What are your operations in Venezuela since launching in 1998?
Allow me first to explain the relationship between TE.SA.M. and Globalstar. TE.SA.M is a company that is 51% owned by France Telecom and 49% owned by Alcatel. The original purpose of TE.SA.M was to develop the Globalstar services in more than 30 countries worldwide: South America, Europe, Turkey, Egypt, South Africa and now in Costa Rica. In Venezuela, the company was established in 1998. We did not launch any commercial services until September of last year. The previous years were years to obtain the licence to operate in Venezuela and build the infrastructure. We have an Earth Station. The initial investment was about $30 million. The earth station downloads the signal from the satellite and distributes the signal through different channels of telephones in Venezuela. We have been building the entire infrastructure in order began active commercial operations as efficiently as possible. We have now got everything ready to begin the growth curve of the company.
As far as your products and services are concerned, could you outline how your operations will be structured and how you plan your growth plan in Venezuela?
Basically, we offer the Globalstar service: Mobile, fixed and satellite services. It is based in areas that do not have coverage or areas that do not have any telephone services whatsoever. We have a vertical market, Venezuela has a strong oil industry- an important vertical market for us. The defence sector is important to us. I have to say that President Chaves has been a great supporter of our products in Venezuela. The President was invited to our launch. There have been times during the first part of last year where the Investors were not sure of the Presidents policy towards investment and this was the perfect opportunity to underline the clear believe that the French investors had in Venezuela. Since the launch the President has shown enthusiasm for the project and has been accessible. Today, we work closely with the military Divisions that use our system and have been thanked by many Generals for facilitating a service that creates a much more accessible communications system. Our system has become a bit of a security issue. I can say that in the last year, some of the major Drug busts that were done with the use of our system. We have been working closely with Agencies such as the DEA and local authorities. No one can clone or listen to conversations on our system. Whilst in Spain on a recent visit, the President spoke about our work so our reputation for what we provide is growing. He has really helped with our promotion. In El Salvador, we have sent phones to help with the earthquake disaster. We are now also working with local and regional governments to develop rural services. Part of our mission is to support the development of the economy of Venezuela- If you do not have a good telecommunications, you do not have an efficient economy. Venezuela has several sectors, especially in the rural areas where there is no telephone service. We are clearly aware that our service due to the price range on airtime is really not focused for the rural market. But I am lobbying with all the members of our group to obtain a more competitive rate for rural services. Finally, last month, we were approved a special rate, much lower and we presented a business plan of how to develop rural telecom systems and we are the choice to develop that. We have government support; we have the infrastructure and the ability to set up shop almost anywhere. In Venezuela there are many small towns that do not have service, these towns are not yet attractive to local telecom companies as it is not a strong investment attraction for them, as they have to invest a lot of money to give services. We do not have to invest as we have already made the investment. We feel that we are in a privileged position to develop now within the rural areas. We have presented a project to Conatel, who started the Universal telecommunications fund. The policy was established with the new Telecommunications law. The Fund requires that all telecommunications companies pay 1% of monthly revenues to the fund. The money will be used to promote and develop the sector in areas where up until now has not been any development. We introduced a special project to Conatel to use the funds for the rural development. By the mutual support of local governments and private sector, we can now at a more economical level offer service. This is being analysed now as a base document to test the fund. There still are many issues to deal with.
Are you taking a leading role in the economic development of the country? You seem incredibly involved in the sectors development and also with what seems to be full government support?
There are several companies in the development of the sector. We need to go back to each company's mission. Many see their mission on the base of the revenues for the shareholders; we believe that our mission is to help the communities of each country. With this in mind, we are focusing the development of some services in areas where other companies are not interested. Perhaps in this sense we are considered leaders in the county's development. This is part of strategy but we also have the advantage of putting a phone anywhere, the entire infrastructure is in place. All other companies would have to put cables or antennas etc.
We are seeing Central and South America as telecommunications development explodes within the sector. The big European players are growing in their presence daily. What kind of effect does this have on Globalstar to produce your projects here in relation with the competing traditional Telecommunications companies?
All the companies have entered the Latin market very aggressively as the region has the highest potential growth due to the market penetration, the mobile penetration and clearly that there are many areas that still need to be covered at this point. We are positioning ourselves to compete in these areas. As our market is in areas where there is no coverage. If you are a globalstar user today, then Telcel arrives and installs an antenna and offers you services at a more cost effective price than us, then you are going to change to the most economical price. We need to take advantage of the slow growth in areas where there is no coverage. At the same time, TE.SA.M is not specifically Globalstar. We are presenting some projects to France telecom to allow us as TE.SA.M. to optimise the investment already made here and to offer other services. We will in the short term offer services that are not strictly Globaltar. We will begin to use long distance services. We have been granted value added services license, allowing us to do Voice over IP. This would allow us to be an internet Service Provider. Part of our strategy is to diversify the services we offer.
| The theory of satellite communications is much more logical. From the person on the street, when they think of Satellite they immediately think of expensive prices, high tech- not necessarily for the average user! How is the development of Satellite technology reaching the mass market?
We are in Mobile satellite telecommunications. We are in the first stages of development. We are not feeding the mass market at this time. We focus on a market of new technology. We are not developing a new trend or culture; we are competing with the quality of the product. Satellite technology is adding a new technology. We have to demonstrate what this new technology is doing. We have to explain that this technology is the future option. Now. It is expensive; it is for the A-B market niche. It will evolve as time goes on. We need to capture the various distribution networks and allow them to see that they can also be a part of the future of technology. We are developing good relationships and services with other companies. Companies are investing heavily in satellite technology.
You are in the early stages of development, what about the next five years, what kind of percentage of the market would you like to have? What other new products would also have developed?
In the case of market share, we have no competition. The competition will be evident in late 2001 or 2002. Taking this into consideration, if this service is launched by the middle of this year, it will come it with broad band , it will give some advantages towards the first stage of satellite that we have because our second generation of satellite will have all of this. I would say that we should have some satellite services, mobile services by this point giving at least 60-70% of the market. The reason that we should continue to dominate the market is because we would have gone through the processes of developing the market which will give us the strongest position in the market. From the other services , five years from now, I think that TE.SA.M. will be an important player In Telecommunications within the regional market. TE.SA.M. has invested more than$300 million in South America. We will compete in some specific areas for long distance service. We have our gateways inter-connected: Peru, Brazil and Argentina. So, now we have channels that are very easy to send international calls. I have local interconnection agreements with all these countries as well as licenses in all these countries. This gives me a position to play a key role in long distance services. Also, with value added services, we will develop voice over IP-I personally believe that this is the future. Today there are existing issues of service quality. But with broadband Internet, the quality issues will improve rapidly.
It took considerable time to reach critical mass in the cell market and to change the culture. How are you planning to create a new change in culture when people are aware of the benefits of satellite communications?
Firstly, we have to break the barrier of cost. Until we break the cost barrier, we cannot reach the mass market. The cell phone market is a commodity; you go with whoever offers you the best price. But now companies are realising that with value added services you reduce you return due to price. For the moment until our prices are reduced we will not reach this market. Within the next 4 years our business plan shows that our initial investment will be paid off and we will be in a better position to lower our operational costs. Also, these satellites have a life span of 5-7 years. When we come out with the new generation of satellites, we will be able to use smaller telephones and also the minute price will be lower. Globalstar will continue to reach areas where there is no coverage. With some value added services we will retain key customers that can use other services for security reasons that other companies cannot provide.
What is your strategy, your vision. How do you market this vision?
Globalstar has gone through different stages. In the beginning when it was a project, we thought that all the cellular companies would want to sell our product as a compliment of their network. We found this to be untrue and changed strategy. Our strategy was to develop a distribution network. We know that our customers are not in the urban areas such as Caracas. We divided the country into six regions. We opened a special franchise, where we have in each region offices. These offices function with a local dealer. We found local businessmen that know the area. We attracted business in this region for telecommunications, with the medium to long term in mind. Today we have six dealers, local coordinators. They work directly with a regional coordinator. We started this work with dealers with people who wanted to benefit from the rural business and that essentially wanted to grow with us. 80% of sales today comes from our vertical business, this will be reflected when we have our first ever commercial dealer convention where we will present our project, mission and strategy for the medium and long term as well as presenting them objectives. We will also launch the intensive program and club called the Constellation club- where the top dealers will go to Japan to the World Cup. We will demonstrate that the members are all key players in the development of the whole concept.
As you mentioned yourself, the commercial development in Venezuela, this is also one of the reasons that we are here….. You are working very closely with the development of this country. What kind of image is this creating for Globalstar?
We are seen as a high tech service. The high- end market is the one, which will allow us to grow. But rural telephone services are also changing: There are more than 30 million people in the world that do not have telephone services. Although it seems expensive, we see the growth outside of the major urban areas. We are perceived as new generation telecommunications.
In your opinion would you like to tell our international decision- making readers about the future of satellite technology?
Firstly, satellite technology would be the choice, a tool when I travel. GSM is good but you have to have a roaming agreement. I think that satellite telephone services will be a key player for roamers as we are a global operator. We will also give internet access support all on one bill. If you are a constant traveller you always have you phone with the same number. We are beginning to sign interconnection agreements with local GSM operators that will provide services as well. The future is looking very interesting for us I the global market. |
