NEW YORK-It is true billions of people have never made a phone call, but that fact is worthless in determining actual demand for mobile satellite telephony services, according to Larry Alletto, senior managing director of Bear, Stearns & Co. Inc.
“Far more important are the addressable market, the competitive dynamics, the market share taken by existing services, how your (satellite) service fills an unmet need and whether provision of that service will generate incremental demand for additional service,” Alletto said.
Alletto spoke at the mid-June, “Space and Satellite Finance Conference,” sponsored by the Institute for International Research, New York.
“We’re of the view there is a tremendous market out there,” Carol Goldstein, managing director of ING Baring, said.
“The difference between [mobile satellite systems] and (wireline) broadband access is that broadband is here now. MSS has a difficult case to prove. Who needs it? Who wants to go to places without cellular phone service?”
Late last month, Allied Business Intelligence, Oyster Bay, N.Y., released a report, “Bandwidth on Demand,” supporting Goldstein’s view.
Within mobile satellite services, voice communications is the fastest growing segment, one that ABI projects will be a $10-billion market by year-end 2003.
“Iridium has put up a very impressive system, but unfortunately had to deal with being first to commercial market without the advantage of a pre-defined customer (base) that a mature market would have offered,” said Larry Swasey, vice president of communications research for ABI.
The many global and regional voice satellite systems planning commercial service introductions in the next several years will quickly find a market, Allied’s report said. However, regional geostationary systems will have the advantages of lower start-up costs and local, targeted marketing.
“Iridium’s difficulties in launching its service have raised concerns about the demand for mobile telephony services,” said Sarah L. Porter, managing director of Ascent Communications Advisors L.P., New York.
“However, most industry forecasts project that total market size at planned prices is adequate to support multiple players. Longer term, price competition may induce consolidation.”
Considering a range of forecasts, Ascent projects that by the end of 2004, there will be anywhere from a low of 7 million MSS subscribers to a high of 19 million.
Geography plays a crucial role in the destiny of mobile satellite systems, said Thomas W. Watts, vice president of global securities research for Merrill Lynch & Co. Terrestrial wireless services are clustered in urban areas, and many parts of the world have many mountains or islands or other kinds of inhospitable terrain.
The existence of incompatible wireless systems from region to region also provides an opening for MSS players, said Les B. Levi, managing director of Chase Securities.
“While there are dual- and trimode (wireless) phones, until 3G emerges five to seven years from now, there is a vast amount of open ground for mobile satellite players,” he said.
