AMSC to Bring Mobility to America
An April 5 satellite launch will allow the Hughes-led firm to offer services never before available in the United States
American Mobile Satellite Corp. is gambling that some people are willing to pay thousands of dollars to be in constant communication with their businesses and families.
These would be the same people who coughed up $3,000 in 1986 when cellular phones were first introduced. Now, for $2,000, they would get a mobile phone that works anywhere in the United States and 200 miles off the coast.
The demand for mobility is at play here, said Brian Pemberton, president of AMSC. "Our future customers are saying, 'I need to have anytime, any place, voice and data communications,'" Pemberton said.
AMSC has been working on a business plan since 1988 that is aimed at answering this call for mobility. The company will make phones available that work even when they are out of cellular range. And after seven years of developing and planning the system, the firm is ready to launch into a new phase -- one of marketing and sales.
But AMSC's plans for revenues and profits hinge on whether its 3,300-pound satellite is successfully rocketed into space next month. If all goes well, the
Reston, Va.-based firm will become the first to provide commercial mobile communications services via satellite in the United States.
The company expects to begin offering services in September and that's none too soon for AMSC's shareholders, which include Hughes Communications Inc., Singapore Telecommunications, AT&T's McCaw Cellular Communications Inc., and Mtel Corp. Executives at AMSC, which is months behind its original business schedule and has been operating at a loss since its incorporation, are looking forward to entering into full revenue service in 1995.
copying the cellular charge
To analyze the market for its own services, AMSC looks to the successful cellular business as a guide. Mobile cellular is one of the fastest growing industries in the United States, Pemberton said. There are 25 million cellular phones installed today, just 11 years after the products were first introduced, he said.
But there are gaps in cellular coverage, thus creating a need for AMSC's service. Although 90 percent of the population is within range of cellular towers, only about half of the country's geography is covered, said Earl Galleher, AMSC's marketing director. AMSC says it will be able to fill these voids and provide mobile phone service anywhere in the United States, including Alaska, Hawaii and Puerto Rico.
Using $2,000 phones that Mitsubishi Electric Corp. and Westinghouse Electric Corp. are manufacturing and distributing, customers will use traditional cellular technology to send and receive calls when cellular towers are in sight. But when there are no cellular sites in the phone's range, it will automatically switch modes to communicate with AMSC's satellite.
Pemberton said AMSC has identified 14.5 million mobile
cellular customers whom they consider "highly probable" candidates for AMSC's service. These are mostly business people with high phone bills. "And even if only 2 percent of cellular users want pervasive coverage, that pays for the first satellite," Pemberton said.
In addition to offering services to mobile car phones, AMSC sees emerging markets in serving recreational boaters and corporate jets, said Galleher. AMSC's manufacturing partners are making different phones for each of these applications and for a few others that AMSC plans to offer.
focus on fleet management
Providing an add-on to cellular service has been a target market since 1988 when AMSC was created by the union of eight companies that had originally applied to the Federal Communications Commission for a license to provide mobile satellite service. Until recently, when the FCC doled out additional licenses, AMSC was the only company allowed to offer mobile phone and data services from space.
In January, the FCC gave licenses to three more companies, Motorola's Iridium, Loral/Qualcomm's Globalstar and TRW's Odyssey, which are proposing satellite systems that will operate from a lower orbit, but will provide similar services. AMSC will have about a three- to five-year lead time on these companies, said Pemberton. Also, because AMSC's satellite will operate from a higher plane, the geostationary orbit 23,000 miles above the Earth, it will be able to provide multipoint service more efficiently than the others, he said.
This advantage becomes important in the fleet management market that AMSC is also targeting. The trucking market has evolved, and applications for managing groups of vehicles will be key to a strong business for AMSC, Galleher said. Not only will AMSC provide fax, locational and messaging services for fleets, but it also plans to provide the first national voice dispatching service.
It's similar to how taxicabs are dispatched now, only on a larger, nationwide basis, Galleher said. From an information center, a fleet operator could talk to 10,000 of its vehicles at a time.
AMSC expects to begin rolling out all these services in September, but its business plans extend well into the next century. The company has rights to two other geostationary slots that it hopes to fill with satellites that are six times more powerful than its first bird. AMSC is also waiting for FCC approval to establish a global satellite system like TRW's Odyssey. It also hopes to provide digital audio radio, which its subsidiary American Mobile Radio Corp. is proposing.
But AMSC's immediate concentration lies with its pending satellite launch, which is probably what's caused the steady rise in AMSC's stock value the past few months. Traded on NASDAQ, it's selling for about $18 per share, up from a 52-week low of $11.50.
Net loss per common share .862.49
Cash, cash equivalents, short-term
Property under construction263,505204,742
Long-term debt (including current)81,57281,974
*Years Ended December 31
AMSC Ownership & Financial Commitments
GM Hughes Electronics
* Also have $12.4M committed from other private investors Source: AMSC