 per year market. It will be a jaundiced affair and lethargic adoption with "Another Iridium" scrawled across the newspapers. I agree the odd urgent call is worth $1m but those really are few and far between, as Iridium has found. They used exactly that argument and we debated it through the months on this thread 3 years ago [well, the old thread]. I bet Airtouch and the Harvard people haven't built an hourly rate model to determine price elasticity. I bet that because I just made it up but it seems a good model to me and it's how I spend my money. So do most people and companies. You cut your cloth to what you can afford and what the job is worth to you. Globalstar needs to make money on regular business, and with people worth less than $200,000 gross a year. The $2 a minute, $350,000 a year gross people are too few and far between. That doesn't include the monthly line charge and the cost of the handset either! It's not good enough to see 6bn people on the planet and think that there must be 1:1000 who will pay up for a Globalstar system. Especially when the number of gateways in commercial operation this year will be few. Also, there is no point selling minutes cheaper in one region than another because each minute can only be sold once, so it should go to the highest value customer. Since the minutes can be carried from one area of the earth to another, [in the battery], we have a bit of an advantage there. The service provider agreement is good in that regard - if one service provider is greedy and stupid, then the minutes won't be sold there but will carry over to a region where the service provider sells the minutes at a cheaper price and gets a LOT of customers. Maurice