To: gmccon who wrote (10493 ) 3/4/2000 6:25:00 PM From: leo_bloom Read Replies (1) | Respond to
Greg: To many investors on this thread, whether McCaw ultimately invested in Iridium really was a non-factor from the beginning. That is, Globalstar was/is going to have to succeed on its own merits, tap into the market, deliver quality service, and exploit its technological and design advantages anyway. For the short term, however, McCaw's announced plans to invest in Iridium, and then his most recent withdrawal from that plan, may have an effect on Globalstar's stock price. Then again, it may not. When McCaw first announced his interest in Iridium, short sellers of Globalstar claimed that a revived Iridium would act to undercut Globalstar's prices, diminishing any competitive advantage Globalstar might have had and perhaps saturating its niche market(s) with oversupply. On the other hand, many investors in Globalstar interpreted McCaw's move as a validation of the market potential for satellite telephony, and therefore saw it as a positive for Globalstar. So with McCaw pulling out, how is one to interpret the implications for Globalstar? On the whole, it's probably a positive. First, the question of demand for Globalstar's service is going to be answered before the year is out, regardless of whether Iridium survives. Second, there will be no meaningful undercutting of Globalstar's prices by Iridium. Third, for at least the next two years, Globalstar will have the only global system for satellite extension of cellular voice and data service that is fully operational. Fourth, if Iridium service is terminated, and that looks increasingly likely, many of the current 50,000 Iridium subscribers would probably move over to Globalstar. The quicker, the better (for Globalstar). (That kind of move could be a very strong positive for Globalstar.) Fifth, Iridium has gateways/licensing in India and southeast Asia. There's been some speculation that Globalstar might be able to bargain for some of those assets and use them to accelerate its rollout. I have no idea how tenable those speculations are. And sixth, going way out on a reach, if Craig McCaw has to back away from Iridium because he sees it can't work, and if he has no birds in the air for Teledesic or ICO, is there some kind of a wild chance that he might actually try to approach Loral/Globalstar to work up some kind of symbiotic expansion of the current Globalstar system? Caveat: my ability to be objective about all this is somewhat questionable, given that I'm long on Globalstar as well as the long-suffering Loral. Good luck on your research and investments.
