WorldSpace CEO Talks Up Satellite Radio In Europe

WorldSpace has high hopes for satellite radio in Europe. The success of XM Satellite Radio [Nasdaq: XMSR] and Sirius Satellite Radio [Nasdaq: SIRI] in the United States has shown that consumers do have an appetite for satellite radio. Washington, D.C.-based WorldSpace and its partners, including Alcatel Space, are eager to tap into the potentially lucrative markets in Europe for this service. WorldSpace plays a key role in bringing digital radio and multimedia services to Africa, Middle East and Asia. This year, it hopes to strengthen its content by introducing a number of niche services, such as a stock quote service. In an exclusive interview with Interspace, WorldSpace CEO Noah Samara talks about the prospects for satellite radio in Europe, as well as other challenges facing WorldSpace this year.

Interspace: Could you tell us about the link-up with Alcatel Space in Europe? Could you give us an update on those plans? What are your hopes and ambitions for WorldSpace in the European market?

Samara: With Alcatel, and in conjunction with some other leading companies, we have implemented in late 2002 an experiment/demonstration of in-car reception of digital radio programmes, associated with telematics/data services. We did this demonstration in Paris. The demonstration gave a glimpse of the radio of the future, the next generation of radio. As they say in the U.S., first there was AM, then there was FM, and now there is XM. So, it is literally the next generation of radio. The demonstration showed that this could be done now. We are encouraged and excited by the success of XM, and more recently Sirius. This validates the business model behind satellite radio. Also, it educates the market about the value proposition of WorldSpace. WorldSpace was a pioneer in this industry in terms of direct satellite delivery of digital audio services. Our hope is that the success that XM and Sirius are enjoying in the U.S. will be something we hope will benefit WorldSpace and its partners in the implementation of the service in the European arena. We will be doing this with a number of other European players. We will be one of many. The success that, in particular, XM has had, was on a good measure based on the technology that we had developed. XM has had a much better head start than Sirius. We want to introduce to our partners and bring the value of our technology and know-how in terms of implementing the service so Europeans can enjoy the service sooner rather than later.

Interspace: What revenue levels do you think you can derive from satellite radio in Europe?

Samara: It is hard to predict. It would be no less than the revenues than have been projected for the U.S. market. Europe is a larger market than the United States and the need for the service is demonstrably stronger. In a sense, the United States is a homogenous market. Europe has different languages, and with such an itinerant population, the ability to deliver a coast-to-coast service in every major European language will be a value-add that I think will prove compelling.

Interspace: Could you tell us about your operations in Africa and India for multimedia and radio services? How many subscribers do you have in these markets?

Samara: Anyone with a WorldSpace receiver capable of operating on power delivered by batteries, solar cells, kerosene or electricity can get radio programmes with digital clarity anywhere in Africa or Asia, not just India. By connecting this receiver to a PC, it becomes a wireless modem. It is capable of downloading hundreds of Mbps of data into receivers. This is a revolution in technology, particularly in these parts of the world where you don’t have the kind of connectivity that is readily available in Europe or the United States. People in the most rural areas can now hear radio using alternative power solutions, but more importantly their computer becomes a lot more meaningful because it is not dependent on telephone lines for exciting content delivery into those computers. People can view Internet type content without any Internet or telephone infrastructure. So, the unique capabilities of the WorldSpace system are already making a huge difference in the marketplace. We have also introduced a premium subscription channel both in Africa and Asia. In Africa, we are broadcasting things like NPR and Radio Caroline for the expatriate populations in the region. In Asia, we have introduced a very small bouquet of music stations found only on the WorldSpace system for the music lovers in the region. We are already seeing a great deal of success. We have just introduced the service and already we are gathering a fast growing subscriber service. We literally introduced it a couple of months ago. In India alone, we have 20,000 subscribers. Our story is about converting existing owners of our receivers into subscribers. We are developing our market in accordance with market needs and what it dictates.

We are introducing a bouquet of programming, and it is really like a stock quote service, similar to Bloomberg services, using our system. We have just introduced that into a limited market. It is in the thousands. The interesting thing about that bouquet of programming is that it shows our ability to deliver niche programmes, both data and non-data, into the market place. As we grow our bouquet of programming that is encrypted, we believe we will acquire quite a substantial number of subscribers in this market place.

There is a logic behind this, which is quite compelling. For example, if you go somewhere like India, we are able to deliver different languages coast-to-coast throughout the Indian sub-continent. If you are a Tamil speaker and you are in a non-Tamil speaking area, you are able to receive your programming from home on our satellite. It is fantastic programming. But, it gets better than that. Even if you are out of India, our India beam covers everything from the Indian sub-continent all the way into the Middle East where there is a huge itinerant Asian and Indian population living there that has nothing to listen to while they are in these countries. We are able to deliver programming to them in this market place. So, we are able to be the voice from home.

Interspace: How many receivers have you sold globally? Did the company meet its expectations in this area in 2002?

Samara: We have sold 300,000 receivers that we know of. There are many people that are purchasing our receivers. For most of our channels, we have over a million dedicated listeners. We expect the numbers of receivers to increase in 2003. In 2002, our expectations had been to grow our receiver base on a word of mouth basis. I think we have done fairly well in terms of our expectations there.

Interspace: When does the company hope to become profitable? What are the main financial challenges facing the company this year? Could you tell us about the company’s capital expenditure plans?

Samara: In terms of main financial challenges, WorldSpace is poised to a large extent to realise its aggressive business model for 2003. We have increased our focus on building our subscription base and delivering on the launch of our government sales unit. In line with our successful financial activity and streamlining, we are positioning ourselves to become profitable by 2005. The major financial challenges are not so much on capital expenditures, as 90 per cent of what we need to do has already been implemented. Most of our financial needs are based around growing the subscriber base, so a success-based type of financing.

We need to find and to fund great content and gain subscriber growth. So, this is where most of our focus is. We are also introducing mobile services into certain markets. That will be something we will be doing around the end of this year, and more of that next year. Towards that end, we are going to have certain terrestrial transmitters in certain cities similar to the XM model in the United States to make sure our service is seamless in a car environment. There will be some expenditure there but compared to the amount of money that has been put in to building our global infrastructure, this will be a very small amount.

Interspace: Could you give us an update in terms of the AmeriStar launch?

Samara: We are focusing on a huge market within our launched business plan. By that I mean we are focusing specifically on countries such as India, China in Asia. We are focusing on countries such as Egypt in the Middle East. We are also focusing on South Africa. We want to make sure that these markets we are aggressively pursuing take root, before we focus on a challenge such as AmeriStar. It is really a question of the right timing and the right partners. We are comfortable about the timeframe in terms of the launch of AmeriStar. We are flexible. The latest we would look to launch AmeriStar would probably be around the 2005 timeframe. Yet, this date could be accelerated very quickly. We are having some discussions with partners on the ground so we are waiting for those to take root.

Interspace: Finally, what are the major challenges ahead for the company? What levels of revenue growth are you expecting this year?

Samara: We have aggressive plans on various initiatives that we have just mentioned. We also have plans to announce key partnerships in 2003 that will complement and deepen our offering as well as our ability to achieve some of our targets. Our expectations are being met. We are launching new initiatives so we are in good shape.

To achieve our growth plans, we are going to be going into the market with a new offering of equity. It is going to be a private offering. We will be aggressively doing that. We have a good story. We are in the final stages of doing that and hope to have it completed within the next three months.

–Mark Holmes

(Contact: Frey Haileleoul, WorldSpace, e-mail: [email protected])