4/22/99 G* Conference Call w/Crossman (JP Morgan) (via LOR thread)
Talk : Communications : Loral Space & Communications
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To: RMiethe (5732 )
From: RMiethe
Thursday, Apr 22 1999 4:31PM ET
Reply # of 5852
Very significant conference call today with BLS and the Globalstar telcos on hand
(TSAM, Elsacom, AirTouch). Hosted by Marc Crossman of J.P. Morgan, it put a good
cast on how Globalstar is not Iridium. While the majority of folks here know the
differences, the more than one hour of Q&A between particpants on the buyside and
the telco reps themselves is a positive step forward for giving Globalstar a wider contact
with the Street, and for lessening the perception of it being not "institution friendly".
I don't have the time to go through all the steps of the discussions, but do suggest that
readers here can probably get what they need from a JP Morgan rep.
For my own opinion, it's good that the telco reps were frank and very explaining in what
they are doing, what they see, and in answering questions, e.g., about Gilat's supposed
$.10/minute call. I have known for sometime that that was backwater, but it was good
to have the telco providers show the ranges for the Gilat system was from $.25 to
$1/minute with latency and echo as part of the phone call.
Let's have a good launch tonight, and one for Telstar 7 in June.
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To: Rocket Scientist (5831 )
From: Valueman
Thursday, Apr 22 1999 5:50PM ET
Reply # of 5852
I don't know the replay, but here are some highlights:
Schwartz--original estimates from both outside research and internal work said 30
million potential market, those that want service, son't have service, can't get service in a
reasonable time, and can pay. They now estimate that to be 40 million. Partners service
100 million cell subs right now. Testing going good on authorization, billing, roaming,
handoffs, etc. There are issues that need to be addressed of course, but nothing to slow
rollout. Software for ground system and handsets working well. He expects the $600
million to be the last money to be raised publicly. Although they will need more $$$ for
general purposes after the commercial start, they have ways around that like vendor
financing(I personally think this is a load of crap, but what the hell--ask the employees if
they will paycheck finance!)
TESAM--building and testing 6 gateways--France, Argentina, Venezuela, Peru,
Columbia, Turkey, distributing service in 31 countries, not as TESAM, but through 2 to
8 local service providers/telcos in each country. Expect little roaming, very little
international traffic, with most in country, and 5-8% regional. They have been validating
market projections with the locals since 1995. Already have an ad budget, will advertise
in each area as it is ready for service, and closely integrate it with G*. In France, 1 to
2% of cellular base will use G*. They have bought 60,000 terminals. They will be short
on phones on day1(bummer).
I'll post more highlights later-gotta run.
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Talk : Communications : Loral Space & Communications
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To: RMiethe (5830 )
From: RMiethe
Thursday, Apr 22 1999 8:52PM ET
Reply # of 5852
There is no playback recording on today's call.
I'll add a few more notes to what Valueman said:
Mike Kerr, GM of AirTouch Globalstar indicated that Cellstar will be the distributor
here and in Brazil for the Qualcom/AirTouch phone (Globalstar tri-mode). The
important point, and let me quite Mr. Kerr: "We have it that if you call for a Globalstar
phone today, you'll get it tomorrow". Cellstar has outlets throughout the US, and they
will be able to deliver the phones effectively to dealerships throughout the US. Same in
Canada. Mr. Kerr sees 1-2% of their base in North America as Globalstar customers.
That works out, if 2%, to about 350,000 North American users (Canada, Mexico
included). I took the base from Air Touch's annual last year. Also said that a technology
show last week, the Globalstar product made a presentation and was received by some
with the comment "I like the price, I need the phone now".
Jean Claude Legarde (spelling?) Director General of TSAM: very smart, very
impressive, no-nonsense. Indicated they are in 30 some countries already as middleman
between Globalstar and their (TSAM's) telco distributors. Emphasized that Globalstar is
not a global roaming system for the world traveller, but is meant for areas that wire and
fiber can't reach. He did say that TSAM has been very conservative in its estimates of
usage, and these estimates of Globalstar users are growing. Also stated that fixed
services are strong in various Latin American countries, and also pointed out that mobile
Globalstar usage can also apply to agricultural industry users fixed in place. On
simplicity of billing, he pointed out that the gateway where the phone calls are routed will
be the only billing source. He did indicate that TSAM would not offer service in any
area till phones were at their distributors for customer pick-up. Spoke about various
rural situations and expressed conviction that Globalstar was in demand there, from their
own reports of distributor partners.
Luigi Gasparolo (spelling?)of Elsacom-- a no nonsense presentation, reiterated most of
TSAM's comments. They are in 28 countries from the Balkans down to the
Mediterrenean shipping lanes.
All in all, Air Touch TSAM and Elsa represent some 100 million users billed monthly by
these three giants or their subsidiaries, and the three representatives saw no real issue
with gaining a percentage of those users that BLS has mentioned.
Globalstar and the partners are finished advertising plans and a one-brand logo for
Globalstar phones, and will spend $40 million on advertising, as opposed to iridium's
$180 million.
One individual, beyond the Gilat note I posted before, wanted to know why Air Touch
bought no more shares of Globalstar last year when ATI indicated they wanted to in the
Soros purchase. BLS answered the question, a good one in my view, that while
Globalstar's current price is $5-7 lower now than then, Globalstar really now has not
offered a plan for the partners to buy more shares at current levels (this includes the past
convertible issue two months ago) and has asked the partners not to make purchases of
Globalstar in the open market. Air Touch, he said, reserved the money to be used for an
increase in Globalstar back in July for their gateway productions (5) in the US, as I
understood the final part of his reply.
A lot of sharp questions were posed, no holds barred really, and I think the three reps
did come through as frank and explanatory. They neither hyped nor understated what
are the issues. On Iridium, they noted only how they believe they have situated their
approach to avoid Iridium's problems, and had no other comments on Iridium. Since
there is no one major center for distribution, but all local telcos throughout each
country/city, the problems Iridium had in that regard will not be one for Globalstar.
Looks like 300,000 phones have been ordered already, with 40,000 month in
production starting Jan 2000. I think 30,000 phones are ready for August delivery, and
120,000 by year end.
BLS, in a question on cellular buildout ten years from now, and the cost for Globalstar
to have new sats by then, indicated that 14% of Globalstar revs (at 12 billion
minutes/year) fund the system operations (including interest and amortization etc.) Net
free cash can be used to renew the system when the current sats go down. He also
indicated, in a further reply to the question on whether cellular will outmode satellite
phones, that some 1.5 billion people will never be reached by wire or fiber, that only 5
systems can by world licensing agreement, use the spectrum for satellite mobile
telephony, the 5 systems combined can serve some 17 million people while they believe
40 million users are a base for mobile sat telephony clients.
I think that about covers it.
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