03.05.11

Genus, we hardly knew ye

Posted in Handheld, Operators, Services, Spectrum, TerreStar at 4:11 pm by timfarrar

TerreStar has finally admitted the obvious, and moved to reject its development and supply agreements with Elektrobit, asserting that “any benefit derived from the Agreement is insufficient compared to the relative burden because the Debtors no longer require the services provided under the Agreements”. TerreStar also asserts that “the Debtors do not believe that rejection of the Agreements will affect the TSN Debtors’ enterprise value…nor the TSN Debtors’ current efforts to market the TSN Debtors’ assets”.

This comes as something of a surprise because TerreStar had based its original plan for emergence from bankruptcy upon trying to sell the Genus phone on an ongoing basis, projecting that it would capture 41K subscribers by the end of 2011 and 156K subscribers by the end of 2014, which I noted at the time was a laughable idea. However, at least it shows that the company is now facing reality, given that only a few hundred phones have been sold and reviews of the Genus continue to be mediocre at best.

What I find most astonishing is that we got into this position in the first place, and people thought it was worth spending so much money simply to repeat the lessons of 1999, and prove once again that there simply isn’t “vast global demand” that will “only grow larger” for hybrid satellite-cellular phones. Investors in MSS spectrum assets have now gone through two business plans that turned out to be misguided, firstly that they could quickly flip the spectrum to major wireless carriers before they had even finished building their satellites, and secondly that they could utilize satellite roaming to keep these businesses afloat until demand for the underlying spectrum did emerge. Let’s hope that the current plan, to actually build out a terrestrial network and offer service, works out better than the last two attempts.

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