Satellite Industry: Financing and Entrepreneurship in the Aftermath of Sept. 11

1
Satellite Industry Financing and
Entrepreneurshipin the Aftermath of Sept. 11

• November 28, 2001
• John F. Dealy
• The Dealy Strategy Group LLC

2
Satellite Company Stock Price Changes Since
September 11, 2001
3
Despite Uncertain Economic Times, Some Favorable
Market Results

• DirecTV Added 425,000 Net New Subscribers in
  3Q2001 -- Bear Stearns Had Predicted 235K and
  Merrill Lynch Projected 100K Net Adds -- DirecTV
  had 10.3M DTH Subscribers as of 9/30/01
• EchoStar Attracted 360,000 Net New Subscribers in
  3Q2001, Resulting in 6.43M Total Subscribers as
  of 9/30/01 (a 35 Increase Over 9/30/00) -- Bear
  Stearns Had Projected 380K and Merrill Lynch
  Estimated 350K Net Adds
• Globalstar Experienced a 14 Increase in
  Subscribers to 58,600 and 37 Increase in
  Minutes of Use to 7.4M in 3Q2001 Ending
  9/30/01 Compared to 2Q2001

4
New/Revived Business Opportunities

• Tragedies of Sept. 11 Increased the Demand for
  Some Ongoing Initiatives and Created New
  Opportunities in the Satellite Field
• Unique Capabilities of Satellites to Provide
  Ubiquitous Mobile Telephony Services (Not Reliant
  on Terrestrial Infrastructure) (i.e., Iridium
  Globalstar) and to Broadcast News/Information to
  Mobile Users (i.e., XM Radio) Attract Increased
  Demand for Services
• Satellites Ability to Provide Real-time
  Surveillance, Remote Sensing, and Two-way
  Communications from Airliners will Receive
  Greater Attention -- Including Government Funding
  and Entrepreneurial Focus

5
Adapting to the Situation

• Examine Current (and Planned) Business Strategy
  to Meet These Emerging Needs
• Ubiquitous Mobile Access to News/Information
  (Local/National/International) -- Keeping People
  Up-to-Date on Breaking News
• Ubiquitous Mobile Communication -- Keeping People
  in Touch with Each Other
• Tracking, Sensing/Imagery, and Other Security
  Measures -- Improving Actual and Perceived
  Security -- Particularly of Travelers

6
Difficult Capital Markets

• Technology Companies Inability to Access Readily
  the Public Capital Markets (e.g., IPOs, Secondary
  Offerings -- Due to Depressed Stock Prices) Means
  They Must Be More Creative in Conserving Funds
  and Accessing Private Capital
• Strategies Include Accounts Payable Deferrals/New
  Business Commitments, Attaching Warrants to
  Private Debt Financings, Postponing and
  Re-phasing Service Roll-outs
• Undervalued Stock an Asset -- If Properly
  Deployed and Leveraged

7
Recent Financing Deals

• Planned EchoStar/Hughes Merger -- Brings
  Economies of Scale to DTH Market, but Confuses
  Outlook for Planned Two-way Internet Access
  Providers -- i.e., Spaceway, WildBlue, Starband
  
• XM Boeing Funding (66M) -- Demonstrates Role
  of Strategic Vendors in Providing Capital Support
• WSNet (Multiple Dwelling Satellite TV) Funding
  (30M) -- from Existing Shareholder Confirms
  Importance of Demonstrated Market Demand -- e.g.,
  750K Subscribers
• Shiron Satellite Communications (User Terminals)
  -- Bridge Loan (30M) from Existing Shareholders
  -- Followed Abandonment of a Series C Equity
  Offering

8
Restructurings

• In and Out of Chapter 11
• Repricing of Announced Deals

9
Bottom Line

• Money Available -- Takes Ingenuity and Realistic
  Pricing to Obtain -- Look At Home First
• Markets have Rebounded To Date -- But Need
  Satellite Success Stories to Attract Public/High
  Yield Capital to the Sector
• Venture Capital Still There -- Looking for
  Smaller Sized Projects, Shorter Time to Revenue
  Generation, and Solid Product/Service Niches --
  Willing to Trade Higher Potential Returns for
  Lower Risk

10
John F. Dealy, President The Dealy Strategy
Group LLC 2300 N Street, NW Washington, DC
20037 phone [phone] fax [phone] john.de
aly_at_dealystrategy.com www.dealystrategy.com