Ali Pourtaheri will be among the speakers at BIBA's 97th Business Technology & Internet.

Author: John Dunn
You can find this article in edition No. 25 Tornado Insider (May 2001) on page 96

At a time when pessimism and caution have ridden their horses back into technology town, it is pleasing to come across a startup prepared to be cheerful amidst the corrosive gloom. The company, UbiNetics, one of a procession of well-funded startups that has sprouted from England’s otherwise uneventful fenland, has good reason for at least a measure of optimism, believes company co-founder and CEO Ali Pourtaheri. The company is looking to make its name in the high-growth wireless space selling GSM, GPRS, and 3G wireless hardware products for network operators and consumer markets.

Selling products that incorporate a range of standards will allow the company to cover all bases. “What you will be seeing in UbiNetics is a very good technology hedging,” comments Pourtaheri, who is in a relaxed and talkative mood. “If UMTS is late it doesn’t matter, because we will continue to ship our GPRS products; if GPRS is late, fine. We will continue to ship our GSM,” he says. He is confident 3G will turn up sooner rather than later and unleash a wave of innovation when it does, regardless of what the markets think of technology companies in the post-bubble low of 2001.

First up in the product portfolio is the GC201, a credit-card sized laptop GSM data card (smaller than Nokia’s, he says), with an unusual twist; attach a headset and you can make phone calls as well. The company is currently putting the finishing touches on a small family of data cards, due for release later in 2001, which will add GPRS capabilities to this mix. The “always on” nature of GPRS should ensure that the latter type of product sells well to the corporate sector, where it could quickly replace conventional modems for network access on roving laptops.

In a different guise, but using the same fundamental technology, is the attention-grabbing GA100 add-on for the Palm V or Vx, which turns a handheld device into a GSM mobile phone with conventional GSM wireless data access. Powered from a built-in Lithium Ion battery, it piggybacks neatly onto the back of the Palm without increasing its size beyond an acceptable level. As with the data cards, the company will later launch a GPRS-capable version of this product, pre-announced with the moniker GA400. At a UK retail of £399, the current Palm add-on isn’t a cheap product. However, if bought in the UK with a network connection, the price comes down to a more affordable £150, a discount the company says should also apply in whichever country it is sold.

At a time when the industry has been making confusing pronouncements about data throughput on GPRS networks, UbiNetics has come up with some hard figures. Its data card and Palm products will be capable of a claimed throughput of 85.6 kilobits per second with backwards compatibility to GSM data access of up to 14.4 kilobits per second. Pourtaheri says he expects throughput to be limited to around 40 kilobits per second at first, but it’s good to get some idea of what it’s realistic to expect from this generation of cards.



Selling GPRS data cards may sound unexciting, but is actually a very practical way of addressing the market of early adopters, the majority of whom will have either laptops or PDAs with PC card slots, according to Maged Fahmy, a senior analyst with Aberdeen Group Europe. Fancier, integrated smartphones will come later. “What UbiNetics might be thinking is that it’s going to take time for a phone to turn into a wireless mobile device,” he suggests.

More in the background, but an important part of the business in the medium term, is the UbiNetics division that designs and sells GPRS and 3G test equipment for network operators, handset manufacturers, and telecom approval authorities. This product line has two elements: the TTM100 Test Mobile for running diagnostics on 3G network infrastructure and applications, and the Node B Emulator, designed to troubleshoot handset performance on GPRS and UMTS networks. It’s hard to get information on the size and composition of this market because network vendors are twitchy when it comes to talking about 2.5G and 3G in terms of throughput and robustness. “Test our network? It works perfectly!” is the official line. It’s not hard to imagine, though, that test systems are essential to rolling out these networks and now is the perfect time to be in the business of selling them. On the other hand, it’s a market that will only last as long as 2.5 and 3G technology are in the rollout and approval phases.

In a 3G spin
In common with Cambridge Silicon Radio (see due diligence, April 2001), UbiNetics is a 1999 spin-off from a technology consultancy, an increasingly popular model for turning IP into wealth-generating equity. The parent – PA Consulting – still shares its Cambridge Technology Centre building, located about 20 miles (33 km) south of Cambridge, with the new outfit, athough “share” is a word that doesn’t do justice to the startup’s rapid expansion. Take a short tour around the Richard Rogers-designed interior and it looks as if the cuckoo is coming close to kicking the parent out of its nest. The space may once have looked expansive to the company’s founding team of 15, but is now seething with between 250 and 300 engineers jammed into ranks of cubicles.

PA Consulting clings to more than half the building but the biggest buzz is now about UbiNetics, not the consultancy. “A design and manufacturing company is valued more highly than a consultancy,” says Pourtaheri matter-of-factly. This isn’t a problem for PA. UbiNetics was originally funded from the resources of its modest venture fund and with a 66 percent stake in the spin-off, it stands to gain if the investment makes good (investors now have 22 percent, the staff 12 percent).

But initially getting the PA management to move quickly enough to approve the deal wasn’t easy. “It took me months and months,” Pourtaheri says of the process, “The business plan needed to be reviewed a number of times. You have to appreciate that PA has been around for 57 years and this is the first time they are really spinning off a company.” Loath to go to high-tech VCs, the company ultimately raised £50 million from eight financial institutions including Merrill Lynch, Gartmore, Henderson and Friends Ivory & Sime. Pourtaheri says he is now having further meetings with strategic investors for a second round.

To counter the impression that UbiNetics has grown in a parasitical way from within PA Consulting, Pourtaheri underlines the efforts made to bring in staff from outside the company. “We focused quite early on bringing on board people with experience. If you look into the board you will not find anyone with less experience than me. We were not using the dot.com approach of bringing brilliant guys from the universities but [who do not] know how to deliver,” he says. The management team is highly experienced for a startup. Pourtaheri himself worked for Ericsson before he joined PA, as did COO Bjorn Krylander. Others on the team have names such as Racal, Sony, Acorn, Pace, Motorola, and ARM in their CVs. That won’t guarantee a smooth path for UbiNetics, however. “They have huge rivals for competition,” reckons Fahmy of Aberdeen Group, noting that Nokia in particular is investing huge sums in getting GPRS data card and 3G technologies to market. Since Nokia was able to knock giant Ericsson out of the manufacturing sector for mobile handsets, taking them on is intimidating. “The key to survival is going to be focusing on a target market,” Fahmy continues. UbiNetics may also be able to live off its wits, turning out products more quickly than its rivals. Since it owns no factories – manufacturing is outsourced – this model may be efficient. According to marketing director Colin Aitken, UbiNetics will survive by being a specialist, quicker to market than its rivals, and under their radar. After spending time at Motorola he should have an idea of the weaknesses of larger companies. “You are going to need to be a dedicated player. You’ve got to enter the market with the latest technology and not be distracted,” he says. The conversation with Pourtaheri turns, inevitably, to the possibility of an IPO. “The IPO money would be used for other [non operational] reasons,” he says, adamant that the company doesn’t need cash just to keep itself going. He is not displeased at speculation about the company’s valuation (even in the post-bubble depression claimed to be anything from £300 to £600 million), but prefers to focus on the startup’s larger goals. “We are extremely ambitious. We are aiming to create Britain’s Nokia,” he says. The confidence and resolve are unmistakable

At Planet Talk newly appointed marketing manager Behzad Saed Nejad takes this warning to heart. For him, one of the most important tasks is to retain customers and increase the amount they spend by widening Planet Talk's product range.

''One of the things we are going to do at Planet Talk is learn from the mistakes of other people. All our major competitors have customers that are very transient; they sign up today and they leave tomorrow.''

Planet Talk is planning a Christmas promotion of the company's new cut-price mobile service. Some of its rivals are not able to think that far ahead but Planet Talk's parent recently received additional funding. Paradoxically it was on the same day that Dolphin called in the administrators that Primus Telecommunications announced it had secured an extra $37m.

Behzad Saed Nejad is confident that Planet Talk will be able to use that cash to pick up customers from its ailing rivals.

''I am very very confident that we will be one of the few to survive,'' he said.

Telecoms investors have taken the advertising campaign of one of the UK's largest providers of cut-rate phone calls to heart. Unfortunately, while Planet Talk claims customers would be mad not to use its services, bankers suspect they would have to be mad to put cash into any of its rivals.

This week saw two more telecoms companies forced to call in the administrators as investors balked at the high cost and low margins of providing alternative services.

RSL Communications and Dolphin Telecom have several things in common. Both have North American parents with funding troubles of their own and by coincidence, both had big operations in Hampshire.

RSL called in PriceWaterhouseCoopers on Tuesday after failing to find a new investor, despite being one of the UK's largest independent suppliers of international and mobile services to business customers. Dolphin Telecom called in Deloitte & Touche the following day and canned about half its 750-strong workforce. Dolphin operates a digital mobile radio network, and counts the Metropolitan Police and BBC among its customers.

One of Dolphin's major customers said yesterday the service is still running but that he has received no information about how long it will continue.

Both sets of administrators are looking for buyers or investors, hoping they can replicate the recent rescue of One.Tel's UK business. Earlier this year, Australian One.Tel floundered despite the backing of media stars Lachlan Murdoch and James Packer. Mr Murdoch, heir to the News Corporation empire, and Mr Packer, son of media tycoon Kerry Packer, could now be liable for part of the £30m owed by the company.

The UK operation, which provides cut-rate international phone calls, was bought out in July by Centrica to boost its fledgling telecoms business British Gas Communications.

But analysts suspect bailing out Dolphin and RSL will be trickier as many potential buyers - such as other telecoms companies - have enough financial problems of their own. ''The major telecoms companies are not going to be the white knights for these businesses,'' said Mike Canfield, principal consultant at research house Ovum.

''Many of these companies are not up the glamorous end of the industry. They only have small margins to play with so in a downturn they will be hard hit.''

Investors are also unlikely to rush into the breach. John Allen, chairman of telecoms investment specialist ARC Associates, has spent 15 years investing in and advising telecoms companies. He believes there are bargains to be had but only if investors stick to a golden rule, often broken by smaller telecoms businesses.

''The first and most important point is how soon can they actually start making revenues and do they have enough funding to get there? Get back to the basics. If there is no clarity on this, then avoid them like the plague.''

Source: PanAmSat sees consolidation By Tally Goldstein in New York Published: April 16 2001 12:55GMT | Last Updated: April 18 2001 01:02GMT

Analysts said Intelsat and Inmarsat - both of which have near-term plans for initial public offerings - could be interested in buying PanAmSat to help boost their portfolios prior to the flotations. Utelsat and Enron, which owns fibre worldwide, could also be interested parties.


Ramin khadem
talking to BIBA July 2000

PanAmSat, the world's largest commercial satellite operator, told analysts on its first-quarter earnings call on Monday that it expected further consolidation in the satellite industry and that it had created a unit to explore strategic opportunities in the market.

''We're fortunate to be in a very strong position of leadership and we're looking forward to taking advantage of that," said Douglas Kahn, president and chief executive.

The global provider of video and data broadcasting services has long been considered an attractive acquisition target. SES Astra, the Luxembourg-based satellite company, had considered making an offer but instead bought General Electric's satellite unit, GE Americom, for $5bn in March.

Analysts said Intelsat and Inmarsat - both of which have near-term plans for initial public offerings - could be interested in buying PanAmSat to help boost their portfolios prior to the flotations. Utelsat and Enron, which owns fibre worldwide, could also be interested parties.

Inmarsat (International Mobile Satellite Organisation) was founded as an inter-governmental body in the late 1970's to provide a global satellite communications system.

It is a success story which often goes unnoticed. Privatisation took place on the 15th April 1999. Within 2 years of privatisation Inmarsat will seek an initial public offering (IPO) possibly in the US and UK.

Mr Ramin Khadem, chief Financial Officer at Inmarsat, explained some of the changes at BIBA's General Meeting on the 16th April 1999. Here is a transcript of his speech.

“Many of you will know very little about us. We don't enter your daily lives, we are not a household name. Inmarsat was started in 1979 in the midst of the cold war. At the time the US and the Soviet Union took an important initiative in setting up this organisation, and of course the UK was instrumental in getting it to be set up in London because of the importance of maritime shipping in the United Kingdom. The nations recognised that they would have to co-operate in order to bring this organisation into being, and despite their different political persuasions, they looked beyond the nation at what was good for the world.

Indeed Inmarsat would not have come about had each nation pursued its own self interest, so it was truly an effort to create a global organisation. 28 countries signed a convention and consequently we became the first international commercial organisation. We had, believe it or not, the United States, the USSR of those days, China, and a number of other investors around the same table making decisions on commercial issues. It was probably the only organisation of its kind, except perhaps Intelsat in Washington, to be in this kind of realm. Together, they made decisions on the purchase of satellites and rockets from different countries and it worked very well. We started the operation by leasing capacity from others to keep our costs and prices down. We did not believe in going big right away. Very shortly afterwards, in fact two years after we started operations, we were profitable.

This was to the complete amazement of everyone who had put money into this organisation which was supposed to be for the welfare of mankind but was thought to become a continuous burden. Due to our rapid success we decided that it was time to build our own satellites. Therefore, as demand was growing, we created the appropriate capacity in space to meet that demand. We now have nine satellites in orbit. There are 2 forms of satellites, smart and dumb satellites, and our satellites are of the dumb variety. Basically, all this means is that the message gets beamed up and then beamed down again, therefore enabling communication to various parts of the world. Now we have 9 of these satellites 22,300 miles in orbit all working perfectly, and we were quite lucky that all 9 were launched without any failure.

On the top of our building in London we have antennas from which we directly control our satellites, ensuring they remain at the correct altitude, and if there is a movement we just turn on a thruster from our control room and for a split second a small thruster on a satellite moves the satellite to the right position

To get the satellites in space, of course you need rockets, and over the years we have been using rockets from various organisations and countries. We have used the Delta and the Atlas rockets from the US, launched from Cape Canaveral in Florida. We have also used the Arian rocket from the Ariel space agency in France, launched from French Guieanna. As well, we have used the Russian rocket, the Proton, launched from Khazakhstan.

The launch of our Russian rocket was very important because we actually broke new ground. Up until then you could not have put a Western built satellite on a Russian rocket. Through negotiations with the USA and the agreements they finally came to with us, the Russians and the Khazakh government, they agreed to ship a Western built satellite to be put on a Russian rocket and sent into space. I will not go into what we had to do to achieve this, but I will say that it was complicated. We had to have people looking after the satellite throughout this period in Russia, and of course we received the full cooperation of both the US and the Russian governments. As a result of that pioneering venture, the Russians have been able to launch many Western built satellites, so that really opened up the path for them. The original mandate of Inmarsat, which was to cover the maritime industry, expanded into aeronautical and land applications. The system is one which allows communications to take place between people on land, in airplanes, and platforms at sea. We have 150,000 terminals now working in our system, and we are used on most of the wide-bodied jets inter-continentally throughout the world.

On land, we are used extensively in disaster relief, and in fact right now in Kosovo there is no other form of communication, with the cellular systems being mostly down. The aid agencies and humanitarians are using this system to communicate from there. But then you might ask why after all this apparent success did we have to change this organisation. The reason is that, although we were successful in the 80's and 90's, the very structure that ensured our success, the cooperative nature, was becoming the cause of our demise. We were not catching up with the realities of the 90's and the year 2000 and beyond, and that is the need to move rapidly, to make decisions quickly. Our structure was not right. This point came home to us in 1994 when we wanted to start a project called Inmarsat P. We were looking at making a hand-held satellite phone, and we found that because the investment of our structure was tied to the utilisation of the system, countries like the US and the UK who had a high usage of our system, would have to make a large investment in this product, and those who had a low investment, like India and China were obliged to make a low investment. But they didn't, and in fact those countries wanted to put a larger investment in this product than the big shareholders, so ultimately we were forced to abandon the structure.

We launched ICO Global Communications in 1995, and its flotation brought in $1.4 billion in investment income in those early days. But that experience taught us that we had to change Inmarsat itself because it simply could not keep up with the investment flexibilities needed. Consequently in 1995 we began in earnest to change it, and we recognised that the dynamic world into which we are going requires movement, speed and flexibility. We looked at many different models, and the one we eventually chose was one which had a secretariat to look after the welfare of the countries, providing public services obligations, distress and safety obligations. And we created a new company by the name of Inmarsat Inter-governmental Organisation, giving a special share to that so-called secretariat in the event that we do not provide public services obligations globally as we are supposed to do. For example, if a ship or plane is in distress there will immediately be help at hand. If we do not commit to doing those things, then that special share, which is a growth in share and does not have economic value, is called in and they can stop our decision making to make sure that we actually abide by what we sell. The other important thing to say here is that we have some very important provisions in our company which are rather unique. First of all it is in our charter that we can only work for peaceful purposes.

We will not get involved in anything to do with war. We will obviously help, as in the Kosovo case, to provide humanitarian aid. In fact we provide a free service at the moment to the many aid agencies in Kosovo, with many thousands of terminals. Moreover, we do not discriminate on the basis of nationality or any other difference among people. That is enshrined in our company's articles, and I think that these provisions are rather unique. We look at the world as one community, and we see no difference as we are all part of the same family. Yesterday marked a very important event. It was the first time ever that an inter-governmental organisation, composed of 85 nations, decided to restructure. I had the honour of opening the extraordinary general meeting of 85 shareholders, who were previously 85 signatories to our convention, and at that meeting they endorsed the new structure, approved the formal transition of the company and appointed a new board. Starting on Monday the new board will commence business, and the world of the next millennium will be what we are looking at. Communications will have a profound change on us in every way, as you already know.

Massive volumes of data, messages, files, internet access, and so on are zigzagging across the planet. It is hard to keep up with it. Increasingly, they will be recognised by bits of information, 0 and 1, because of the digital system. We will play our rightful role in this business, and we are now working on a new concept. We are going to have the same 3 or 4 satellites in space illuminating to earth through some core network, what we call satellite points. Essentially what happens is that you will be able to communicate using a very small laptop computer, through a very small terminal the size of an A4 page, which folds and can be carried with the laptop.


A satellite in orbit

It will be generating rates of 114 kilobits/second. This is a concept we are pursuing and it is very exciting. We still have to have our board approve it of course, but this will allow people on the move communicate, have internet access and so on. It is an exciting business, so long as we remember to serve the world community without limitation for peaceful purposes, and without discrimination of any kind. I think it is also a modest effort in improving world brotherhood and unity”.

QUESTIONS

How far away are we from having a hand-held telephone with which you can communicate from anywhere in the world?

Actually we are already there. A company called Iridium has actually started this business, and they have some terminals in use. ICO Global Communications, which we had a hand in creating and are shareholders in, is also aiming to do the same within the next year or so.

Will it offer 100% coverage anywhere?

It will give you coverage but you have to have line of sight, and therefore you have to be outside and be able to see the sky. Of course in London and other metropolitan cities it is hard to do that. Our system at the moment reaches our smallest unit, which is the size of a laptop. The stationary satellite, at 22,300 in space, provides communications from a fixed point, so if you are stationary anywhere you can communicate. The hand-held product involves satellites that are in lower orbit, and consequently you have to be in the line of sight. If the satellite has gone over the horizon then you have to wait for the next satellite to come up. It gets a bit complicated. There is a big debate about this, and obviously there are pros and cons.

Approximately how big is the market, and how fast is it growing?

We believe it is quite a large market. Analysts have been talking about millions of actual users today who would purchase a satellite phone. I am not certain if it is all that big, but I think there is a big niche market, with people genuinely needing to be in contact wherever they are. There is today a cellular phone, a GSM phone, which is capable of achieving this in various parts of the world. But there are those people who need it outside of the main cities around the world, in fields and so forth. So the need for satellite communications is strongest for those who are in the remotest regions, and I believe there is a significant demand for that. We see our business growing very much in terms of traffic, and it is growing by significant numbers year after year. There are some analysts who expect something in the region of 8-12 million users globally by the year 2002. Now that sounds like a reasonably small number, but it is not really. We have 150,000 users and we cover the globe. Of course these are on planes and ships, so multiple people can use the system. If one ship has the terminal, all the people on board can use it. So that is a huge number. Whether it will come to pass, of course, we don't know.

How affordable is it going to be?

Well that is always going to be a problem. When you have a constellation of 4 satellites that has cost you $1 billion to get up, you need to recover your costs. The unit charge, per minute, is actually higher than you might expect. Our charges are about $2 per minute. Now that might sound like a lot of money, but when you consider that it gets you from anywhere in the world to anywhere else, it is not bad value, particularly if you are stuck somewhere. It is rather expensive, but only because we have got to pay for the satellites, and make some money as well.

Is there a lot of competition?

Yes, there is a lot of competition with satellites. You have satellite television where there is a lot of competition. There are fixed satellite services that are offered by three or four international organisations. In our business, which is mobile applications, we are uniquely mobile. There is one company, which I mentioned before, called Iridium, another company is GlobalStar, which is planning on being operational in a years time, and then there is ICO global, which is our affiliate company, which will also be operational within a years time. So within 2 or 3 years, there will be 3 other global players, with massive amounts of capital investment made. Altogether about $18 to $20 billion.