[nukkad] Terror Infuses Fresh Life Into Satellite Phones

[Goyal Nitin <>]

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Tip of the day:  "Heat not a furnace for your foe so hot that it 
do singe yourself." William Shakespeare, King Henry VIII, Act 1, scene 1
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http://special.northernlight.com/wireless/infuses.htm

Terror Infuses Fresh Life Into Satellite


Story Filed: Friday, October 12, 2001 9:20 AM EST 

New York, Oct 12, 2001 (123Jump via COMTEX) -- Ailing satellite telephony
providers received a boost
last month when terrestrial wireline and wireless systems failed in New York
and Washington in the wake of
the September 11 terror attacks. 

As the United States goes into a global war against terrorists, Iridium
Satellite and Globalstar
Telecommunications (GSTRF) are enjoying a growing demand for their handheld
satellite phones. Will this
stabilise the companies' shaken financials? 

Fresh Air For Satellite Voice 

On September 11, many users found out that satellite phones surpass
traditional fixed and mobile phones
when it comes to reliability amid unexpected, sweeping disasters. The
terrorist attacks in New York badly
hit Verizon's (VZ) fixed network in lower Manhattan, that comprises 500,000
phone lines and more than 6
million dedicated circuits. The giant telco reported some 200,000 voice
access lines, 100,000 business
lines and 3.6 million data circuits went out of order due to the strikes. 

Cell phones were also unusable in the calamity area as the major carriers
had lost crucial equipment. In
Manhattan, where there are cell sites every two to three blocks, Verizon
Wireless lost 11 cellular towers,
Sprint's (PCS) unit also suffered as four of its cell sites went out of
service. 

Furthermore, a flooding in Verizon's key facility disrupted the services of
several wireless carriers,
including AT&T Wireless (AWE). In the places where wireline and cellular
networks were still operational,
they were overwhelmed by traffic as everyone wanted to check on his loved
ones. 

In those terrible days, satellite phones of Iridium and Globalstar proved
they were the best suited to cope
with catastrophic circumstances. As many military and rescue workers
witnessed, satellite provided
reliable communications in the critical moments and places where wireline
and wireless phones were
ineffective. 

As a result of the events-driven demand, low-orbit satellite phone providers
saw a substantial increase in
both sales and traffic. Iridium Satellite said phone usage was up 25% in the
week following the events and
new additions were four times the usual rate. Last year the company went
through bankruptcy to see its $5
billion satellite network sold for a mere $25 million to a group led by Dan
Colussy, a former Pan Am
executive. 

Iridium, which has a $72 million service contract with the US Department of
Defense, delivered 1,200
handsets to Manhattan rescue workers and 50 handsets to the Pentagon shortly
after the attacks. The
satellite phone company also equipped a dozen control vehicles with
"stationary rack" units for use by New
York recovery squads. 

Globalstar, the other satellite venture operating 48-plus-4-spare satellite
low-earth-orbit systems, also
reported quadrupled sales in the days following the attacks. The company,
which added about 3400 new
subscribers worldwide in July, sold several hundred phones in New York
alone, in a week. The satellite
phone provider also saw a surge in phone usage and a continuous increase in
demand worldwide. 

An announcement from Stratos Global, a reseller of both Iridium and
Globalstar, confirmed the boost in
satellite phone sales. The Toronto-based vendor said its sales skyrocketed
nearly 400% in the week after
the attacks. Iridium and Globalstar did not, however, overplay on commercial
opportunities, and they made
donations of handsets and airtime to aid the rescue operations. 

New Niche Markets For Satellites 

Satellite low-earth-orbit systems possess an indisputable advantage of
reaching remote locations. There
will always be parts of the country and the rest of the world that can be
served cost-effectively only through
satellites. 

Yet, high-profile players such as Iridium and Globalstar have overestimated
the demand for their
premium-priced satellite services in the face of the plunging cost of
ground-based wireless services.
Satellite voice has failed to match terrestrial wireless price levels, and
it is currently holding niche market
segments where its higher price is justified. Satellite telcos have found a
stable customer base primarily in
defense, mining and transportation industries. 

After it emerged from bankruptcy, Iridium managed to get a two-year contract
to provide up to 20,000
handsets and unlimited service for the U.S. government. On the other hand,
Globalstar hopes to capitalize
on high-potential markets such as Saudi Arabia, Brazil and Russia. Both
companies are targeting special
customer segments such as military, marine and oil rig operators. 

The September 11 events not only provided a one-time boost, but they also
seem to have opened up a line
of new market segments for satellite telecoms. As the global war against
terrorism has just begun and
major actions are taking place in areas where there is no terrestrial
infrastructure available, intelligence
agents, reporters, humanitarian activists and businessmen are poised to
become heavy satellite-phone
users. Globalstar revealed it has already been getting queries from security
agencies, television networks
and corporations in the aftermath of the attacks. 

Prompted by aircraft hijacking/crash problems Iridium recently offered a
service aimed at replacing or
supplementing flight data recorders - currently in use to record flight data
and crew conversations. The
recorders, also known as black boxes play a key part in the investigations
of a hijack or crash of an
aircraft. 

Based on its voice and data transmission capability, Iridium's satellite
network can relay the voice and
data information from the aircraft via satellite to the flight control
center on the ground in real time and allow
them to be saved securely on storage devices. The system could be extremely
valuable in circumstances
such as the hijack of four planes on Sept. 11. In addition it would allow
federal authorities or airline officials
on the ground to assist better in an in-flight emergency. 

The Federal Aviation Administration (FAA), is yet to take a decision on
Iridium's offer. While officials
agreed on the solution's merits they also point out some negative factors
such as the cost, space
requirements or the impact on cockpit operations. Nevertheless, Iridium's
proposal demonstrates once
again the strongest selling points of satellite low-orbit telecom systems. 

Long Term Impact? 

It now remains to be seen whether the attacks-spurred surge in demand is
enough to reenergize the
satellite phone industry. Both Iridium and Globalstar have said the boom in
sales and phone usage would
improve their financial standing. 

Due to the terms of its contract with U.S. federal authorities, Iridium will
not get any extra revenue directly,
from the events-related activities. Being a private company, it has not
revealed a full picture of its
financials. Yet, even before the rise in demand Iridium had stated it
expected to turn in a profit next year. 

With a global footprint, streamlined cost structure and flat-rate pricing,
Iridium may take advantage of the
shot in the arm the events gave it, to find a path to profitability. The
bargain price of $25 million paid for a
$5 billion satellite network is a solid base for Colussy and his partners,
but they also have to achieve lower
costs of operations. The company had spent a massive $10 million every month
under its previous
management for operations. 

Globalstar has shown a more conservative stance on possible gains due to the
war against terrorists.
While the company asserted that every minute of phone usage improves its
cash position, it remains
cautious about the long-term impact the events-related boost could give to
its business. 

Tough Times for Globalstar 

Currently, Globalstar is facing bankruptcy burdened by heavy debt and high
operating costs. The high-flying
satellite venture has failed to translate the technical superiority of its
system into fast subscriber growth and
a significant revenue stream. While Globalstar showed continuous steady
progress in the first two quarters
of 2001, its growth rate in terms of both subscribers and usage has remained
unacceptably slow. 

Globalstar's mobile subscribers was estimated at 51,600 at the end of Q2
2001. This represented a nearly
30% growth over the previous quarter, but the company is still too far from
its "break-even" point. It is
estimated that Globalstar needs about 1.5 million customers to fully cover
service costs and manage its
debt. 

In addition, the operator recorded a total of 5.4 million minutes of mobile
and fixed billable service for the
quarter, or a monthly average of 35 minutes per subscriber. Industry
analysts estimate Globalstar needs to
reach at least 100 monthly minutes per subscriber to start making any money.


The company reported a second-quarter net loss of $145 million on net
revenue of just $1.8 million. With
about $98 million in cash as of July 2001, Globalstar was able to continue
operations only because it has
suspended principal and interest payments on all of its funded debt since
January. 

Globalstar's shares have lost most of their value since last year, and in
late May, the company was delisted
from the Nasdaq National Market. The stock has been trading for months close
to its 52-week low of 20
cents on the Nasdaq SmallCap market, down from 14.18 in September, 2000. 


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