By Maxwell Murphy
A Dow Jones Newswires Column
NEW YORK (Dow Jones)--GlobeTel Communications Corp. (GTE) may just turn
"worse than expected" into "better than imagined" after all.
Recently, a delay in a $150 million initial payment from a wireless deal with
Russian investors sent shares sharply south. But the Russians told Dow Jones
Newswires their commitment to GlobeTel could make the delay doubly lucrative
for the Florida-based company.
Displeasure with the hold-up, coupled with confidence in both GlobeTel and a
swift resolution, has caused the Russian investors to bump the first scheduled
payment to $300 million, or half the face value of the wireless-network pact
GlobeTel announced in December, the company and one of the Russian investors
told Dow Jones Newswires Thursday.
An 'In The Money' column in January profiled the GlobeTel saga and
highlighted the risks and potential rewards attached to it, its stock and the
Russian wireless pact.
GlobeTel was due to receive $150 million, the first of several payments
totaling $600 million, by Jan. 31, but that same day the company instead told
investors via a press release that receipt of the money would be delayed up to
30 days. GlobeTel Chief Executive Timothy Huff blamed some technical regulatory
issues regarding the transfer of funds.
Maxim Chernizov, the only named principal of LLC Internafta, the Russian
company set up to do business with GlobeTel, echoed Huff's view during the
interview with Dow Jones Newswires Thursday, saying the delay was caused solely
by the efforts of regulatory agencies to make sure the funds weren't being
laundered and the transaction passes all the requisite international "sniff"
tests.
The $300 million, along with the rest of necessary funds, are in banks like
Banco Do Brasil waiting to be released to GlobeTel's European operations,
Chernizov said from Moscow in a telephone interview. The interview was
conducted using a third-party translator on a conference call set up by
GlobeTel.
Chernizov, who describes himself as a businessman who made his fortune in
rare earth metals, declined to name the other Internafta principals until the
wireless venture becomes official and begins commercial operations, but he says
none of the money he and his partners bring to the table is in any way
associated with oligarchs, politicians or anyone else who would raise flags.
Chernizov says Internafta isn't worried about competition from established
Russian players because GlobeTel's network will work with wireless networks
already in place but also brings new technology to improve the depth and
breadth of telephony and other wireless services, as well as increase the size
of the regions blanketed by coverage.
He says he has already received firm interest from affiliates of Russian oil
giant Gazprom OAO - where Chernizov says he used to work - who would much
prefer to use Internafta's WiMax services than the spotty satellite phones that
are the standard in Russia's barren Northern regions. The fact that he and most
of his partners have no background in telecommunications doesn't shake
Chernizov's confidence in the least.
Internafta's aggressive plans call for 10 million or more subscribers in the
first three years of service, which would create an enormous recurring revenue
stream which Internafta and GlobeTel would split down the middle. Spokesmen for
established players in the Russian wireless arena, like Vimpel Communications
(VIMP.RS), couldn't immediately be reached for comment on the state of that
industry in Russia or the competitive threat a newcomer like Internafta might
pose.
GlobeTel's highly speculative stock has done a yo-yo on the American Stock
Exchange for months as the former Bulletin Board company has announced
ambitious deals for its WiMax wireless networks and other emerging
technologies, deals that have yet to pay dividends.
It sports a huge shareholder base, many of whom are rabidly loyal. As you
might guess, it also has its share of cynics among both investors and the
fourth estate. A growing throng of short sellers is betting against the
company, and almost 5.4 million of its more than 121 million fully diluted
shares outstanding were sold short as of the middle of last month. Even though
trading at $2.58 a share at last glance, some of its strength sapped by the
delay announcement a couple of weeks ago, GlobeTel's market value tops $300
million; however, that is a number the Russian money would likely justify and
then some.
Critics point to a raft of glowing press releases about global deals that
have yet to generate revenue. They poke fun at GlobeTel's vision of fleets of
airships - blimp-like Stratellites - which the company claims will eventually
eliminate the need for cellular phone towers and provide a cheaper, more
effective and easier alternative to satellites.
Critics also say GlobeTel's current business, growing rapidly though it is,
is nothing more than an unprofitable attempt at the simple business of bundling
and reselling wholesale overseas long-distance minutes to major telephone
service carriers. Another business for which GlobeTel has high hopes is a
sort-of Mastercard-phone card combo, being tried out in places like India, that
allows secure international wire transfers of funds among individuals.
But GlobeTel is also surrounded by respected people of pedigree, including
engineers from the National Aeronautics and Space Administration and a
decorated former astronaut. In September, it named as chairman Sir Christopher
Meyer, the distinguished former U.K. ambassador to the U.S., and it counts
among its supporters successful businessmen like J. Randolph Dumas, a Wharton
business school graduate and former national briefing officer for the Central
Intelligence Agency, and Leo A. Daly III, the third-generation head of the
eponymous global architectural and engineering firm.
Dumas, Daly and recently named GlobeTel director Dorian Klein helped form
international venture capital group Rubikon Partners with noted American
political figure Henry Kissinger.
CEO Huff admits the company hasn't proven itself yet, and welcomes the
skepticism. He says in the near future it will become obvious whether or not
GlobeTel is for real. Major progress toward a bright and profitable future will
be clear this quarter, he says, with "substantial gains" in all the company's
businesses.
By the third quarter, GlobeTel's success should be a "foregone conclusion",
he said, and the fourth quarter will be "the cherry on top." If not, expect
someone other than Huff to go down with the ship, because Huff says if GlobeTel
"isn't being called a success by December 2006, [he] will no longer be its
CEO".
(Maxwell Murphy is one of four "In the Money" columnists who take a
sophisticated look at the value of companies, and their securities, and explore
unique trading strategies.)
-By Maxwell Murphy, Dow Jones Newswires; 201-938-5173;
maxwell.murphy@dowjones.com
(END) Dow Jones Newswires
02-09-06 1339ET
Copyright (c) 2006 Dow Jones & Company, Inc.
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