STM Wireless Inc. said Friday it has landed a 10-year contract valued at more than $100 million to provide and maintain a nationwide satellite network for telephone and data communications in Mexico.
The company's Direc-to-Phone International subsidiary, established to provide satellite-based telephone and data transmission services in developing countries, will install a minimum of 7,500 satellite phone lines in 2,500 locations throughout Mexico.
The contract is the largest in the 15-year-old company's history "and is a gigantic validation of the rural telephone system strategy they adopted two years ago," said Matt Desmond, an industry analyst with Red Chip Review in Portland.
Irvine-based STM's stock surged 19.6% Friday on news of the contract, rising $3.13 a share to close at a 52-week high of $19 in heavy trading on the Nasdaq market.
STM said its has begun to deliver and install equipment in Mexico and expects to have the basic system installed in the next two years.
Direc-to-Phone will operate it jointly with Mexican phone service provider Miditel and will provide all maintenance and service during the 10-year contract, said Paul Kinderman, STM's sales and marketing director.
The company now has about 200 employees. Kinderman said the contract is expected to create some new manufacturing jobs at STM's Irvine facility and to provide a variety of installation and service job opportunities in Mexico.
STM officials said that Miditel plans to use satellite and wireless technologies to rapidly build high-quality telecommunications facilities in major markets throughout Mexico. Private Mexican interests own 51% of Miditel and a 49% share is held by Korea Telecom, the telecommunications firm owned by the South Korean government.
STM also makes and markets products for corporate communications and data networks. But it began emphasizing development of rural telephone systems two years ago after it developed a low-cost receiver-transmitter unit that makes installation of satellite-based systems economically feasible in rural areas.
Emil Youssefzadeh, STM president and chief executive, said the company intends to provide home telephone and data services in areas of the world that lack a ground-based telecommunications infrastructure and have low market penetration of basic telephone service.
"Our market is not targeted toward high-end business users requiring mobility," Youssefzadeh said. "Our focus is on users needing basic services at their home or office, and our goal is to push the technology and create a mass market by constantly improving and reducing the cost of user terminals."
The satellite system STM provides makes it possible for users to call from any remote site to any other remote site within the network, eliminating the need for a central hub. The system also permits international telephone calling, can be integrated into most existing telephone systems and enables system operators to offer caller ID and other advanced features.
For the first half of 1997, STM posted a $936,000 profit on revenue of $21.8 million. The company, which went public in 1992, lost $4.8 million last year on revenue of $34 million, but is expected to be profitable this year, Desmond said.
Company officials said the 1996 loss stemmed largely from the cost of developing new products and technologies.
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STM Wireless' stock soared Friday after the firm announced it has signed a $100-million contract to establish a nationwide telecommunications satellite network in Mexico. Monthly closing prices and Friday's close:
Friday's close: $19.00
Source: Bloomberg News