Wall St. Cuts Satellite, Pager Stocks Some Slack
On Wall Street, at least, the sky didn’t fall on the paging and satellite companies Wednesday in response to the massive service disruptions caused by the errant Galaxy 4 satellite.
Share prices of leading paging concerns, such as industry leader Paging Network Inc., and of the major satellite operators, including Galaxy 4 owner PanAmSat Corp., suffered only modest losses.
Immediate and reassuring words from the companies’ executives, including forecasts that services would resume shortly, no doubt helped relieve investors’ fears. In the satellite sector, the industry’s tremendous growth prospects also gave investors little reason to punish those stocks over this one failure, analysts said.
“They’ve got an enormous number of satellites on order,” said Marco Caceres, an analyst at consulting firm Teal Group in Fairfax, Va. He predicts that 1,700 satellites will be launched worldwide during the next decade, and that 70% of them will be for commercial use.
And in the paging market, the companies and their stocks are struggling so much already that investors appeared to shrug off the Galaxy 4 snafu.
Paging operators such as San Francisco-based AirTouch Communications Inc., which is also a major cellular-telephone service provider, “did damage control quickly and got the word out [that] it would be fixed,” said Jennifer Murtaugh, a wireless communications analyst at Everen Securities Inc. in Chicago.
AirTouch and most other paging providers have backup plans for such an emergency, plans that basically call for switching their transmissions to another satellite provider and then adjusting the direction of their signal-receiving dishes.
Paging Network, a Dallas-based concern whose service is called PageNet, said it expected to have service restored in most of its major markets by late Wednesday. PageNet has more than 10 million of the U.S. paging market’s 49.5 million total subscribers.
PageNet’s stock edged down 25 cents to $14.13 a share, while another leading paging provider, Metrocall Inc., slipped 19 cents to $6.13 a share.
The $4-billion U.S. paging industry is a modest slice of the overall commercial market for satellite-based communications services. The entire market generated $39 billion in revenues last year but will explode to $171 billion by 2007 as new technologies--such as direct-to-home satellite television--take their place in the industry, Merrill Lynch & Co. analyst Thomas Watts predicts.
Another burgeoning market is one for worldwide mobile communications using a fleet of small satellites in low Earth orbit. Players preparing to operate those systems include Iridium World Communications Ltd. and Globalstar Telecommunications Ltd.
Their satellites, and larger orbiters used for video transmissions and other technologies, are being built by such major producers as El Segundo-based Hughes Electronics Corp., Lockheed Martin Corp. and Loral Space & Communications Ltd.
Most of those companies’ stocks fell in trading Wednesday, but not by much. Iridium lost 13 cents, to $59.63, and Globalstar dropped 75 cents, to $59.13.
PanAmSat, which operates 16 satellites in addition to the Galaxy 4, fell $1.75 a share to $55.75. Hughes, which owns an 81% stake in PanAmSat, fell $1.13 a share to $52.88.
The paging business keeps growing, but the primary “beeper” operators have struggled to simultaneously gain market share and turn a profit. PageNet, for instance, lost $157 million last year on revenue of $961 million, and in February it announced plans to cut 1,800 jobs, nearly a third of its work force.
MobileMedia Corp., the third-biggest paging provider, entered bankruptcy proceedings last year.
Paging companies have spent heavily and cut prices aggressively in the 1990s to expand their networks and gain market share. But that’s made some of them debt-heavy at the same time their profit margins are being squeezed.
They’re also under attack from the cellular-telephone industry’s new technology.
“As cellular [phones] transfer to digital, they incorporate a lot of the traditional paging services,” analyst Murtaugh said.
An exception: Mobile Telecommunication Technologies Corp., which runs the SkyTel messaging service. Although the company lost $89 million last year on revenue of $408 million, that was an improvement over its $172-million loss in 1996.
The company’s stock inched down 31 cents to $24.25 a share on Wednesday. But it has more than doubled in price in the last 12 months.
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Lost in Space
PanAmSat Corp.’s Galaxy 4 satellite stopped providing paging service to roughly 90% of subscribers in the United States when it began an uncontrollable spin and was unable to receive signals from regional towers. Satellites are an integral part of a paging company’s network, allowing it to beam its signals all over the United States at once. The number of Americans using pagers has exploded in the last 10 years. How a pager works and the number of subscribers in the United States:
How a Pager Works
1. The person placing a page dials the pager’s phone number. The signal gets a special code so it knows which pager it’s intended for.
2. The page travels through the telephone network to a paging terminal, where it’s beamed through the atmosphere.
3. The satellite picks up the signal and beams it back down to transmitters in the paging company’s service area.
4. The transmitters blanket the service area with the page.
5. The appropriate pager recognizes the signal and displays the message on its screen.
Number of Pager Subscribers
In millions (Figures for 1998 through 2001 are estimates)
2001: 66.5 million
Sources: Personal Communications Industry Assn., Times research
Researched by JENNIFER OLDHAM / Los Angeles Times
