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WorldSpace ‘concerned’ at lack of cash
Chris Forrester   
18-05-2008

worldspace.jpgWorldSpace still claims to be one of the “world leaders” in satellite-based digital radio services, but WorldSpace is a tad different from the two other players in the sector, XM and Sirius, in that they are adding subscribers. 

Number three in a field of three, WorldSpace admits in its latest SEC filing that it is now in negative subscriber territory, down 2,696 subscribers during the quarter-year to March 31, to just 171,470 subs.

Indeed, WorldSpace says it has a “planned cessation of marketing efforts in India and other parts of the world…”, and this despite expending millions of dollars in India in an attempt to get listeners to buy into the WorldSpace concept.

And WorldSpace’s astronomic losses continue to mount. Despite having next-to-nothing in the bank and total revenues during the quarter of a meagre $3m, it managed to spend $36.4m, albeit a reduction of 10% of the $40.6m expenditure in the same period a year ago. There’s no doubt that founder, president, CEO and lender of last resort Noah Samara certainly knows how to tighten the company’s belt when times are tough.

A Samara-controlled company (Yenura Pte Ltd) had promised to cough up $40m in subordinated financing for WorldSpace, but the cash has been slow to arrive. “The realization of these business objectives has been limited by the continued slow availability of funds from the facility,” said Samara’s WorldSpace SEC statement while talking about his own lending commitment to the firm. He added: “I am concerned about the Company's cash position and its pending and near-term payment obligations, including those to our debt holders. We are working very hard to solve this liquidity issue and will announce something as soon as we have a commitment.”

WorldSpace – on March 31 – had just $2m in the bank, plus other restricted cash and investments of about $5.6m. On Friday, May 16, WorldSpace was significantly outbid (by Qualcomm) in the auction for 40 MHz of L-Band spectrum in the UK, which means the company cannot now offer terrestrial retransmission of any satellite-radio service it offers over Europe – at least not in L-Band.

Towards the end of last year Samara made a number of key statements as to WorldSpace’s immediate near-future, as well as announcing the Yenura $40m financing lifeboat. On the question of further cash injections, he told analysts that in certain cases these discussions had reached the “due diligence” stage, adding that new financing would be in place by year-end. He spoke of advanced discussions with Turkish and South African partners for financing at local levels.

While singing the praises of recent progress in Europe with terrestrial repeater licences, the SEC statement ignores major repayment commitments that are now just days away.

We’re not the only ones watching this train-wreck happening. On Thursday May 15 WorldSpace stock price tumbled from $1.70 to $1.45 (and rose a few cents on Friday). Of course, that price has been worse, they fell to just 88 cents in February – but a year ago they stood at $5.66. Confidence is not good.