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

To: KyrosL who wrote (24461)	11/16/2001 2:44:51 PM
From: Rocket Scientist	Read Replies (2) \| Respond to of 29987

KyrosL, I don't think the retail price went down noticeably anywhere. G* seemed to have made a unilateral reduction in the wholesale price to the SPs (probably in lieu of cash subsidies which were foreseen in the 2nd Qrtr 10Q but didn't actually happen as far as one can tell by looking at the Q3 10Q. ) Also, and probably more importantly, G* reports all MoUs sold, but only counts as revenue those sold to SPs "where collection is not reasonably assured" IOW, some (undisclosed) SPs not only stiffed G* on their GWs and UTs, but are reselling service without paying G! There may even be some debooking of revenues reported earlier in the year, since the latest 10Q says (for the first time) that G "is not recognizing revenue in 2001 from service providers where collection is not reasonably assured" (emphasis mine)

To: KyrosL who wrote (24461)	11/16/2001 3:11:46 PM
From: Maurice Winn	Respond to of 29987

Kyros, you forgot that GlobalstarLP is a wholesaler, not a retailer. So, if Globalstar cuts prices to retailers and the retailers close their operations or maintain their previous prices, sales will reduce. Cutting the prices is a way of keeping the wholesalers interested in maintaining their operations until the restructuring is organized rather than simply closing their gateways and walking away. I am guessing that's the motivation. Having taught everyone for three years [and longer before that for Inmarsat etc] that satellites are very, very expensive, you are right that considerable marketing will be needed to change that idea. Word of mouth is marketing. If people have a real deal, it's not long before they are telling their friends and family and colleagues. The idea that talking on a phone doesn't increase with price reductions is shown to be false by comparing Iridium and Leap Wireless. Compare consumption when minutes and phones were rich boys toys with consumption of minutes now that phones and minutes are sold in six packs and by the bucketful and with all you can eat pricing. The question is the shape of that price versus volume curve. My argument is that phone calls range from omigod panic calls where price is irrelevant and people will pay whatever money they have to make a call [for example your boat is sinking in the middle of the Tasman Sea and you want to be saved - $8,000 per minute? No problem] to chatty time-filling recreational chats where somebody just wants to have a natter with somebody. When somebody just wants to have a natter, or yak, to somebody, [these are similar speaking styles], they will pay their 'recreational rate', which is closely related to their earning capacity. People will spend on time-filling recreational things at their 'hourly rate'. Somebody who earns $1 an hour will be reluctant to spend $2 a minute to yak on a Globalstar phone. That would be $120 an hour. They would only make 'urgent calls' and keep them really brief, monitoring the time with a stopwatch. But they would spend perhaps 3c a minute without worry too much about it [but again, they'll be mindful of time used]. Somebody who earns $10 an hour will not want to spend $2 a minute either because it takes them a few days to save the money to make an hour long yakking phone call at $120 an hour for the call. But they'd natter happily at 10c a minute [though they'd still be sensible about using the phone and would look for cheaper ways of making the call - such as waiting until they are able to see the person or waiting until they can use a free landline phone]. Somebody who earns $100 an hour will be less fazed by $2 a minute for normal calls, but they'll not want to get bills for $1000s so will be mindful of their usage. At 20c a minute, they'd gab all day except they are probably time-managers so tend not to pass the time on the phone, though ironically, they spend a lot more time on the phone than low-paid people. Companies, which have high-value operations will get their staff to spend a lot more money on phone calls if they can't find a cheaper way of doing it. But they won't go nuts and the value of the work they are doing is usually closely related to the pay rate of the person doing the job, so we could perhaps treble the 'acceptable rate' for companies. Or at least double the rate. So a $40 an hour employee would be doing a job worth $120 an hour and phone calls at $2 a minute wouldn't be a very big deal. But we are getting in small numbers of people because nearly all the $40 people are in cities where terrestrial services are available. So, you can see that price elasticity does exist and is very large. At $10 a minute, it'll be emergency and urgent calls only. At $2 a minute, there'll be a few high-priced people will use the phones when needed. At $1 a minute [$60 an hour] it's still really expensive and numbers of potential users are small [not many people in paddy fields in China or sheep farms in Kiwiland earn $60 an hour]. At 30c a minute [$18 an hour] we are getting into some serious numbers. At 20c a minute [$12 an hour] we are getting into the the Bell Curve [especially in the USA] in a big way and swarms of people will want to use such a service. At 10c a minute [$6 an hour] even people in New Zealand are starting to have that earning capacity and spending capacity. To really hit the jackpot, we need to be at 5c a minute [$3 an hour = $6,000 per year and there are millions of people on earth who would like to yak at that price]. There is elasticity of demand and I believe the 10 billion or 20 billion minutes we want to sell from Globalstar will mean a LOT of customers. If people used only 500 minutes a month [half the Leap Wireless rate], that would mean 2 million subscribers would be needed. With fixed phones [which would handle a lot more calls usually] there would be fewer subscribers owning a phone. So, the service needs to be retail-priced somewhere in the 10c to 20c per minute range to fill the constellation and get a high rate of adoption. Price-elasticity is what this is about. Consumer surplus and price-elasticity. Mqurice

To: KyrosL who wrote (24461)	11/16/2001 5:06:52 PM
From: John Cuthbertson	Read Replies (1) \| Respond to of 29987

"in the last quarter MOU increased while revenues from MOU dropped. This means that per minute prices dropped a lot, on the average. It also means that elasticity of demand does not exist." Kyrosl, Actually, it shows directly that elasticity of demand does exist: prices went down, and volume went up, that's the very definition of price elasticity of demand! The crucial question is how much elasticity there is. That depends on the shape of the whole curve of demand vs. price, and that curve is influenced by marketing, as you suggest, as well as many other things. I think we've not yet found out how much demand there could be. ==John C.