*** QUALCOMM as the wholesaler *** <The only problem is if QCOM takes over the whole thing, then they will be in competition with the Wireless companies of the world. As you know, it is these wireless service providers who market QCOM phones. Such a move by Qcom would jeopardize their core business, IMO. It is better for QCOM to be a minority owner, but provide all of the financing needed to make the operation a go.>
I've done enough selling to know that customers dislike a supplier competing with them. They don't even like a supplier selling to their competitors. And that's in the oil industry where oil is just another product! Jealousy is a powerful part of the business world [as are greed, fear, wishful thinking and the whole range of human emotion]. So I understand your point and accept that it will be true in wireless as well as oil.
So, let's assume we are dealing with seriously jealous wireless service providers, ASIC makers, phone makers, countries and patriotic subscribers.
If QUALCOMM took over all of Globalstar, it would still be Ericy, Telit and QUALCOMM producing the Globalstar phones and nobody else.
Since QUALCOMM sold their handset division to Kyocera, they have been out of the handset business. Kyocera retained the right to put QUALCOMM on the Kyocera phones, which they have been doing. Since QUALCOMM sold the infrastructure division and spun off Leap Wireless International, they haven't been competing with service providers or handsets makers, other than through Globalstar.
With Globalstar as a wholly-owned subsidiary, QUALCOMM would be directly competing with handset makers, ASIC makers, software suppliers, infrastructure suppliers, data suppliers minute wholesalers [such as NextWave wanted to be] and minute retailers who don't have Globalstar minutes to sell.
Initially, very few competitors would care because the market share would be trivial and nearly everyone thinks Globalstar is a dud. You can't imagine Tero telling Nokia to hit the panic button! But let's assume Globalstar takes off and starts to become a significant threat, or even that some competitors think it might become a threat.
So what?
The ASIC division is going to be spun off. So, for example, suppose Vodafone gets cut right out of Globalstar. What can they do?
They could stop buying and retailing QUALCOMM terrestrial handsets - well, that's been solved because Kyocera took it over. They could stop buying infrastructure from QUALCOMM. Oops, too late on that one too because L M Ericsson owns it. They could refuse ASICs from SpinCo. Damn, that's been spun off too and anyway, are they really going to use some second rate ASIC and go out of business? Nokia tried that route and in the end had to cave in and buy QUALCOMM CDMA ASICs via another company. If anyone was in a position to avoid QUALCOMM, Nokia was. They failed.
Vodafone could refuse to sell Globalstar service for QUALCOMM. That might be okay, but maybe Sprint would sell Globalstar phones and service. Maybe a lot of other companies would too. Everyone looks for a competitive advantage and to keep up with the competition. I doubt that Vodafone would want to be left out of Globalstar as a product to offer their customers. Neither would Sprint like to be left out. Oh yes, they could offer GEO voice-delay mobile service with no upgrade path, no data, no gpsOne, not much of anything. That wouldn't be a smart move.
If jealous as hell, what could Vodafone or other service providers do? China Telecom could get sole agency from the Chinese government, true. But they'd have to buy from QUALCOMM if they wanted minutes. They don't have CDMA, so maybe they would be asking favours of QUALCOMM to defend themselves against Unicom which does have CDMA [but not Globalstar].
QUALCOMM has no real reason to want to be in the actual service provider business, where it involves selling, relationships, account management and so on, at which existing service providers do quite. So QUALCOMM would be much better off as the wholesaler. There is no point in duplicating customer relationships and setting up as a service provider, which is already a competitive business. QUALCOMM would be much better off to be the wholesaler and seek service providers as their agents. The service providers would have no reason to deny Globalstar to their customers. They have plenty of reason to offer it.
I don't see how QUALCOMM owning Globalstar and wholesaling minutes to existing service providers would jeopardize the service providers' existing businesses. It would certainly jeopardize the business of those who DON'T sell Globalstar service. That's competition. Leap Wireless probably wouldn't bother with Globalstar because they are a local coverage, eat-all-you-like company and don't bother with roaming, let alone Globalstar.
But if there is any problem getting service providers to offer good Globalstar services, then QUALCOMM could go over their heads, direct to subscribers. QUALCOMM could be like Dell and sell phones, set up as prepaid, from the end of the production line over the internet and eBay. There are three Globalstar phones for sale there now: search.ebay.com One of them ending in 32 minutes [about 2100 Pacific Standard Time]. People could buy minutes through the internet direct from QUALCOMM by prepaying with their credit card or other Internet Transaction method.
What would, or could, service providers do in retaliation? Nothing. That's what. They couldn't dump CDMA. CDMA is the future. They can't avoid royalties. They could refuse to sell LaunchPad, Eudora or other products from QUALCOMM. But it's not too bright to refuse to sell products and services if competitors are offering them. That's called cutting off your nose to spite your face.
Governments in some countries would refuse to allow Globalstar service unless it was via a local agent and that would be okay by QUALCOMM. QUALCOMM would set the price and supply the phones. Or the local agent could use Ericy or Telit phones if they don't like QUALCOMM. But why use those if QUALCOMM phones are the best? Vodafone Australia uses Telit and Ericy Globalstar phones because they are trying to support their GSM network. Cross-subsidies like that can be fatal to a business. The GSM people end up bludging off the Globalstar division, which is soon not too amusing for the Globalstar division.
I see no jeopardy for the service providers if QUALCOMM supplies them wholesale Globalstar minutes and the phones and data modems and software. I see competitive advantage if the service providers can integrate Globalstar into their offer to subscribers.
Thanks for the detail on the conference call.
Mqurice
PS: But I doubt that QUALCOMM would want to take over the whole thing and would prefer to have Loral, Vodafone and other service providers and partners remain in Globalstar LP. In the event that a full takeover is needed to avoid failure and large delays, I think QUALCOMM would rather do that than have Globalstar follow Iridium into the miasma of bankruptcy and liquidation. |
