Six months ago Soundview Financial predicted Iridium would have 500,000 users by the end of 1999. Six months later it reduces that number to 130,000. Why cite an analyst's report as indicative of a company's prospects, especially when the swing is this great?
We do not own Iridium. We do own Globalstar and we do own Loral. Iridium is not going out of business, cellular ground systems are never going to totally meet demands for telephony because of their, as poster Drew Williams so excellently put it, "swiss cheese" faultiness in transmission. Half the southern California coastline is constantly fading in and out with cellular, and the southern California coastline has more cells per square mile than New York City. At the right price, consumers will opt for a communications system that will fill in the holes.
Iridium is a military project, as was pointed out to us long ago. One could tell that it was because of its "orbital reach" over the poles and transoceanic capacity. Its handsets were made for battlefield deployment-- they look like bricks, unlike the slimmer Globalstar version. Iridium's announcement of handset sales the other day to the military is not a good number, because Iridium is under contract to not disclose its pending military sales. Read various comments in Defense Daily or Aviation Week-- you can make a good case that the eventual number will be over 200,000 handets in the US military arsenal. It is this that Iridium has going for it, and is the reason it is not going to "vanish from the face of the earth". And I say this as a non-Iridium shareholder, and one who has no financial liability in its outcome. Over time, Iridium will probably end up with 400,000-500,000 users worldwide. Not 5 million-- did anyone ever believe they would get to that number? 500,000 will get them by, but don't look for an Iridium 2 unless the military foots the bill. My opinion, only, of course.
As for the sudden "revolution" in miniaturization of handsets and "leaps" in cellular phone technology-- sure the prices of cell calls are lower, but, as poster Drew Williams points out, the coverage is no better today than it was 5 years ago. There are miles of dead space all throughout the southwest-- miles. And in most of Canada-- don't even bother using a cellular phone. I can't speak for areas outside of Canada and the US. I'll use a phone that will provide more complete coverage if the cost is within bounds. Am I going to need absolute perfection? I know that Globalstar is not going to provide 100% coverage because it won't have enough satellites in orbit for line of sight handling. But it will certainly be better that what I have now if I can be assured that I am not going to fade in and out so often, as I do now with AirTouch. For the record, my cell phone bill with Air Touch now is $1,400/month (and that's with a lot of fade). So, I, and lots others in this area, will want to see what Globalstar has to offer. If the price is $.70/minute more than what I am paying now, I'll definitely use it (instead of the Iridium mark-up for a satellite connection) if I know by using its access to satellites overhead the annoying fade will stop almost completely.
I have been reading the Globalstar board for a good period of time, and sometimes of late think I am reading obituary columns, or watching passersby in a wake viewing a casket. Who knows how many read these SI posts? No wonder the price of Globalstar is down, if the number of readers is what is advertised by SI. I wouldn't touch the stock after reading some of these recent postings. Not that anyone here is more informed than others who neither read nor post here, nor that I am more informed either. But one does have to consider, as poster BrianH did today, that Air Touch and Vodaphone did not invest in Globalstar four years ago without having any idea where cellular would be today. These two are among the top 5 largest cellular providers in the world. They did not know what was coming down the pike when they invested in Globalstar four years ago? Me thinks not. BrianH makes a good point. They knew what was coming and invested in Globalstar still. Again, my opinion.
There is, if I can express another opinion, too much emotion it seems in the discussions here. One gets the impression that some here have leveraged their entire assets base in Iridium for example, at prices double the current. Maybe they have-- but Iridium is not going to fold. Globalstar is not going to fold either. Pricing will get Globalstar into a lot more hands, but even now the local providers for Globalstar have raised their base price for its per minute use, not reduced it. In all the discussion here on Globalstar, I have not seen any mention of that fact. A supplier does not raise his price when demand is declining. Sure there will be variances in pricing, and it will be what the market says it needs to be for the system to be maximally profitable and also consumer satisfactory. But as Globalstar is coming on stream, the base price has been upped by the regional telcos.
Globalstar, as reported in the Journal two weeks ago, also signed a contract with Schlumberger for pay phone construction, and unless Bernard Schwartz has lost his mind, Globalstar is planning on major penetration, like ICO, into India for fixed site phones, as well as in China and parts of Africa to compete with GEOsat systems being planned. ICO will be building payphone units for 500 Indian villages it was reported in one of the news reports last week, with 10,000 villages expected to be served by 2002 by the satellite providers licensed there.
I for one think that most on the board have lost focus of what was set up for Globalstar as a low cost provider of better service than cell coverage, and far better quality of transmission than lower priced GEOsat systems. Everyone seems to be watching the price which, because it is not moving, means Globalstar is dead. Voluminous articles that serve as noise in the whole debate keep popping up here as omens of the doom to come. These sorts of articles have been around for years-- I remember when we first bought AirTouch at our shop, Motorola was going to clean its clock. Everyone in the printed media said it.
It didn't happen.
I remember when we bought Qualcom (a favorite of some of the posters here I gather)-- it was not going to work. It was hype, it was exaggerating, it was outright making up the numbers. Wrong-- the pundits were repeatedly wrong on AirTouch and Qualcom. Now the pundits are writing the epitaphs of Globalstar, of Iridium. Next thing you'll see, Loral is going out of business.
Amidst all the gloom about Globalstar, there is nothing factual to confront the gloom, readers. As a large institutional shareholder of both Loral and Globalstar, and in this case Globalstar, I think poster Maurice Winn has it pretty well figured out. Ocassionally sharp of comment to those who may disagree, his understanding, from everything I have been able to read and hear, is far sharper. My point of view is that he is going to be proven right about Globalstar. To paraphrase Shakespeare (sorry I am not quoting Lincoln), "the marketing's the thing". If AirTouch and Vodaphone get the marketing right (that's 90% of the sale), and for the money they invested in Globalstar they probably want to get the marketing right, Globalstar will do just fine. Till then, the jury's out, and maybe some more balance to this board is the docket of the day till the verdict is in.
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