SDUnion. Globalstar predicts shining future in wireless. Qualcomm-backed firm pursues success where 2 rivals failed
By Mike Drummond
UNION-TRIBUNE STAFF WRITER
September 23, 1999
NEW ORLEANS -- If executives at Globalstar are worried, they aren't
showing it. At least they aren't showing it here at the Personal
Communications Showcase '99 trade show, where 600 wireless companies
and 20,000 attendees from around the world have converged to keep atop
one of the planet's fastest-changing industries.
Officials with Qualcomm-backed Globalstar might be forgiven a bit of
hand-wringing. Theirs is, after all, the only worldwide satellite phone system
left standing, after the spectacular financial flameouts earlier this year of two
erstwhile competitors -- Iridium and ICO Global Communications.
But Tony Navarra, president of San Jose-based Globalstar, said yesterday
that the failure of others has not added pressure on his company to survive, let
alone make a profit.
"We don't feel any more or less
pressure to deliver
low-earth-orbit satellite phone
service," Navarra said.
In fact, Navarra said, the
company launched four satellites just yesterday morning, bringing the number
of Globalstar's orbiting birds to 40.
Using those satellites, Globalstar seeks to deploy its go-anywhere mobile
phones in areas where traditional and mobile phone networks don't reach --
the outskirts of Rio de Janerio, for instance, or the vast regions of China and
those "dead spots" in the big, square states of America. Company officials say
about 95 percent of the planet has no mobile phone networks, representing a
lucrative chunk of the risky $65.9 billion satellite communications market.
Commercial Globalstar service is expected to begin in nine countries within
the next two months.
Globalstar officials say they will succeed where pioneering company Iridium
failed because their technology is superior and less expensive, and their
targeted market is more realistic -- the farmer, the oil driller, the coastal
mariner and others deployed outside the ring of traditional
telecommunications.
Iridium, by contrast, initially targeted the mobile business traveler in the hopes
that corporate road warriors would buy into the concept of a "world phone."
San Diego-based Qualcomm, Sweden's Ericsson and Italian manufacturer
Telital are building Globalstar phones, expected to retail for about $1,500. A
minute of talk time is expected to cost about $1.50 in the United States.
Bankrupt Iridium originally planned to charge about $3,000 per phone and up
to $8 a minute for a call.
Iridium also launched a worldwide marketing blitz reportedly costing $180
million before the system was fully functional, angering would-be customers
with dropped calls and fuzzy reception.
David Kestenbaum, analyst with ING Barings, said Motorola-backed Iridium
priced itself "way out of sync with the market," limiting total subscribers to
about 20,000, when it needed more than 500,000 to meet financial
obligations.
"We thought all along Iridium would fail," Kestenbaum said. "Iridium probably
likely will vanish."
Gerald Beckwith, president of Qualcomm's wireless systems, readily agreed.
"We could never figure out (Iridium's) business plan," Beckwith said, adding
that Iridium's tailspin dragged down ICO when skittish investors proved
reluctant to deliver funding.
Iridium sounds as though it has some fight left in it, however. Though it is in
bankruptcy, the company continues to offer services for existing customers
and recently dropped prices to compete with Globalstar.
"Iridium can make it; it's got great technology that's working today," Raymond
J. Leopold, one of the architects of the Iridium system, told The New York
Times recently. "There are too many people who put too much money into it
to walk away. You can't just go out and pawn a constellation of 66 satellites."
Globalstar officials gleefully noted that their company is sponsoring the
Canadian version of the Iditarod dog sled race this year -- a race Iridium
sponsored last year. Still, Globalstar officials are not dancing on the graves of
their competitors.
Mike Kerr, vice president and general manager of Globalstar USA, a
member of the Vodafone AirTouch group, said the company is taking a more
cautious approach to marketing, targeting advertising in trade journals and
other niche or vertical markets.
Moreover, with the absence of competition, it's hard for analysts to gauge the
performance of the market, Beckwith said, adding that a rival "keeps my
pencil sharp."
Globalstar will need about 500,000 subscribers to break even. Company
officials expect to have 1 million customers by the end of next year.
Kestenbaum, the ING Barings analyst, is betting that Globalstar will fly where
two others have faltered.
"We believe Globalstar will succeed," he said.
¸ Copyright 1999 Union-Tribune Publishing Co. |
