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Technology Stocks : XM Satellite Radio Holdings Inc. (XMSR) -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (371)	11/22/2002 1:36:26 PM
From: pcstel	Read Replies (1) \| Respond to of 3386

"Could you define "churn metric"? In 15 years as a practicing CPA, I've not seen this term used; although I can speculate about what it means. " CHURN is simply customer turn over. Deactivations! If you subsidize a radio for $185 dollars without a contract and the customer decides he does not like the service, and deactivates the service. Then you have thrown away your $185 dollar subsidy, and the cost of interest on that $185 dollars until it is repaid. Go look at any Wireless Service Provider. They all subsidize handsets, and provide CPGA and either Gross Adds and Deactivation numbers,or Gross Adds and Churn %, or all three! The CHURN metric is represented in percentage of the subscribe base and is on a monthly basis. For example. In the Wireless Service Provider sector. CHURN normally runs about 3%. That mean in a year. 36% of their customer base deactivates their account. This is why Wireless Service Providers usually require 1or 2 year Contracts for service at a specific price to offset the up front subsidy and acquisition costs the Company is providing to acquire that customer. So a typical Wireless SP's CPGA (typically subsidy plus marketing expenses) runs $330. They get a one year contract for lets say $40 per month. So they can recapture the CPGA in about 8 months. The problem with SDARS is that the subsidy alone is $180 per Net Add, not including Marketing Expenses. With with an ARPU of $9.60. It takes 19 months to just recapture the base subsidy, let alone the $50 in interest expense that has accrued in association with that subsidy. And we haven't even added in the other metrics that make up CPGA like Marketing Expenses. But, there is no long term contract that ensures that you will recapture your CPGA! When they start with the OEM installations. They will be paying subsidies on every radio that is installed. So every car that rolls off the line. XMSR will be paying a subisdy. No matter if the purchaser of that car ever subscribes, or continues to subscribe after the inital trial period. CPGA is too HIGH! ARPU is too LOW! No contract to ensure you can recover your CPGA! Hope that helps! PCSTEL