To: i-node who wrote (509 ) 3/28/2003 3:20:52 PM From: pcstel Read Replies (1) | Respond to Actual and projected SAC, including fixed marketing costs, were computed by Merrill Lynch as of yesterday as follows: Cost of Goods sold less equipment revenue is your subsidy provided. With subsidies of 11.8 million and Net Adds of ~64K. Your subsidy component of CPGA is over $180 by itself if Churn was zero. That does not include your sales and marketing expenses that would relate to CPGA. XM CPGA is well over $400. They can tell you some sort of "powder puff" figures that relates on how they want you to consider CPGA. But, it's not how the subscriber industry at large and "profesional investors" would calculate it. Message 18272472 From a cash flow perspective, what is important is that SAC level off at some reasonable level prior to the time the satellites have to be replaced (which will require additional cash flow). TODAY, the subs from 1 year ago are paid for. So, your argument that SAC effectively prevents profitability is without reason. Message 18764429 This is clearly as I indicated you would see when we argued this six months ago; that you have a certain amount of substantial up-front costs that are better characterized as startup costs. You should also keep in mind that the average subscriber is paying 1 year in advance; thus, beginning '04, the total cost of subscriber acqusition will be covered in advance. You're obviously confused on this issue; perhaps by some other kind of business you've been involved with.
