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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (3805)	4/8/1999 6:47:00 PM
From: djane	Read Replies (1) \| Respond to of 29987

3/31/99 ING report on G/L (via LOR thread) ING Barings - Satellite Research Group -------------------------------------------------------- March 31, 1999 Private Meeting with Globalstar & Loral Chairman, Bernard L. Schwartz We held a private meeting with Bernard L. Schwartz, Chairman & CEO of Loral Space & Communications and Globalstar Telecommunications Ltd. on Monday afternoon to discuss an update on Globalstar and Loral Space. NOTE TO INVESTORS We continue to be bullish on Globalstar, while we acknowledge that Iridium's troubles could continue to have a negative psychological affect on the stock price. Stock Price Weakness - a Result of the "Iridium Over-hang." Although more bad news may continue to flow out of rival Iridium, we simply DO NOT embrace the perception that Iridium represents proof of concept for Globalstar. We strongly believe that MSS pricing must be in-line, with terrestrial roaming rates. This means that satellite minutes-of-use (MOUs) must retail for $1.50 or less. Globalstar should be able to achieve this price point easily with its $0.14 per MOU wholesale breakeven point. However, Iridium is NOT Proof of Market in Our View - Globalstar is in a different business! Iridium, with its unfavorable cost capacity structure, could find it mathematic ally impossible to earn money on its satellite product at competitive rates because its wholesale breakeven point is around $1.40 per MOU- or a factor of 10X over Globalstar's. As a result, Iridium must charge between $5.00-$7.00 retail per satellite MOU to justify its costs and earn a margin. We strongly believe that there is little or no market for this product. Satellite phones already exist that retail for around $2.50 per MOU. Notes from Monday's Globalstar Meeting (GSTRF- SB) Service Providers - Some New Blood Coming. India and Brazil are the critical markets. · We believe that a few new service providers are likely to become franchisees in parts of Asia, India and Brazil. Although Schwartz would not confirm our thoughts, we believe however that Singapore Telecomm is likely to step into the Asian/Indian slot, while AirTouch is a likely candidate in our view to become a service partner in Brazil. · Since many of Globalstar service providers are telephone companies, the company believes, as do we, that Globalstar should avoid some of the pitfalls experienced by Iridium in the distribution of product. Globalstar management last week held an in-depth meeting with the company's service provider/investors - the mood was reportedly optimistic and focused on the details of service introduction. The service providers have paid for and built gateways, know their local markets, and intend to simply add Globalstar to the existing local infrastructure and menu of services provided. · Service Providers have Incentive for Success - They have skin in the game! · Globalstar partners have incentive to bring product to market for a variety of reasons, including their equity positions in the company and the ability to gain access to escrowed funds is conditioned on service rollout. New Management Appointees Expected - A Time for Positive Transition Globalstar is developing into a Telecommunications company and is looking to place an executive out of the Telecomm industry in the senior ranks of the company. This can only be viewed as a positive in our view. User Handsets: · The newest version of the actual - working Quallcom handset is smaller than working units we have seen in the past. The Qualcomm phone was just a bit larger and heavier than a cell phone, most of the additional size is due to its specialized satellite antennae. · We expect that the handset production lines will be running at 40,000 per month by the end of 1999. Ericsson is expected to ramp up production 90 days prior to service introduction. (i.e. June). · The phones are expected to cost $750 retail- eventually. Initial price is expected to be $800-$1100. Some distributors believe strong demand will enable them to mark up phones to about $1600 for early adopters. We believe, however, Gateways: · The hardware for 38 gateways have been built by Qualcomm. · Six gateways are already installed, eight are expected to be completed by service start, including. U.S., Canada, China, Korea, Italy, France, U.K., and Brazil. · Service will initially be marketed in areas where gateways are operational. Launch Campaign: · Launch schedule is proceeding according to plans. The complete 48-satellite system is expected to be placed on orbit by year's end. Service is planned to start in 3Q99 using a 32-satellite system. Subscriber Demographics · Service providers are ordering equipment at a rate of 75% for mobile service and 25% for rural fixed site telephony. The near-term focus is on mobile extension in developing countries such as Argentina, Brazil, China, and Russia. · Rural fixed telephony is not an immediate focus for Globalstar, but likely a service to be introduced within a few years. Advertising and Marketing: · Globalstar and its partners are planning a global print and broadcast campaign in advance of the initiation of service. · Tag line for campaign is expected to be "Taking Your Voice Above and Beyond." · Goal is to raise consumer awareness and brand product and service providers at a local or regional level. . · Start looking for ads around June. $600 million gap remains till service introduction - Loral standing by. Management is very much against issuing additional equity in Globalstar any time soon. Schwartz would prefer to finance through debt. The thought is that the funding gap is such a temporary issue, that the cost of borrowing the funds should be nominal in the long run. We strongly believe that Globalstar will achieve its financing requirements. Worst case scenario in our view is that Loral will act as Globalstar's bank.