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

To: i-node who wrote (397)	11/25/2002 11:05:59 AM
From: pcstel	Read Replies (2) \| Respond to of 3386

You are wrong about this; the fact that you lose money on initial subscriptions may be immaterial so long as you have the financial backing you need. Oh! I am wrong about a lot of things. So being wrong about this would not be a novel concept. However! The financial backing you need may find it material that you lose money on every new (initial) subscriber. And I don't think the subsidy is going to decrease to a large degree anytime soon. The Economics of Scale of their radio receivers is not there! Now if you were pumping out these things by the millions, then you may have some Scale to the production. But production in the couple of hundred thousand units is not going to scale to the degree that is required to affect subsidies to a large degree. The other problem is as soon as forward visibility on funding becomes an issue. Your manufactures start decreasing production, and start to demand payment of payables. Not only does GM start to look for security and limit their exposure, everyone else starts to try and limit their exposure as well. However, you seem to be unaware that per-subscriber costs have ALREADY declined from that level, in that the subsidies on the SkyFi are substantially less than those required ont he Sony, Alpine & Pioneer units. Further, of the anticipated sub growth of 150,000 during the 4th quarter, 120,000 of those units are projected to be the less expensive (in terms of subsidy) SkyFi units. Yes, I am unaware of those metrics you describe. After all. I can't even find Churn metrics let alone subsidy figures on individual units and projected units purchased by the anticipated subscriber growth for the current quarter. Even at that, the per-subscriber costs that have been incurred to date appear to be such that they WILL be profitable on a net basis over a couple of years time. Really? I'd love to see your basis for this statement. After all, I showed that given current subsdies per net add and ARPU metrics provided, that the revenues required to recapture the base subsidy (plus cost of capital) of CPGA is over 2 years. Let alone the other components that comprise CPGA like Sales and Marketing Expenses which were 3X the amount of subsidies last quarter? And we haven't even added in Customer Care and Billing, Network Operations, General and Admin. This point is what the naysayers miss; after you hit breakeven, you can go to 10M, even 20M, subscribers with minute increases in operating expenses. I agree with this statement. It is the basis for subscriber models. The question is. Can you find someone to fund a subscriber model with ARPU this low, and CPGA costs this high. In hopes of making it to FCF breakeven on a operational basis, or even EBITDA positive several years out. PCSTEL