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To: Yogi - Paul who wrote (1460)	2/23/1999 3:07:00 AM
From: LK2	Read Replies (1) \| Respond to of 2025

Questions about Iridium growth cited as possible cause for sharp slide in stock price For Personal Use Only >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> msnbc.com Iridium may not hit growth targets Wall Street worries over terms of bank covenants By David Bowermaster MSNBC Feb. 22 — There is widespread concern on Wall Street that Iridium World Communications Ltd., the satellite phone and paging service, will not meet minimum revenue and subscriber targets outlined in bank covenants that the company agreed to in December. The worries have knocked Iridium shares down over 20 percent, to a 52-week low of $24 3/16, over the past two trading days. RUMORS THAT IRIDIUM might break the covenants first hit Wall Street Friday, according to a research alert issued today by Armand Musey, a satellite analyst with C.E. Unterberg, Towbin. Under the agreements reached in December, Iridium must have $30 million of accrued revenue and 27,000 subscribers by the end of the first quarter 1999. "What the market is saying is this company is not going to make their targets," said one satellite analyst, speaking on background. He also said that Iridium should be able to renegotiate the covenants if the milestones are missed. "The banks have zero interest in throwing Iridium into default," the analyst said. At the end of 1998, Iridium had accrued revenue of $186,000 and 3,000 subscribers. Iridium launched its service commercially on November 1, 1998. Iridium agreed to the covenants as part of a $1.55 billion bank facility arranged by Chase Securities Inc. and Barclays Capital, a division of Barclays Bank PLC. Motorola, which built Iridium's satellites and gave birth to the company, guaranteed $750 million of the total. Motorola also provided $400 million of additional vendor financing to Iridium. Iridium and Motorola did not immediately return calls seeking comment. Iridium's chief financial officer, Roy Grant, told at least one analyst on Friday that the company is not in negotiations with the banks to change the terms of the covenants. Grant did not predict, however, whether or not the covenants would be met. Iridium stock is now off more than 64 percent from its 52-week high of $72 per share, which it reached last May after successfully launching its 66-satellite communications network. Since then, Iridium has been hurt by a later than expected product launch (originally scheduled for September 1998); difficulties getting handsets to customers; and reports of satellite failures, even though such failures were anticipated by Iridium's original network plans. Iridium addressed at least one of those problems last week when it announced that handsets manufactured by Kyocera Corp. of Japan are finally ready to ship. Motorola and Kyocera are the sole suppliers of Iridium handsets, so customers in many important markets — including Japan — have been unable to get handsets until now. Despite the recent difficulties, John Coates of Salomon Smith Barney says he still has a long-term buy on Iridium — and the entire satellite communications sector. "The market is penalizing Iridium without giving them a chance to prove that demand exists" for their service, says Coates. Musey of C.E. Unterberg, Towbin also maintains a buy on Iridium, though he expects demand will not rise as fast as the company expects. "We continue to expect 210,000 subscribers by year-end 1999 vs. company goal of 500,000 to 600,000 subscribers," Musey said Monday. MSNBC © 1999 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<