Sorry it took so long to get these up. I was trying to find some juicy tidbits to add the the FAQ from the last week or so on the FOOL board, but I don't really feel like sitting at my computer any more today. There are a lot of good comments, too many for me to sift through. Anyone remember any good ones, let me know.
Here's Readware's comments:
Subject: Re: 2006
Date: Mon, Dec 15, 1997 2:39 AM
From: Readware
Message-id: <19971215023901.VAA00188@ladder01.news.aol.com>
Toothog-- The p/e of G* will decline probably in 2003 (nothing changeable is eternal, you know) because by that time there will be probably 5 satcom telephony systems-- Iridium, G*, ICO Global, Hughes GEO telephony (ICO is GEO also), and Alcatel (at the end of 2003)-- with Ellipso being the marginal fill-in [around 2001] (and also some by Asia Cellular, another GEO system). So that's 5 systems plus Ellipso (I do not think it will be global in scope,
its ten cents/minute claims notwithstanding), and Asia Cellular. (I am assuming Odyssey does not materialize-- it would not be on the scene till 2002, if it did, anyway). Hughes also invested 5% in ICO.
Pricing will probably start declining in 2003 (or late 2002) then, bringing more users in. P/e's will decline because while the user base expands it will take more users to provide upward revenue momentum (the marginal profit/user will be on the wane-- it will take more users to generate a dollar of sales, in other words). It does look as if the p/e expansion and then contraction of the satcom telephony providers will plot that of the ground based
cellular systems of the 1980's into the 1990s.
Subject: Re: brokers
Date: Tue, Dec 16, 1997 12:53 AM
From: Readware
Message-id: <19971216005301.TAA07382@ladder02.news.aol.com>
No-- revenues can grow, but the "quality" of revenues is what dictates the higher or lower p/e. If revenues grow because of lower pricing, the p/e for the company goes down, even if the revenues are growing at a very high rate. At that point "margins" are discussed, and there should be "pressure" on profit margins (doesn't mean profits go down, means simply it takes more revenues to generate the same amount of profit)-- and pressure on
profit margins compresses the p/e.
Some one asked about Asia and G* revenues. I do not in any way know G*'s internal projections country by country for their business revenues. However, in two published models I have seen Japan, Korea, and S.E. Asia figure for 11% of total global mobile satcom revenues projected for 2002. That does not mean 11% for G*-- it is for total global satcom mobile revenues. China figures for 8% of Iridium World, and 8.5% for G* (see their annual
reports or prospectuses). I have not seen any % numbers for 1999 or 2000. A good source for shareholders on these numbers would probably be to phone AirTouch-- they are the world's largest reseller (reseller, not manufacturer) of mobile cellular. They can probably give estimates for 1999 and 2000, if anyone could.
Subject: Re: Globalstar free cash flow
Date: Tue, Dec 16, 1997 1:00 PM
From: Readware
Message-id: <19971216125800.HAA25473@ladder01.news.aol.com>
Actually I don't know how the cash flow will be handled after payment for a second generation (I believe that is 12 more LEOs to the 54 (8 or 10 as spares) and debt paydown for the first. Aggregagate cash flow (1999-2002) looks to be $6.5 billion, some 86% of which is retained by G* (this includes taxes). Bonds have to be paid off (principal plus interest) by 2004. Bonded debt cost plus interest for the years up to 2004 looks to be $3.217 billion.
The second generation (12 LEOs in the 2.5Ghz band at a cost of $40 million/sat) looks to be about $480 million plus one launch cost.
As for your question on interest or dividends I don't know how G* management views that-- I do know that at the G* annual meeting in April 1997 the G* chairman spoke, in response to a question, favorably of dividends from cash flow for G* shareholders, but he did not elaborate.
Subject: Re: B.Schwartz prefs Gstrf
Date: Wed, Dec 17, 1997 2:23 AM
From: Readware
Message-id: <19971217022300.VAA06082@ladder02.news.aol.com>
One story for you on telephony: our general partner was in Fez, Morocco last week. He had to wait on line 2 hours to phone Los Angeles. And from his description, Fez, Morocco is not a stone age city. It has everything but---- adequate phone service. That kind of phone wait is not uncommon, I am told.
Maybe Mr. Schwartz knows what the conditions in different countires are for telephony, and why he bought more G*-- thinking of it as providing a cure.
Subject: How do you get subscriber numbers?
Date: Wed, Dec 17, 1997 5:56 PM
From: Readware
Message-id: <19971217175601.MAA10084@ladder02.news.aol.com>
A good email, and I don't know why it wasn't posted here.
In any event this is how you get subscriber number estimates for mobile satcom telephony companies (like G* and Iridium World):
1. The wireless phone provider partners for both G* and Iridium World (these are, e.g., AirTouch, Vodaphone, and the some 60 service providers for Iridium) bill their customers monthly;
2. This creates a data base of users and user cellular phone habits;
3. G* has a database of about 17 million such users, Iridium World of about 19 million such users;
4. You look at the database and see how many users above 200 billable minutes/month are not billed locally for ten days or more/month;
5. The wireless providers in their surveys of these users have found that these users are travelling, on business, in need of cellullar service but without access to their wireless provider;
6. This number out of the 36 million actual users noted above amounts to just over 9.1 million users (those using the phone 200 minutes/month and not billed for 10 days/month, and this is, as I said, because these users are in need of wireless, but not with access to it);
7. You then ask them if they would use a G* phone or Iridium phone if such a satcom phone service was available so that they would no longer be without phone service;
8. Since they need such a phone service by their own admission, and are long-paying paying customers with a history to these wireless providers, it is reasonable to assume they are telling you the truth;
9. Out of this database, you get your "expected market" of users for both Iridium and G*.
10. If 9.1 million users say they would use such a phone, you cut the number in half and come up with 4.5 million users who you believe will use the G* or Iridium phone;
11. Divide by two, and you get 2.25 million for each provider.
This database does actually exist-- you compile it by adding up all the users of these various cellular providers in the world who are associated partners with either Loral or iridium/Motorola. And then you get the actual survey question results.
This is how you get to an estimate of "business users" for satellite phones.
The individual reader of this information will have to draw his own conclusion on whether or not the estimates drawn from this database have any validity. But this is how the estimate number was reached. He or she can choose to differ, obviously. I just wanted to indicate here how the number is reached.
Subject: Re: Readware Question
Date: Wed, Dec 17, 1997 9:12 PM
From: Readware
Message-id: <19971217211201.QAA26413@ladder02.news.aol.com>
Yes, I had written that a few weeks ago in my comments on ViaSat. It has a great DAMA-- whether or not Loral would use it I can't say. Hughes and Lockheed both also have no DAMA.
Subject: Lehman Conference
Date: Wed, Dec 17, 1997 9:17 PM
From: Readware
Message-id: <19971217211701.QAA26860@ladder02.news.aol.com>
Nothing new to report from it. The brokerage rates G* a 1, and Iridium a 2-- 1 is a "buy" and 2 is a "market outperform" (whatever that means).
Lehman's model has a G* long distance phone call being about 30% cheaper than Iridium after all the mark-ups. The differential sounds too narrow-- I would think of it on average as being about 37% cheaper-- however, the number was for one call only that they chose as an example. They did not give an average differential.
Subject: TRW-ICO Global
Date: Thu, Dec 18, 1997 1:56 AM
From: Readware
Message-id: <19971218015600.UAA29694@ladder01.news.aol.com>
It looks like TRW threw the towel in on Odyssey and has decided to join up with ICO Global's satcom telephony effort.
Subject: Re: Lehman Conference
Date: Thu, Dec 18, 1997 1:34 AM
From: Readware
Message-id: <19971218013400.UAA27231@ladder01.news.aol.com>
There was nothing at the G* presentation today to make one believe anything was different today with G* except that it is closer to the February launch. G* did inform the Lehman conference that they have 5 billion billable minutes booked already by wholesalers-- yes, I said 5 billion. You can call the company yourself to verify that. That sounds like 6 or 7 months of sold out capacity on the constellation.
As for Iridium, that their system is 2/3 done, and all they need now is to get the software ready (and they have six months to do that) and a few more satellites in the air, the price of $34/share is pretty ridiculous by valuation standards. The price of 2/3 of the constellation actually in-orbit and gateways well on their way to completion is worth approxmately $2.2 billion. The full constellation, gateways, and software system brings the price to
close to $4 billion.
By the way, both G* and Iridium will be enacting massive advertising campaigns-- in all the media-- Iridium this summer, and G* in the Autumn. Iridium's cis $250 million. G*'s I don't know tha cash amount. But it will be everywhere.
I spoke to a trader today at a Wall Street firm's money desk, and he suggested that "hot money" has lost so much money in computer and networking company stocks, that they are trying to offset losses with gains-- and those gains are few and far between for them, it appears. I know nothing about computer or networking stocks-- but this is what he suggested. His opinion is just as good as yours. As for the fundamentals of G*, though, the conference was
in no way negative.
Usually when everyone believes the end has come, when all money is to be lost, that shares in all companies are to be avoided for the sake of one's own solvency--that is a sign that the dawn is just minutes away.
Subject: Re: Lehman Conference/TRW-ICO
Date: Thu, Dec 18, 1997 3:10 AM
From: Readware
Message-id: <19971218031000.WAA08446@ladder01.news.aol.com>
Toothog: Conference was today. Perhaps some of the selling was due to the announcement of TRW-ICO that I oosted before. It, however, removes one satcom competitor-- TRW-- from the battle for customers. I had said as early as this past June that I did not think TRW Odyssey would ever come to pass. I also said that the other day on this post.
It also frees up the CDMA band, since TRW was going to use that band for its Odyssey system.
Now TRW has joined up with ICO. They are two years behind G* and Iridium, however.
I will say the Lehman broker thought the G* subscriber numbers were conservative, but I do not know how much in-the-field research on numbers that his firm may have done.
ICO is no small banana. I said the other day I thought that would be the third satcom system for telephony. ICO has the most satellites worldwide(Comsat has the most for any one country). However, it tends to be clumsy, like all huge government related companies. It is not that quick with individual customers and their markets-- just look at their maritime phone system.
As for the launch: it is on schedule-- it was reiterated at the conference today.
You should call the company yourself from time to time, check in on launch preparedness. You have every right to, as a G* shareholder.
Subject: Re: Lehman Conference
Date: Thu, Dec 18, 1997 5:04 AM
From: Readware
Message-id: <19971218050400.AAA21660@ladder01.news.aol.com>
It is the wholesalers that were said to have bought the 5 billion minutes on the constellation. At full (48 satellites) constellation capacity that is a time of six-to-seven months (I am not sure how many beams each satellite delivers). By full would be meant that for the entire six-seven months all satellites were at full uninterrupted service 24 hours/day.
The number is large. I will be looking into it further within the next two days.
Subject: Billable minutes clarification
Date: Thu, Dec 18, 1997 7:29 PM
From: Readware
Message-id: <19971218192901.OAA09443@ladder01.news.aol.com>
The 5 billion billable minutes I mentioned the other day is a commitment from G* resellers to buy 5 billion billable minutes from G* over the life of the G* LEO constellation, That would be about 5-6 year time frame then.
Subject: Re: block trades
Date: Thu, Dec 18, 1997 10:55 PM
From: Readware
Message-id: <19971218225500.RAA28887@ladder01.news.aol.com>
Sometimes it is better to know who the buyer is...
Subject: Re: Any launch delay?
Date: Sun, Dec 21, 1997 9:46 PM
From: Readware
Message-id: <19971221214601.QAA25947@ladder01.news.aol.com>
On the G* price decline and launch delay question (which is a very good one, mthughes): Iridium has declined from intraday high to Friday's intraday low ($54 to 31 1/4) some 40% without any launch delays.
An opinion: the US equities bear market, which began when interest rates started declining in late August, has picked up momentum as every conceivable financial worldwide catastrophe is being discussed with an air of erudition and learned composure. Odd where these learned savants now being listened to with such twitching ear were in July. I read this week Barrons, almost always bearish on equities, and simply recalled how bullish their
editors were right before the stock market crash of October 1987.
The Buffet $2 billion purchase of zero coupon bonds in August should have alerted all, I suppose, to an impending rise in bond prices.
A fact: there has been no change in the G* scheduled launch of 5 February (the launch of satcoms FM1, FM2, FM3, and FM4 from pad 17a at Cape Canaveral on the Delta II launch vehicle).
I, and many others, are told of rumors almost every day now of a G* launch delay, which rumors one even with only a surface knowledge about satcom technologies would have to dismiss given the reasons being given for the delay. None show any knowledge on the speaker's part at all of how satcoms, their ground operations control centers, their space segment operations, function. Even Wall Street analysts set forth trepidations about a launch delay for
reasons (if they are the reasons they are supposed to have given) that show an unusual shortcoming in an understanding of the satellite technologies of which they they are supposed to possess at least a surface competence. One example: one analyst, I am told (this comes second-hand), claimed he heard that G* had a problem with their communication "buffers"-- there are no such things. I have no idea why something like that would be said.
The reason for the G* delay given by management was to certify TT&C's integrity-- Tracking, Telemetry, and Control. These use uplink and downlink subsystems other than those involved in the actual communications processing and transmission links of the satcom for its communication uses by a customer. You want to be certain of TT&C for all proposed satcoms in the constellation, both LEOs and GEOs.
The G* chairman on his 11 November conference call told those listening that only a few more weeks were needed to have all in order-- that G* management had thought of a late December launch in fact, but the rocket launch facilities were not available. I am told, though I cannot verify, that he said the same on either CNBC or CNN in an interview shortly after the launch delay announcement was made.
He then went out and bought some more G* stock, just as he had done shortly before the launch delay announcement. The purchases amount to $2 million, as others on this post have noted.
Mt-- you always ask very good questions, if I may say so. Perhaps you may want to keep in touch with G* on the launch readiness. All shareholders are entitled to that.
As regards the prices of G* and LOR today-- it appears to me, for my opinion, that we are in a bear market which brings with it a "lemming behavior" egress from common stock, and which has hit both G* and LOR in their prices. I can't make short-term calls, but that is what I think has happened, and accounts for the G* price drop. |
