09.16.08
Posted in Financials, Globalstar at 8:08 am by timfarrar
Globalstar faces its next quarterly milestone payment to the satellite construction escrow account with Thales Alenia Space at the end of September. The company has admitted that sooner or later it will need to raise more money to complete its second generation satellite constellation – it has previously indicated that $250M+ will be needed, though some of this could be offset by cashflows from operations if the SPOT product really takes off. However, in the short term, as we’ve noted previously, SPOT isn’t producing cash. Excluding the money already in the escrow account, Globalstar had available liquidity of $75M at the end of June and expected payments to Thales Alenia of EUR146M over the 12 months to June 2009. The Euro/dollar exchange rate has fallen by about 10% since then, cutting the value of this EUR146M to only $208M in dollar terms, compared to $231M at the end of June. As a result the payment which Globalstar has to make into the escrow account at the end of September may be closer to $50M than the $60M+ it could have been if the exchange rate had remained constant. The original sum would have come close to using up Globalstar’s remaining liquidity, but now it looks like Globalstar may have another 3 months to raise additional funds.
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09.08.08
Posted in Financials, General at 8:23 pm by timfarrar
This isn’t really an MSS topic, but having worked for several years in the late 1990s on the Teledesic project and with fond memories of evaluating the market for broadband in developing countries, I thought the emergence of O3b Networks with reportedly $60M of investment from Liberty Global, Google and others, merited a comment.
Some of the commentaries appear to conflate O3b’s satellite backhaul business plan with the satellite access services offered by Wildblue and HughesNet in the US. O3b can’t offer services to the end user (except the largest corporates) since customers will require expensive terminals which track their Low Earth Orbit satellites. As Teledesic found out in the late 1990s (and as is still true today) you either need a couple of moving dishes (to ensure seamless handover) or an electronic steered antenna – both are well beyond realistic consumer prices (not to mention their installation difficulties compared to fixed geostationary terminals).
Instead O3b will offer backhaul for ISPs operating in countries without fiber links, so they can obtain connectivity to the Internet backbone. That’s a fairly well established and highly competitive market (valued at several hundred million dollars a year), with Intelsat and other FSS players competing intensively on price. Characteristically the market grows as Internet take-up and usage expands within a country, then collapses almost to zero within 12-18 months of fiber’s entry. There’s absolutely no reason for O3b to change this equation – satellite is at least two and in some cases closer to three orders of magnitude more expensive than large fiber connections for this backhaul service, and fiber continues to decline rapidly in price.
A second market is for cellular backhaul within a country, when fiber isn’t deployed outside the major cities. Again this market is somewhat transitory: terrestrial microwave links become a good option when the cellular coverage is sufficiently contiguous for daisy chaining links from one tower to another, but the satellite opportunity is longer lasting than ISP backhaul in major cities. The opportunity here for O3b will also be affected by how much more expensive its terminals are than standard VSATs, since somewhat more limited amounts of capacity are required. However, O3b’s low latency may be helpful for this voice-oriented traffic.
Thus O3b is simply a bet that quite a few countries, particularly in Africa, won’t get fiber any time soon. Even though its been (very) slow to get going, I’d rather put my money on EASSY, an African fiber project with many of the telcos in the region as signatories (as well as credible international players), which has just entered the construction phase and is hoping to be operational in 2010, well before O3b could expect to be up and running.
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