Back to the future?

Posted in Financials, Iridium, Operators, Spectrum, TerreStar at 3:11 pm by timfarrar

Last week I attended the Iridium Partner Conference held in (a rather wet) Phoenix, AZ at the Hyatt Regency Scottsdale. Ironically that was the very same hotel where the first demonstrations of the Iridium phone were made back in May 1998. 2010 is certainly shaping up to be just as significant for the MSS industry as was 1998, with the launch of the new TerreStar Genus phone just a few months away. We will then find out whether the new entrants are going to be able to mount a credible challenge to existing MSS operators, or whether they will experience an underwhelming customer response as Iridium and Globalstar did a decade ago. Our new profile of TerreStar has just been released, and discusses all these issues, including five year subscriber and revenue forecasts, along with an assessment of the value that might be realizable for ATC spectrum in the next few years.

At the conference itself, Iridium clarified that they intend to contract for the new NEXT constellation in mid-2010, and to ensure that they are fully funded at the same time. That would presumably involve a combination of bank loans guaranteed by export credit agencies and additional capital markets funding, totaling something between $1B and $1.2B – we would guess that they might need to raise of order $200M to $300M in high yield debt or convertible bonds in addition to the guaranteed bank loans. Interestingly, Iridium now regards advance funding from hosted payloads as “icing on the cake”, rather than as an essential component of its NEXT funding, allowing it more flexibility to consider projects which would provide an ongoing stream of revenues as opposed to just an upfront data purchase. Clearly the expectation is that by taking a “big bang” approach to its funding, Iridium will not only be able to persuade their distribution partners and customers that they will be around for the foreseeable future, but also that Iridium will close some of the EBITDA multiple discount on which their shares are trading compared to Inmarsat.


Interesting times for TerreStar…

Posted in Financials, Handheld, Operators, Regulatory, Spectrum, TerreStar at 4:39 pm by timfarrar

There’s a lot happening with TerreStar at the moment, as the company tries to complete the exchange offer to extend the maturity of its preferred shares. The deadline has now been pushed back until early February, while in a separate development, Echostar’s representatives have resigned from TerreStar’s board, effective December 31, 2009.

In the meantime, all eyes will be on the FCC, which needs to approve TerreStar’s ATC application (made back in the summer of 2007) before January 20, 2010 to prevent TerreStar defaulting on its loan agreement for the second satellite, which TerreStar’s deputy GC described in an October 2009 submission to the FCC as an event that “would likely be catastrophic to the company”. TerreStar will certainly be hoping that the FCC’s indications that it is taking another look at MSS allocations as one of the options to free up more spectrum for wireless broadband will not cause them to delay approval of TerreStar’s ATC application beyond this deadline.

Jan 13 update: TerreStar has just received its ATC license, and can look forward to launching commercial service in the “first or second quarter” of 2010 (per its recent statement to Satellite News) once the current testing phase is complete and the company has completed its Preferred Stock Exchange Offer and raised additional funding.

We’re planning to publish our new profile of TerreStar later this month, including forecasts of the market opportunity for both MSS and ATC services, and are also looking forward to trying out the TerreStar Genus phone when its demonstrated at the SATELLITE 2010 show in Washington DC in March. Its going to be fascinating to see whether TerreStar can succeed where others have failed in creating mass market demand for two-way MSS.