Forum Archive Index - April 2004

["david.gibson" <david.gibson@k.co.nz>]

Cris,

 

Specifically,

 

Technology:

 

1)  The "physical layer" technology MUL.ASX intends deploying is not new - these systems have been available for at least 10 years.  Every major ship, aircraft and even some trucks have a terminal.

 

2)  The physics of the proposed deployment makes it unsuitable for Internet based applications.  (High latency).

 

3)  I have some concerns about the upstream technical architecture - peering arrangements.  Independent investigation leads me to question how efficient peering is to be accomplished when the basic registrations don't seem to be in place

 

Business Model:

 

1)  Optus, in Australia, is the incumbent provider.  They own their satellite network and have significant broadcast communications contracts to underwrite the expense of the network infrastructure.  MUL.ASX must carve market share out of Optus' hide.

 

2) MUL.ASX indicate that they "lease transponder space on this satellite" (NSS6) - this may even be different from "we lease a transponder".  If they had sole rights to a transponder and associated antennae footprint - on an exclusive basis - this is one thing; sounds as if they might be just clients of whoever owns the transponder.  If this is the case - you or I could compete with them tomorrow by subscribing to services from SITA or OPTUS.  Hence, there is likely no barrier to new entrants if they prove a lucrative new business model.

 

3)  Having agencies with a terminal vendor and a Microsoft reseller arrangement does not confer any special advantage.  (The point in the valuation stating because they have a Microsoft reseller arrangement and that the average revenue from the average reseller is $X million => the reseller arrangement is significantly valuable - is illogical in the extreme).

 

Let me see - they are in a cash burn situation (revenue $8mil - loss$4.5mil); market share will be at the expense of Optus who own satellite networks and manage Australia's largest gateway to the Internet (a well entrenched, well capitalised competitor); forecast revenue is $139mil - 17 times existing revenue in a developing area of their business.  No factor advantages, no barrier to new entrants, no specialist intellectual property.

 

What am I missing?

-----Original Message-----
From: sharechat-owner@sharechat.co.nz [mailto:sharechat-owner@sharechat.co.nz]On Behalf Of Cristine Kerr
Sent: Friday, 2 April 2004 13:34
To: sharechat@sharechat.co.nz
Subject: Re: Re: [sharechat] MUL - MULTIEMEDIA PROFILE AS AT MARCH 31, 2004

Hi David,

 

Sorry. I don't understand your point. It's OK to have concerns but please be specific.

 

Are you saying there is no room for competition OR

are you saying MUL's pricing strategy is not as good as Optus' OR .... ????????????

----- Original Message -----

From: david.gibson

To: sharechat@sharechat.co.nz

Sent: Friday, April 02, 2004 10:36 AM

Subject: RE: Re: [sharechat] MUL - MULTIEMEDIA PROFILE AS AT MARCH 31, 2004

Guys,

Last post on this - I promise.

As near as I can tell Optus have been running the MUL.ASX business model for
about 15 years now:

http://www.optusbusiness.com.au/00/01/0001p.asp?segment=1&category=39

If you like the business model - maybe an investment in Sing Tel is for you!


>Even if the revenue projections in the Findlay & Co report take twice as
long to achieve I think it would still be a good investment.

My concern is that the revenue projections may never be achieved.  Further,
the cost structures in achieving a defined revenue must be higher than the
entrenched competition.

What is Optus going to do?  Sit back and have a trivially capitalised
competitor eat their lunch?

I am left with the feeling that I am watching a Division preparing to "go
over the top" and charge the German machine guns in the opening battle of
the Somme.  I hope I am wrong - but my money has to be on the Germans.

Last post on this topic, from me - I promise.


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