To all,
Figured some people would want to read Readware's
response to the NY Times article today.
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Subject: Re: Complete NY Times article
Date: Mon, Mar 30, 1998 21:08 EST
From: Readware
Message-id: <1998033102083000.VAA26906@ladder01.news.aol.com>
On the New York Times article:
Globalstar's business plan, according to its President, Douglas Dwyer, sees 80% of its business coming from 16 nations (none of these companies is an LDC-- "less developed country"). (As an aside, 40% of this nation is without cellular coverage). It is not competing with local cellular companies, nor is it restricted to the American traveller. The population of the 16 countries totals over 1.7 billion people.
According to the ITU there are 50 million individuals in areas without access to fiber who can afford the monthly phone service at the Globalstar cost (100 minutes/month, $333 month). Globalstar Thailand, an area of recent sharp economic reversal, stated within the past month in a recent Bangkok daily, that it expects to be cash positive in 2000 (this is not one of the 16 countries).
Globalstar's partners have committed to 1.5 billion minutes over the life of the first constellation to Globalstar (roughly a $500 million guarantee). In this way Globalstar has diversified its risks worldwide.
As an aside, again, DDI of Japan (an Iridium, not G*, provider) has stated that it expects to be cash positive in 2000. Iridium's international phone cost, on average, is 40% higher than Globalstar's.
Two countries, two different companies, saying the same thing.
Along these lines, Iridium's Chairman, Robert Kinzie, purchased Iridium common shares in the mid $40 range some two months ago. Its president, Edward Staiano, purchased Iridium shares at $23/share and $36/share. Globalstar's chairman, Bernard Schwartz, purchased $2 million worth of G* common in the mid-$40s in November. This information is publicly available. In the case of the G* chairman, he was already adding to his equity position.
ICO Global is currently before the FCC fighting to get spectrum access for US satcom telephony service. It is presenting a 10 (or12) MEO telephony system, while Hughes, which is building ICO's MEOs, is also building its own GEO telephony system for the middle East, and Lockheed is finishing up its 3 GEO ACeS fleet for SouthEast Asia telephony.
Additionally, and probably more persuasive, is the recent $1 billion loan to Iridium, which has no revenues or earnings, is already $5.7 billion in debt, from a consortium of banks. Is a consortium of banks going to to loan $1 billion to a company that has no earnings or revenues if it does not have good grounds for believing that it will get the $1 billion back plus interest?
Can all these companies be wrong? And one analyst in Maryland be right? For the comment of Altel's Rex Power (as quoted by Steve Levine, the Times' piece author) we have the statement from Globalstar Thailand.
On the comment from Inmarsat's Ivey ("filled with amazement at the sales projections"): Inmarsat has neither the technology nor sales effort that G* has. One of Iridium's principals used to work for Inmarsat-- Ivey's comments were dismissed in a phone call referencing Ivey's comments-- for what that is worth.
On the comments from the Merrill Lynch analyst on Loral, a look at his reporting on Iridium, which all can check for themselves-- the record is public--, might be clarifying: at $54/share last year this analyst put a "neutral" (= sell) on Iridium, which went to $31 after his rating reduction. (He had originally put a "buy" on the stock at $20/share with a $225/share price objective for 2002). Iridium is now above $60. On 25 March (just last week)
this analyst changed his target price of $55 in 1997 to $82 for Iridium in 1999. When the stock was $31 in late 1997, after his rating reduction, he did not put a target of $82 on the stock for 1999. He wanted to "wait for confirmation" on developments at Iridium. He waited for the stock to go above $55, in fact, before he announced his $82/share target for 1999.
As for G*'s price decline: Is it odd that at the Dacom announcement the stock receives a number of downgrades? Qualcomm, you will recall, sold 1 million Globlstar Telecom shares at $33/share last year. Dacom is selling part of its partnerhsip interest-- it has to be killing them.
Does anyone find it peculiar that a northeastern US brokerage firm downgraded G* only 48 hours before the Dacom announcement and then comments from some at the same firm started raising questions about the first four Globalstar satellites (dark questions about their functioning properly) because of a misreading of a COMMUNICATIONS DAILY statement in the 3/27/88 edition of that daily?
The Merrill analyst, and the northeastern US brokerage comments.
The shareholder meeting on 28 April 1998 should be interesting.
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