BellSouth's pie-in-the-sky ambitions
Iridium to go dark? Plus: 'towering' stocks
By Jeffry Bartash, CBS MarketWatch
Last Update: 2:26 PM ET Mar 17, 2000
NewsWatch
WASHINGTON (CBS.MW) -- BellSouth apparently plans to take to
the sky soon, offering satellite TV service to customers in the southeastern
United States.
Don't expect market leaders EchoStar Communications and DirecTV to
be quaking in their boots, however. The BellSouth effort is likely to be
narrowly tailored, and the telecommunications carrier doesn't possess the
same brand recognition, marketing muscle and variety of services as its
two-would be rivals.
News of BellSouth's satellite plans were first disclosed in a BusinessWeek
article on Friday. While company spokesman Jeff Battcher declined to
comment on the report, he did note that "we have always said we'd look
at a satellite provider."
Battcher was also more than willing to point to what he called inaccuracies
in the story. Contrary to the report, he said BellSouth has no plans to
terminate its role in Americast, a limited pay-TV service the company
offers through landline and fixed-wireless technology.
"We're not going to abandon Americast," Battcher said. "It's not going
away. We're committed to it." He also disputed the assertion that
Americast only has 350,000 subscribers: "We've never given that number
out."
Call it a nondenial denial. In any event, BellSouth has good reason to use
satellite as a means of reaching customers. Its primary method of
delivering TV, by fixed wireless, is hampered in some areas by line-of-site
issues. Line of site simply means that radio signals need a clear path to
customers' antennas. If anything blocks the signal -- trees or hills, for
instance -- then the service is no good.
"While the service has excellent digital quality and loads of channels and
value-added features, the weak link was due to the line-of-sight
technology they couldn't serve everyone," said Jeffrey Kagan, an
independent telecom analyst based in Atlanta.
Satellite is one way of getting around that. Few customers can't be
reached by signals from the sky. That means BellSouth (BLS: news,
msgs) could reach a vaster audience.
To that end, the company reportedly will lease space on a Loral Space &
Communications satellite (LOR: news, msgs). It's much cheaper this way
than building one's own satellite network and will allow the Baby Bell to
roll out service almost immediately.
Analysts believe it's a good adjunct strategy if it doesn't cost too much
money or take up too much time. The company has good brand
recognition and is well regarded in the nine states it serves. It can use its
own large sales force to market the service.
What Wall Street is skeptical of is speculation that BellSouth might
eventually challenge DirecTV, owned by Hughes Electronics (GMH:
news, msgs), and EchoStar (DISH: news, msgs) on their own turf. That
could be a costly battle at a time when analysts believe the company
should focus on getting larger and modernizing its network, two expensive
propositions in their own right.
"I would have reservations about them doing this on a national scale," said
Drake Johnstone of Davenport & Co. "That part makes no sense."
***
It looks like the plug is finally going to be pulled on the Iridium satellite
phone system. Reports suggest the service, now under bankruptcy
protection, will be turned off at midnight, March 17. See AP story.
Iridium, as is well known by now, was the first global satellite phone
service to launch service. The $5 billion project, however, was sunk by
poor marketing, clunky phones, high prices and perhaps most important,
the explosion of cell phones.
When the project was conceived by Motorola a decade ago, cell phone
networks weren't widespread. Iridium's creators believed their would be a
huge demand for wireless phones that businesspeople could use all over
the world and that they could also sell the service to customers in
underdeveloped parts of the world where public phone networks are
inadequate.
The failure of Iridium seems to be hanging over the head of GlobalStar
Communications, the one remaining worldwide satellite phone service
currently in operation. It launched service last month, but the stock
(GSTRF: news, msgs) has been languishing in the mid-teens after peaking
last year above $50.
GlobalStar may well succeed -- it's avoided the mistakes that undercut
Iridium -- but some analysts still question whether there is enough demand
for the service.
While it'll be a year or more before analysts find out, companies that plan
to build multibillion dollar satellite systems for high-speed Internet access
ought to absorb the lessons of Iridium before they take the plunge and
make sure a market exists.
Just like wireless networks, high-speed connections are rapidly becoming
prevalent, at least in the most populated areas of developed countries.
Cable and phone companies are both rolling out services, and some
cheap high-speed satellite networks are also set to fly soon.
***
Shares of Crown Castle (TWRS: news, msgs) and American Tower
(AMT: news, msgs) got a boost Friday after Lehman Brothers analyst
John Bensche reiterated "buys" on both companies.
The two companies own, operate and manage tower structures over
which wireless phone calls are transmitted. Both had strong fourth
quarters, are rapidly expanding and are relatively undervalued, Bensche
argued.
With the use of wireless phones exploding, more and more towers are
needed. Yet wireless phone carriers want to focus on selling their services
and have outsourced operation of the towers themselves to companies
such as Crown Castle and American Tower.
American Tower rose 4 11/16 to 49 11/16 in recent trading. Crown
Castle was up just 3/8 to 40 11/16, but it had been up as much as 1
13/16.
Jeffry Bartash is the telecommunications reporter for CBS
MarketWatch. |
