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WorldSpace, founded in 1990, was an early investor in XM Satellite Radio, but sold out so it could focus on its mission of bringing subscription satellite-delivered radio to portions of the world not served by XM and Sirius Satellite Radio. WorldSpace founder and CEO Noah Samara spoke to The Hollywood Reporter’s West Coast business editor Paul Bond about the company’s challenges, opportunities and the XM-Sirius merger.
The Hollywood Reporter: First, the basics. How many satellites do you have today, how many more will you need and how many subscribers are there so far?
Noah Samara: We have two satellites covering all of Asia and Africa, the middle east and Europe. That represents 5 billion people driving 300 million cars in 131 countries. We will need more satellites as we build our business in Europe. Our subscribers now are mostly in India, where we do not have a terrestrial repeater license, which is really important to deliver your service to automobiles. We have 177,000 subs.
THR: Why don’t you have a repeater license in India?
Samara: Depending on the country, it takes a long time. It took XM and Sirius seven years.
THR: You’ve been around for 17 years. What’s the hold-up?
Samara: We started the business, got 127 countries to agree on a global frequency allocation, built the first satellites, launched them and actually helped co-found XM on the way. We sold our stake in XM in 1999, then continued working on our repeater licensing on a country by country basis, as well as a restructuring and refinancing of our business.
THR: How much did you make on your XM investment?
Samara: We invested $150 million and sold it for north of $200 million a year and half later.
THR: Your stock has sunk from $24 to just a few dollars. What’s the problem?
Samara: When we took the company public we were under the impression that our license from India for terrestrial repeaters was around the corner, but it got delayed because of regulatory things going on, like their introducing in 2000 private FM radio for the first time. The government focused on licensing FM in 2005 and 2006, and then we were next. I’m told it is imminent.
THR: Are there regulatory hurdles in China, too?
Samara: They don’t allow foreign broadcasters to own equity in an entity that broadcasts in China, so we need to work out a revenue sharing arrangement with an entity that currently has licenses. We have our satellite that covers China and a partner on the ground, Chinasat.
THR: And these countries also regulate content, right?
Samara: China regulates content, India and most other places less so. In China, the content must be developed by Chinese entities.
THR: How many different languages do you broadcast in?
Samara: About 20.
THR: When will you turn a profit?
Samara: We’re a public company, so I can’t give you that answer.
THR: How much cash have you raised and how much more will you need?
Samara: A little more than $1.5 billion, and we’ll need an additional $200 million to $300 million, and we’re doing that, but the exact structure isn’t finalized yet.
THR: The Wall Street Journal reported that some of your backers have ties to terrorism. What’s the deal there?
Samara: There were reports that some of our backers had ties, but we have restructured in a way that those people no longer have equity or debt in our company.
THR: What’s your primary target today?
Samara: Our current satellite is good to do service in Italy, where we have a repeater license and a relationship with Fiat. It’s the first market outside the United States that will receive an XM-like service. We expect our first after-market receivers and the service to go online in late 2008, and OEM receivers made by Fiat to go into cars some time in 2009.
THR: You reported third-quarter subscription revenue of $1.9 million, up from $1.8 million a year ago. Isn’t that anemic growth for a firm that wants to be a growth company?
Samara: Yes. The reason, like I said, is that our service in India has been delayed, and India had been our priority. As a result, we have pulled back our spending in India until our repeater license is in place.
THR: Do you have an opinion on the XM-Sirius merger?
Samara: It’s a great idea. The competition between the two of them has really done a disservice to the viability of satellite radio and has really driven up the cost of doing business.
THR: Does your company have competition?
Samara: We are the only satellite radio provider outside of North America, South Korea and Japan.
THR: Do you see demand for WorldSpace being as robust as demand for XM and Sirius?
Samara: I had the option to let go of either our global coverage area or to let go of the service in the United States. We chose to stick with what we’re doing being it’s a much larger market.
THR: You’ve been criticized that your pay package of $650,000 a year is extravagant, given that your company is unprofitable and your stock is falling.
Samara: The pay package is consistent with companies in a similar space. Plus, we’re trying to solve a business opportunity that, when we do, will provide huge returns for our investors.
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