Going up…

Posted in Handheld, Inmarsat, Maritime, Operators, Services at 10:44 am by timfarrar

2011 was a very tough year for Inmarsat, when the company struggled to grow its MSS revenues at all in the face of a shipping downturn and military pullback from Afghanistan. Now 2012 has started on an even worse note, with LightSquared defaulting on its $56.25M Feb 18 payment to Inmarsat.

In the face of this pressure, Inmarsat have adopted a somewhat surprising response to increase their revenues. Inmarsat indicated in the latter part of 2011 that maritime E&E prices would be increased from January 1, 2012 in an attempt to shore up legacy maritime revenues. This move was at least somewhat logical, as it did not affect the early adopters who would be most likely to churn to other services.

However, in early 2012 Inmarsat also announced they were withdrawing the wholesale voice price cuts made in early 2011 when they trumpeted a suggested retail price of $0.55 per minute for FleetBB and FleetPhone voice calls. I’m told that apparently these wholesale price cuts had simply been absorbed by Inmarsat’s partners, and had not led to widespread retail price declines (because Inmarsat’s maritime crew calling rates were still uncompetitive with Iridium), but they did have a major negative impact on Inmarsat’s maritime voice revenues in 2011.

Even more remarkably, this week Inmarsat have just told partners that they will be increasing the price of ISatPhone Pro handsets by about 20% and withdrawing the two year prepaid card expiry for low value cards that I criticized back in 2010. It therefore appears that Inmarsat has finally recognized (as Iridium very bravely concluded when they continued with a premium handset strategy) that there is very little churn in the MSS handheld market and this cannot be increased simply through lowering prices.

UPDATE (2/27): I’m told that Inmarsat is also increasing the monthly subscription prices for postpaid ISatPhone Pro service very substantially, and we are likely to see retail prices rise by around $15 per month (in other words what is currently a ~$200 per year service for low end customers would potentially double in price). I’ve not yet managed to confirm when this price rise will take effect. This is likely to cause quite a lot of upheaval as distributors figure out how to reposition the ISatPhone Pro once it is no longer pigeonholed as the “cheap and cheerful” satphone option.

Taken individually all of these changes therefore seem to have a rational basis, but it has to be very worrying when distributors have to go and explain to their customers that Inmarsat’s prices are being increased in numerous different areas, when historically customers’ biggest complaint about Inmarsat has always been that they get a great service but are being gouged on price. This also comes in the context of a wider telecoms sector where it is almost universally accepted that prices will go down and services will improve each year. While these changes may be sufficient to allow Inmarsat to achieve (at best very modest) positive growth in MSS revenues during 2012, they could also set up more difficult comparisons in 2013, especially if some customers opt for competitors’ services instead.

More broadly, Inmarsat need their customers to respond positively to the company, especially now that direct sales are being emphasized and when Global Xpress is poised to enter a much more crowded maritime VSAT market in a couple of years time. As a result, it will be interesting to see how views on Inmarsat develop across the MSS industry as these price changes filter through to end customers, and whether customers’ satcom choices are affected in the future.


Not very happy holidays for the MSS sector…

Posted in Aeronautical, Broadband, Globalstar, Handheld, Inmarsat, Iridium, LDR, Maritime, Operators, Orbcomm, Services, TerreStar, VSAT at 12:20 pm by timfarrar

As I remarked in an interview for the Satellite 2012 downlink newsletter yesterday, 2011 has seen a dramatic deceleration in MSS revenue growth, with wholesale service revenues now expected to grow by less than 3% in 2011, compared to the 7%-8% growth seen in each of 2008, 2009 and 2010. Yesterday we also released our latest industry report which gives ten year forecasts for MSS industry growth. In the L-band market (including Inmarsat L-band, LightSquared, Thuraya, Iridium, Globalstar and Orbcomm) we project cumulative revenue growth from 2010 to 2020 of only 4% p.a. and even when Global Xpress is added to Inmarsat’s revenues in the latter part of the decade, the overall cumulative growth rate is only increased to around 6% p.a.

This represents a striking contrast with widely quoted forecasts from Euroconsult and NSR, that the MSS market (excluding GX) will grow at 7% p.a. over the decade (Euroconsult) or 10% p.a. from 2010-15 (NSR). These optimistic forecasts seem to have achieved wide currency with analysts and bankers, who have argued (for example at the Satcon conference in October) that the MSS industry is more attractive than the FSS industry because of its much faster growth profile. One example that stands out is a JP Morgan analyst report on Inmarsat, published last Thursday, which gives an upbeat assessment of Inmarsat’s prospects and projects a target price of 800p per share (roughly double the current level). Not only does JPM expect LightSquared’s spectrum lease payments to be continued indefinitely after they file for bankruptcy (which is ludicrously unrealistic once you understand that LightSquared’s political backing has evaporated and even the FCC has basically given up on them, but may reflect the fact that JPM co-led (with UBS) the sale of LightSquared’s first lien debt earlier this year), but they expect Inmarsat’s core L-band business to resume growth at 2.5% p.a. from 2012 and Global Xpress to achieve Inmarsat’s target of $500M in annual revenues after 5 years.

Where do we differ with Euroconsult and NSR? It appears the primary source of the discrepancy is in our expectations for the maritime and aeronautical L-band markets. According to the JPM report, NSR is projecting 11% p.a. and 13% p.a. growth respectively for the maritime and aeronautical segments between 2010 and 2015. We are told that Euroconsult also takes a relatively optimistic view of the outlook for the maritime and aeronautical L-band markets. However, our expectations are that wholesale maritime and aeronautical L-band service revenues will actually decline between 2010 and 2020, as customers move to Global Xpress and other VSAT solutions. As a result, future L-band growth will have to come from land-based services, particularly low speed data and (to a much lesser extent) handheld satellite phones. That’s relatively good news for Iridium and Globalstar (as well as Orbcomm, if they can continue to gain momentum), but its still unclear whether ~8% p.a. growth in land MSS revenues will be sufficient for all of these companies to thrive in the face of what will inevitably be an ever-increasing focus by Inmarsat on this part of the MSS market.

If you are interested in our latest report, which also includes a detailed analysis of Inmarsat’s maritime market outlook and forecasts for in-flight passenger communications services, as well as discussion of the current prospects for terrestrial use of MSS spectrum, please contact us for more details about our MSS information service.


May the Force be with you…

Posted in Globalstar, Handheld, Inmarsat, Iridium, Operators, Services at 8:40 am by timfarrar

So Iridium has announced its “vision for the future of personal mobile satellite communications”, Iridium Force, including a range of new products and services. These new products and services are not exactly what was rumored last week (no commercial Netted Iridium service or standalone Bluetooth device). Instead they include the new Iridium Extreme (9575) phone, which includes integrated tracking capability and an SOS button, a new smaller 9523 voice and data module (which could potentially form the core of a standalone voice-capable device) and the AxcessPoint WiFi hotspot which provides data capability through a 9575/Extreme or 9555 phone.

It seems the aim of the AxcessPoint hotspot will be to increase usage of existing phones, via a low incremental cost (~$200) accessory, which is likely to provide a better financial return for existing service providers than a more disruptive low cost standalone device. Indeed Iridium expects to achieve a premium price for the new Extreme phone and does not see a need to lower the price of the 9555 for now (given its strong sales so far this year despite competition from the ISatPhone Pro).

If the two phones are sold (at retail) for say ~$1200 and ~$1000 then it wouldn’t surprise me if up to 80% of Iridium’s handset sales for the rest of this year are of the new Extreme phone (assuming adequate stocks are available). That would certainly be positive for Iridium’s 2011 equipment revenues, which to date have not declined compared to 2010 as the company originally expected. However, Iridium intends to keep the 9555 in production, providing it with optionality on pricing next year, once Globalstar comes back into the handheld market.

What will be really interesting is how Globalstar pitches itself, given that Inmarsat has not achieved much revenue success with the ISatPhone Pro at the low end of the market. It seems Globalstar will need to challenge Iridium and focus on the medium and high end of the handheld market in order to achieve reasonable ARPU levels. In that case, how important will a low price handset be to Globalstar (given this strategy hasn’t yet enabled the ISatPhone Pro to penetrate the high end of the market)? Will unlimited usage packages be a better strategy to pursue, or will Globalstar’s other attributes (consumer distribution channels, better data speeds, low latency and good voice quality) be sufficient to achieve a different result to Inmarsat? Whatever course Globalstar takes, Iridium’s success in the handheld market over the last 12 months means I’m not convinced that lower handset prices are as important to future revenue growth as some people previously expected.


Bits and bytes…

Posted in Financials, Handheld, Iridium, LightSquared, Operators, Regulatory, Services, Spectrum, TerreStar at 9:20 am by timfarrar

Next week on September 7, Iridium is announcing “a new force in personal communications that aims to address the growing expectation of connectivity everywhere, all the time” which is “more than the launch of a single product”. There have been a couple of rumors about what this might be, firstly a commercial version of the Netted Iridium PTT service that has been such a success with the DoD, in conjunction with the new 9575 phone (which has a convenience key that could support such functionality) or secondly a Bluetooth-enabled device (similar to inReach or SPOT Connect) that is voice and data capable and can connect to standard cellular phones (a concept that has been put forward on multiple occasions by various MSS operators, including ICO Global back in 2001 and is already possible on Inmarsat BGAN terminals). Of course there may be some third unknown possibility, but of these two options it appears that the first is a more differentiated concept and may be nearer to realization at this point in time.

This week Inside GNSS reported some interesting insights into the LightSquared/ GPS interference debate, including a meeting in Washington DC last Friday August 26, “brokered by NTIA” which “suggested that a new test period — of 90 days or more may be needed”. The article also mentioned “Guidance from the White House” which mandates that officials “cannot attack LightSquared” because “President Obama apparently sees LightSquared’s plan as a centerpiece of a wireless broadband initiative that he hopes to make part of his re-election campaign”. More information may emerge at the rescheduled September 8 hearing of the House Committee on Science, Space, and Technology, which could be especially controversial as “NTIA reportedly is refusing to release information about the effect of GPS denial of service submitted by federal agencies” (similar to the devastating FAA assessment) to the Committee chairman.

Finally, a little more clarity emerged on how the claims of TerreStar’s various creditors will be treated, after the bankruptcy judge ruled on August 19 that the first lien debtholders have a valid lien on the proceeds of TerreStar Networks’s spectrum licenses. As a result, it now appears that in the TSN bankruptcy, there may be as little as $30M-$40M of cash left for the unsecured creditors ($1111M left of distributable value after paying the DIP and PMCA loans vs secured claims of $1077M as of August 31), who have total claims of $460M (including $179M for the 6.5% Exchangeable Notes and $104M for Sprint), although of course some of these claims (including an intercompany loan of $57M from TerreStar Corporation) are being challenged and TSN has asserted quite sizeable claims in the TSC bankruptcy (which could increase the total recovery, albeit in New TSC Notes, by tens of millions of dollars). However, this certainly means that Harbinger is taking yet another hit on its TSN investments, when it was buying Exchangeable Notes at as much as 82 cents on the dollar last November and the return to unsecured creditors is estimated to be only 10 to 15 cents on the dollar.

In the TSC bankruptcy, the Plan of Reorganization that has been filed contemplates that unsecured creditors (including potentially Elektrobit and TSN) with total claims estimated at $136M will receive “New TSC Notes” with “face amount equivalent to estimated Allowed Claims” secured by the estimated $177M value of the 1.4GHz spectrum. The Preferred Stock holders ($90M of Series A held by Highland and $318.5M of Series B, the majority of which is held by Soros and Harbinger) will fund an exit facility of $6.5M and receive all of the new equity in TSC, while the 1.4GHz spectrum lease (with Harbinger/ LightSquared) will remain in place providing $2M per month of revenue for TSC and more than covering the estimated $12M annual interest expense on the New TSC Notes.


The China syndrome…

Posted in Handheld, Inmarsat, Iridium, Operators, Services at 8:41 am by timfarrar

One of the most puzzling aspects of Inmarsat’s Q2 results was the revelation that while it has now activated over 30K ISatPhone Pro handsets (as of early August), and sold at least 15K handsets to distributors during the second quarter, land voice revenue in the quarter was only $3.3M, down 17.5% on the corresponding period in 2010. While the decline in overall revenue appears to be largely due to reduced BGAN voice usage in Afghanistan, service revenues from the ISatPhone Pro still appear to be pretty minimal, presumably less than $1M in the quarter, and Inmarsat admitted that the revenue “is still lagging where we would like it to be”.

I’m told that the reason for this discrepancy is that Inmarsat has sold nearly 10,000 phones in China over the last year, which come pre-activated with a 10 minute prepaid card, valid for 2 years. That explains why Inmarsat is now claiming to have achieved a one third share of new activations, although it still appears to be trailing Iridium in overall handset sales (Iridium added 17K net new commercial voice subscribers in the second quarter).

Of course, the booked service revenue from these ISatPhone Pro sales in China is well under $1 per month, which clearly has a dramatic impact on Inmarsat’s overall handheld ARPU. As a result, if the Chinese market continues to be a major driver of sales for the ISatPhone Pro, it will make it even harder for Inmarsat to come close to gaining 10% of the handheld market in revenue terms by the end of 2012. Indeed the challenge that Inmarsat faces in “break[ing] into the heavy-spending larger customers where there is a long-established provider in place” is amply demonstrated by the fact that apparently journalists don’t even know what an ISatPhone Pro handset looks like.


No connection to reality?

Posted in Financials, Handheld, LightSquared, Operators, Regulatory, Services, Spectrum at 7:14 pm by timfarrar

What would you know? I go camping for a weekend, and suddenly we have a $20 billion network sharing “deal” between Sprint and LightSquared “to share network expansion costs and equipment, and to provide high-speed wireless service to the phone company” described in a leaked letter to “Harbinger Capital Partners hedge fund investors”. This seems like a very peculiar way to reveal such a ground-breaking deal, especially as Sprint notably declined to comment on whether or not a deal had been signed, and there is little clarity about whether this is a new deal or simply the same “accord” that was reached some time ago.

UPDATE (6/20): LightSquared’s CEO today “declined comment on whether a deal had been finalized”, after telling Bloomberg in an interview on June 10 that “if we have something to announce we will be back here”.

Regardless, the obvious question is what conditions remain to be satisfied, before Sprint actually moves forward with the buildout. As I’ve noted before, it is critical that Sprint gains sufficient security to cover its upfront costs, either from rights to LightSquared’s spectrum assets or LightSquared raising additional cash through an IPO. However, a near term IPO looks like a stretch, and it is unclear whether the second lien spectrum rights granted this week are sufficient to satisfy Sprint. Also LightSquared obviously needs to resolve the GPS interference issues, so it can actually use its spectrum. If the leaking of this deal (presumably by Harbinger) serves to plunge Sprint into the firestorm of the GPS interference debate, then it will be very interesting to see whether Sprint decides to actively support LightSquared or takes a more neutral position with the FCC and Congress.

However, all that is somewhat of an aside to the real purpose of this post. My camping trip was only 40 minutes away from my home in Silicon Valley, but in an area with absolutely no cellphone coverage. Wouldn’t it have been great to have one of LightSquared’s new dual mode satellite phones (if and when they come to market) so I could have had a connection to the real world that would have allowed me to hear about the breaking news? Unfortunately not, because when I looked up at the sky, all I could see was trees, and as with any MSS network, you need a line of sight to the satellite to be able to make or receive a call.

TerreStar’s Genus satellite phone has proven to be a complete disaster, despite the expectation that there would be vast global demand for these phones. As a result, I wonder if some of the commentators in the LightSquared proceeding really have any idea what they would be getting from the LightSquared network in rural areas (after all, a terrestrial network covering 92% of the population will leave at least 25M people relying on satellite coverage).

For example, this letter asks us to “think of Native American communities who do not even have basic cellphone service now but would with this network” and this letter notes how the “new super-fast broadband wireless network that is backed up by satellite communications…would provide our staff seamless connectivity even in extremely remote locations”. However, that’s hardly surprising when we are told how you’ll have voice connectivity and can get your e-mails “no matter where you are, if you step out of your car, in the Yellowstone National Park” (where there’s also an awful lot of trees and mountains) or “in the middle of Grand Canyon” (pretty difficult when there’s a 5000ft cliff to your south). Haven’t we heard that one somewhere before?


Why is Iridium outselling Inmarsat?

Posted in Handheld, Inmarsat, Iridium, Operators, Services at 1:50 pm by timfarrar

Last July, I suggested that although the performance of ISatPhone Pro was better than I had expected, the pricing strategy adopted by Inmarsat seemed to be mistaken and their expectations of rapid churn from Iridium were wide of the mark. Some criticized this opinion as biased, suggesting that the ISatPhone Pro would actually be “a huge hit“. Based on conversations with distributors last fall, I encountered a quite diverse set of views, with some expecting the low price of the ISatPhone Pro to open up significant new markets, and others concerned that they would not be able to make up for the lower revenues through increased volumes and (what were supposed to be) better margins.

Now that the first results are in from Q1 of this year, it appears that Inmarsat sold only 6K-7K handsets (total revenues of $3M including accessories), while Iridium sold well over twice that quantity (15K+), with handset unit sales up 39% on the previous year. These results come as quite a shock, because even though I was relatively skeptical about the potential of the ISatPhone Pro to open up new markets, I still found it hard to envisage a scenario where Iridium sold more handsets than Inmarsat this year. However, unless things turn around dramatically in the second quarter of the year (which is the key sales window for handheld MSS phones), that will very likely be the outcome for 2011 as a whole. (Note that Inmarsat did have slightly more net adds than Iridium in the quarter, ~7K as opposed to 4K-5K for Iridium, but that reflects the fact that Iridium has well over 200K commercial handheld subscribers, some of whom will inevitably terminate service each month).

Distributors now seem far more downbeat about the prospects for the ISatPhone Pro than they were even late last year, presumably because so far it doesn’t look like substantial untapped markets have emerged, and customer response to the phone itself (as opposed to the price) has not been that positive. In addition, the ARPUs being generated by those ISatPhone Pros that have been sold appear to be rather low, because Iridium seems to have been quite successful in targeting multi-unit sales and retaining its high value customers, while leaving the low end individual market largely to Inmarsat, by not reducing the headline price of the handset too much.

Will Inmarsat therefore fall short of its target of reaching 10% of the MSS handheld market after 2 years? In terms of active handsets the target remains achievable (if now somewhat more challenging), because Inmarsat needs to gain around 70K-80K handheld subscribers by the end of 2012 (compared to around 15K ISatPhone Pro users at the moment). However, it seems all but impossible for Inmarsat to generate the $30M in annual wholesale service revenues it would need to gain a 10% share of handheld MSS revenues. Indeed, unless Inmarsat does gain much greater traction amongst high end users, it is plausible that its annual wholesale service revenues from the ISatPhone Pro may be as low as $10M (and in any case are unlikely to be more than $15M) in 2012.


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.


What’s happening with TerreStar’s Genus phone?

Posted in Financials, Handheld, Operators, Spectrum, TerreStar at 11:09 am by timfarrar

TerreStar Networks has now filed its Monthly Operating Report for December, which gives details of its revenues and cost of goods sold (COGS). In December 2010, TerreStar reported total revenues of $113,479 against a total COGS of $615,155, which compares to revenues of $91,626 and COGS of $125,189 in November 2010. However, TerreStar has not stated whether it is in compliance with the terms of the DIP Agreement, which requires both the “Roam-in Revenue” and the “number of subscribers” to be no less than “85% of the amount set forth in…the Agreed Budget and accompanying projections” as of December 31, 2010. The target number of subscribers is not disclosed in the DIP Agreement, but the Agreed Budget details the Roam-in Revenue (i.e. excluding handset sales) as $89,000 for December 2010. Under the DIP Agreement, this information should have been made available to the “Administrative Agent and the Lenders” (although not necessarily disclosed publicly) within 3 business days after the end of each fiscal month.

Due to the lack of any breakdown for the December revenues in the Monthly Operating Report (and the completely inaccurate supporting comment that “Our revenue currently is derived primarily from a spectrum-leasing agreement”, when in fact it is TerreStar Corporation that has a spectrum leasing agreement with Harbinger), it is quite hard to determine whether TerreStar is meeting the covenants in the DIP Agreement. At an ARPU of $50 per month for the Genus phone as envisaged in the Blackstone business plan, then there would need to have been an average of 1780 Genus subscribers during the month to produce $89K of service revenues in December. However, my assumption is that the real ARPU for TerreStar (once AT&T’s share of the revenues is subtracted) is significantly lower than this figure, implying that potentially in excess of 5000 phones would need to have been activated by the end of December (to produce a month average subscriber base generating sufficient revenue) to meet this target.

It is hard to tell how many phones were shipped to distributors prior to November, as TerreStar has not filed a 10-Q for the third quarter of 2010 or a monthly operating report for October 2010. It is possible that no new phones and accessories have been sold to distributors, and the vast majority of reported revenues in December were “Roam-in” service revenues from AT&T. However, TerreStar reported COGS of over $615K in the month, and it would be somewhat surprising if this was all free equipment for demos, replacements, etc. (especially as we understand TerreStar did not originally intend to supply free demo phones to distributors). Notably, the Agreed Budget envisaged $321K of equipment sales during December, which far exceeds the total revenues actually generated during the month. Given the rapid expansion in “Roam-in” revenue in what was disclosed of the Agreed Budget ($10K in October, $40K in November, $89K in December) it also seems likely that the January 2011 budget target would require further substantial growth in sales, and therefore would be even more challenging to meet.

UPDATE: I’m told that no more than a few hundred Genus phones have been sold to end users (and many of these are likely to have been purchased just for an initial test of the service), so it is inconceivable that the DIP covenants related to “Roam-In” revenues and subscribers could have been met at the end of December.

FURTHER UPDATE (2/11): On February 3, TerreStar filed the third and fourth DIP amendments, confirming that the the covenants related to Roam-In Revenues (Section 6.11) and Minimum Subscribers (Section 6.12) had not been met at the end of December 2010 or January 2011.

The next question is where TerreStar goes from here with the Genus phone. Will it be able to reach agreement with suppliers such as Elektrobit to keep supporting the phone (especially when Elektrobit is owed a substantial sum of money by TerreStar)? Would any breach of the DIP conditions simply be waived, and decisions on the future of the Genus phone postponed until after the company emerges from bankruptcy? With all the uncertainty about what will happen on MSS-ATC spectrum, that would seem to be logical. However, the apparent lack of appeal for this supposedly game-changing phone also highlights why LightSquared is so keen to be granted permission for its partners to offer terrestrial-only services, and I would ultimately expect TerreStar to follow the same path.


Surely you can’t be serious?

Posted in Financials, Handheld, Inmarsat, Operators, Spectrum, TerreStar at 5:51 pm by timfarrar

TerreStar has finally filed the exhibits to its Disclosure Statement which set out more details about its Genus business plan and the valuation of its spectrum, and though I don’t think Blackstone are paying tribute to Leslie Nielsen when they respond “I am serious” (and don’t call me Shirley), their Genus business plan has caused much mirth in the MSS industry.

I’ve previously pointed out the similarities to the launch of Iridium (and ironically Blackstone were also the financial advisers to Motorola in their attempts to restructure Iridium after it filed for bankruptcy in 1999). Just as back then, it seems hard to understand how TerreStar can hope to capture 41K subscribers with an average wholesale ARPU of $50 by the end of 2011, let alone 156K subscribers with an average wholesale ARPU of $42 by the end of 2014 (almost equal to the size of the entire North American handheld MSS market today), given the reception that the Genus phone has received so far in the market, and the recent laughable attempt to sell the phone to consumers.

However, it is interesting that TerreStar has now initiated a formal sale process for its assets in an attempt to gauge their market value. This has also generated some amusing responses, but of more interest is whether this means TerreStar has reached a deal with Harbinger to avoid a fight over the “unsecured creditors’ entitlement to excess value of TerreStar-2 (after repayment of the Purchase Money Credit Agreement)” which is acknowledged in the Liquidation Analysis to be an issue of contention (and is presumable one reason why Harbinger has been buying up TerreStar Networks’ 6.5% Exchangeable Notes). Certainly, this process would be an obvious way to find out whether one or other of the European S-band licensees (Inmarsat and Solaris) really is interested in buying the TerreStar-2 ground spare, in order to meet their license obligations to the European Commission, and to see whether the $200M valuation placed on this satellite by an appraisal back in August can actually be realized in practice.

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