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

To: russwinter who wrote (392)	11/24/2002 9:58:12 PM
From: pcstel	Read Replies (1) \| Respond to of 3386

I don't think XMSR's debt is really the primary issue here especially in comparison to the name you mentioned. Much smaller amounts involved, and much lower hurdles to cross to reach profitability. I just don't see the same animal. Agreed! I made a note earlier that XM is a Zero even if they had no debt. The reason again being that the apparent CPGA and Equipment Subsidies are way too high, and the ARPU is way too small. Spending 11.8 million dollars in equipment subsidies alone to add 65,000 non-contract net adds that will only generate 7.5 million in Revenues per year is not a valid business concept. Especially when your cost of capital is 14%. Your interest expense on your subsidy alone is ~$2.10 a month, let alone the time required to recapture your CPGA is measured in years! The more customers they add, the higher their Cash Burn rate do to subsidies. You just can't do it on an ARPU of $9.68 per month without some sort of long term (3 year or longer) contract. Don't get me wrong. Certain items will scale in this model. Like Customer Care and Network Operation Costs. Others like subsidies, wil not. You simply can not provide a $180 subsidy on a no contract service with an ARPU or $9.70 per month, especially when you cost of capital is 14%. Do some simple math. Equipment subsidies were 11.8 million last quarter to add ~64000 net adds. Your subsidy was $184 average per net add. $184 @ 14% for two years now costs you $240.. 2 years of subscription nets you $232 dollars at stated ARPU levels. So you can barely recapture you subsidy in 2 years. Let alone the other metrics that make up CPGA. PCSTEL