Next steps for Worldspace

Yesterday we reported the financial crisis at Washington-based satellite radio operator Worldspace. Unfortunately, there are more challenges ahead for company head Noah Samara (left).
Once our report appeared, Rapid TV News had a flurry of confidential e-mails from interested parties. One suggested, fairly obviously, that there was a great deal happening behind the scenes at Worldspace’s Silver Spring HQ, most focused on how the company’s limited assets can be exploited in the event of a liquidation or refinancing into new ownership - or at least new control that wipes away the huge legacy issues inherited from the Samara days. The largest problem is for “new Worldspace” to regain trust from Wall Street and the investment community generally.

“Every angle of WorldSpace’s current strategy appears to be focused on rolling out an entirely new business in Europe,” said one source, who questioned whether Samara had also abandoned Worldspace’s other businesses in Asia and India? What are the residual liabilities there and how can any new customer trust that he will deliver if he walks away from those markets?” Unsaid, but hinted at, is that as well as not paying some salaries, Worldspace is employing a similarly ultra-cautious approach to paying day-to-day suppliers and their bills.

We are also reminded that almost exactly three years ago Samara and his team managed to take almost $200m from investors on a business plan – now seemingly abandoned – to mainly secure subscribers in India and China. Worldspace did manage to sell subscriptions in India despite not having a repeater licence, although more recently India’s authorities have said that a Worldspace-type operation would need major Indian partners in order to be issued a formal licence. China was the subject of a considerable interest and effort from Worldspace, without much governmental success. The $200m raised is now the subject of assorted Class Action lawsuits alleging lack of transparency by the company’s officers at the time of the IPO.

To start a new European business, which Worldspace has been focused on this past year or two, now requires a complete rewrite to include: content focused on Europeans, car deals that are real and will attract investment, and a mobile service rather than his current fixed service (ie satellite power and coverage). In fact, “a complete terrestrial network which even Craig McCaw for ICO thinks will cost $800M in the US, how much more for Europe?” asks a reader.

Yesterday we spoke of Worldspace’s “assets”, namely a couple of tired satellites and a partly-built ground spare. A reader reminds us that the mothballed AfriStar 2 (the ground spare) is now “quite old technically” given that it was designed almost 10 years ago, and is now outmoded in thinking and functionality. Like everything else in this business, the past 10 years have seen design innovation, on-board technology improvements and flexibility in terms of transmission options. One would have to ask the obvious question as to whether there was any real value for a 2009-2010 operator in AfriStar 2? Are there elements of its bus which could be speedily adapted and upgraded to reflect this new thinking, or is it best to be – sadly - junked?

Worldspace might well still pull a survival rabbit out of its hat. It has done so before. But more than flourishes of press releases it needs magically to drum up cash – lots of it, if the business is to survive and achieve a few of its European goals.

One final point. Rapid TV News wants European sat-radio to succeed. We have talked recently with people like Solaris Mobile, who see radio playing a part on its upcoming DVB-SH system. There’s Ondas Media and other would-be players looking to enter the market. We just hope someone can succeed, and that the water isn’t too muddied by what has happened this past 10 years since AfriStar 1 was launched in October 1998.