1 / 15

HUGO SATELLITE NETWORKS

HUGO SATELLITE NETWORKS. Shravan Chopra Tanya Dorhout Yashmin Fernandes Angela Ho Ben Lyons. March 1, 2001 Professor Campbell R. Harvey BA 456 Emerging Market Corporate Finance. Agenda. Background Case Introduction VSAT Technology & Market Project Details & Risks

kuame-chan
Download Presentation

HUGO SATELLITE NETWORKS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. HUGO SATELLITENETWORKS Shravan Chopra Tanya Dorhout Yashmin Fernandes Angela Ho Ben Lyons March 1, 2001 Professor Campbell R. Harvey BA 456 Emerging Market Corporate Finance

  2. Agenda • Background • Case Introduction • VSAT Technology & Market • Project Details & Risks • Country Risks & Discount Rates • Case Solution • Summary

  3. Background • Modeled after an actual strategic decision at a satellite network company • Reconstructed story • Fictional project details • Fictional scenario • Lack of company disclosure

  4. Case Introduction • Strategic planning decision in 1995 • Evaluate project and market factors • Analyze and mitigate risks • Use appropriate discount rate • Identify and quantify real options

  5. VSAT Technology

  6. VSAT Market • Market size: • Globally: 135,000 units currently installed • Growing local market • Oligopoly: Hugo and Gomex • Customers: • Corporate networks declining • Growth in rural telephony segment • Alternative technologies

  7. Project Details & Risks • New VSAT manufacturing facility to be constructed in an emerging market • Low cost structure objective • Capitalize on large, unfulfilled local demand • Establish relationship with local telecommunications agencies • Governmental financial incentives • Build capacity to serve local and global markets

  8. Project Details & Risks • Construction risk • Operational risks • Labor • Production costs and delays • VSAT price risk • Threat of alternative technologies

  9. Country Risks & Discount Rates • Brazil, China and India site candidates • Qualitative and quantitative analysis • Risks: political, expropriation, economic, legal, war/violence, infrastructure

  10. Case Solution Assumptions across all three scenarios • Local government participation and incentives (amount of subsidy varies across countries) • Currency and inflation risk mitigated by working in U.S. dollars • Revenue and cost assumptions given • Total VSAT market growth rates given

  11. Case Solution Frequency Chart: China Mean NPV and Standard Deviation

  12. Case Solution Build manufacturing facility in China • Largest local market demand and population • Most favorable governmental incentives • Best opportunity to mitigate project and country risks • Fewest competitors • Lowest discount rate and highest NPV • Most valuable real options

  13. Real Options • Intensity & expansion option • Shutdown option • Export option • If local demand declines, the company can ship VSAT units abroad. It may be possible to export at a higher price and take advantage of the low cost manufacturing facility. • Portfolio option • Build three smaller plants in each location. • Reduce overall portfolio risk.

  14. Summary • What really happened to Hugo? • What really happened to the VSAT industry? • Questions and Answers

More Related