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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-23044
AMERICAN MOBILE SATELLITE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0976127
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10802 Parkridge Boulevard
Reston, VA 20191-5416
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 758-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 per value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The aggregate market value of shares of Common Stock held by non-affiliates at
March 25, 1999 was approximately $117,879,802.
Number of shares of Common Stock outstanding at March 25, 1999: 32,237,078.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Certain information in the Company's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders is incorporated by reference in Part III of this
Form 10-K.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. X
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AMERICAN MOBILE SATELLITE CORPORATION
-------------------------------------
1998 Annual Report on Form 10-K
-------------------------------
PART I
------
This Annual Report on Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "believes,"
"intended," "will be positioned," "expects," "expected," "estimates,"
"anticipates" and "anticipated." These forward-looking statements are based on
the Company's current expectations. All statements other than statements of
historical facts included in this Annual Report, including those regarding the
Company's financial position, business strategy, projected costs and financing
needs, and plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Because
forward-looking statements involve risks and uncertainties, the Company's actual
results could differ materially. Important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Annual Report, including, without limitation, in conjunction with the
forward-looking statements included in this Annual Report. These forward-looking
statements represent the Company's judgment as of the date hereof and readers
are cautioned not to place undue reliance on these forward- looking statements.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements. Readers should carefully review the
risk factors described in other documents the Company files from time to time
with the Securities and Exchange Commission, including the Registration
Statement on Form S-3, No. 333-71423, and Form 10-Q Quarterly Reports to be
filed by the Company subsequent to this Annual Report on Form 10-K and any
Current Reports on Form 8-K and registration statements filed by the Company.
- 1 -
Item 1. Business.
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Overview
--------
American Mobile Satellite Corporation (the "Company" or "American Mobile"),
through its subsidiaries, is a leading provider of nationwide wireless
communications services, including data, dispatch, and voice services, primarily
to business customers in the United States. The Company's combined network
offers a broad range of end-to-end wireless solutions utilizing a seamless
network consisting of the nation's largest, most fully-deployed terrestrial
wireless data network and a satellite in geosynchronous orbit.
American Mobile provides data service through a number of network
configurations, including a "terrestrial-only" service network, a
"satellite-only" service network and a "multi-mode" terrestrial and satellite
service network.
American Mobile operates the ARDIS terrestrial network which is a leading
provider of nationwide wireless data services to markets consisting primarily of
business customers with a need for reliable, two-way wireless data
communications in the field services and transportation markets.
The ARDIS wireless data network provides the widest breadth of coverage of any
single provider of terrestrial wireless service in the United States. The
network is comprised of approximately 1,800 radio towers (base stations) that
provide service to 427 of the largest cities and towns in the United States,
including virtually all metropolitan areas. The network was designed and built
using Motorola technology to provide reliable two-way data communications, deep
in-building penetration and efficient frequency usage. The extensive coverage
and deep in-building penetration provided by the ARDIS network is attractive to
customers who desire a single service provider whose nationwide scope extends
from large metropolitan areas to smaller cities and towns. Customers use
applications such as service call dispatch, asset tracking, and peer-to-peer
communications to achieve critical business objectives resulting in increased
productivity, profitability and customer satisfaction.
American Mobile's satellite-only data communications system provides data
services primarily to long-haul trucking customers. The Company's multi-mode
communications system uses the Company's integrated terrestrial and satellite
network to provide "least-cost routing" for customers' two-way data
communications by actively seeking connections to the lower cost terrestrial
network before automatically using the Company's satellite network, thereby
providing cost-effective nationwide coverage.
In addition to providing data service, American Mobile offers two forms of
mobile satellite voice communications service: nationwide dispatch service and
satellite telephone service. American Mobile is the only company that offers a
nationwide dispatch service which allows multiple users located anywhere in
American Mobile's extensive service area to share a single connection for
point-to-multipoint communication using push-to-talk handsets. American Mobile
markets its nationwide dispatch service primarily to field services users with
wide-area fleet communications needs. American Mobile's satellite telephone
service provides traditional voice, fax and data service through satellite
terminals that are similar to cellular phones.
As of December 31, 1998, American Mobile had approximately 105,700 units on its
combined satellite and terrestrial network, of which 13,000 were satellite voice
units and 92,700 were terrestrial and satellite data units.
- 2 -
XM Radio
- --------
XM Satellite Radio Inc., a subsidiary of XM Satellite Radio Holdings Inc.
(together with XM Satellite Radio Inc., "XM Radio") has been granted a license
from the Federal Communications Commission (the "FCC") to construct, launch and
operate a domestic satellite system for the provision of satellite-based digital
audio radio service ("DARS"). XM Radio made a payment of $90 million to fully
pay for its DARS license in October 1997. The Company currently owns 80% of the
capital stock of XM Radio. The remainder of XM Radio currently is owned by
WorldSpace, Inc. ("WorldSpace"), a leading international DARS company that is
planning to provide DARS service to Latin America, Africa and Asia. Through its
investment in XM Radio, WorldSpace has an option to increase its ownership in XM
Radio, subject to pending FCC approval. On January 15, 1999, American Mobile
provided an additional $21.4 million of convertible financing for its
subsidiary, XM Radio. This loan was funded through the issuance of a $21.5
million subordinated, non-recourse, note of American Mobile to Baron Asset Fund.
American Mobile's note issued to Baron Asset Fund is exchangeable into
approximately half of the additional XM Radio common stock to be received by
American Mobile as a result of the January 15 transaction.
Assuming conversion of American Mobile's convertible XM Radio notes, the
exchange by Baron Asset Fund of its exchangeable note and the exercise of the
outstanding WorldSpace options following FCC approval of the pending consent to
the transfer of control of XM Radio, as previously reported, American Mobile's
ownership in XM Radio would be 22.6%, and the ownership position of WorldSpace
upon exercise of its options, subject to FCC approval, would be 71.8%.
History
-------
The Company, a Delaware corporation, was incorporated in May 1988 by eight of
the initial applicants for the first mobile satellite services license,
following a determination by the FCC that the public interest would best be
served by granting the license to a consortium composed of all willing and
qualified applicants. In March 1991, the Company transferred the mobile
satellite services license to its wholly owned subsidiary, AMSC Subsidiary
Corporation.
In August 1989, the FCC authorized the Company to construct, launch and operate
a mobile satellite communications system. For the system's mobile links, the FCC
assigned to the Company the exclusive license to 30 MHz of L-band spectrum,
subject to international frequency coordination. L-band spectrum is considered
advantageous for mobile communications services because it is less affected by
radio propagation difficulties than are higher frequencies. The FCC licensed the
Company to provide a full range of mobile voice, data and dispatch
communications services via satellite to land, air and sea-based customers in a
service area consisting of the continental United States, Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and U.S. coastal waters and airspace.
On March 31, 1998, the Company acquired ARDIS (the "Acquisition") for a purchase
price of $100 million (the "Purchase Price"): $50 million in cash, and $50
million in shares of the Company's Common Stock, as approved by its stockholders
with respect to certain of the share consideration at the 1998 annual meeting of
the Company's stockholders.
- 3 -
In connection with the Acquisition, the Company and its subsidiaries entered
into agreements with respect to three financings and refinancings: (1) $335
million of Units consisting of 12 1/4% Senior Notes due 2008 and Warrants to
purchase shares of Common Stock of the Company; (2) a $100 million Revolving
Credit Facility and a $100 million Term Loan Facility (collectively, the "New
Bank Financing"); and (3) a $10 million commitment with respect to Motorola
vendor financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
Upon completion of the Acquisition, ARDIS became a wholly-owned subsidiary of
AMSC Acquisition Company, Inc. ("Acquisition Company"). In connection with the
Acquisition, the Company also transferred all of its rights, title and interest
in three additional subsidiaries - American Mobile Satellite Sales Corporation,
AMSC Subsidiary Corporation and AMSC Sales Corporation, Ltd. - to Acquisition
Company. As a result, each of these entities is a wholly-owned subsidiary of
Acquisition Company that, in turn, operates as a wholly-owned subsidiary of the
Company. The Company continues to retain its direct ownership interest in XM
Radio.
The Network
-----------
Following the Acquisition, the Company's integrated network consists of (i) a
satellite in geosychronous orbit with coverage of the continental United States,
Alaska, Hawaii, Puerto Rico, the U.S. Virgin Islands and U.S. coastal waters and
airspace, and (ii) the largest two-way terrestrial data network in the United
States with coverage of 427 of the largest cities and towns in the United
States, including virtually all metropolitan areas. The network provides a wide
range of mobile data and voice services in multi-mode and single-mode
configurations.
Users of the Company's integrated terrestrial and satellite communications
network access the network through subscriber units that may be portable, mobile
or stationary devices. Generally, subscriber units enable either data or voice
communications and are designed to operate over either the terrestrial data-only
network or the satellite network, which provide both voice and data
communications. In addition, the Company's multi- mode subscriber equipment is
designed to provide least-cost routing of data messages over the integrated
terrestrial and satellite network.
Subscriber units receive and transmit wireless data or voice messages from
either terrestrial base stations or the Company's satellite, MSAT-2. Terrestrial
messages are routed to their destination via Company-owned data switches, which
connect to the public data network. Satellite messages are routed to their
destination via satellite data and voice switches, located at the Company's
headquarters, which connect to the public data and switched voice networks. A
data switch located in Lincolnshire, Illinois links the terrestrial and
satellite networks for the delivery of the Company's multi-mode data service.
The Company's terrestrial network delivers superior in-building penetration,
completion rates and response times compared to other wireless data networks
through the use of a patented single frequency reuse ("SFR") technology
developed by Motorola. SFR technology enables multiple base stations in a given
area to use the same frequency. As a result, a message sent by a subscriber can
be received by a number of base stations. This technology contrasts with more
commonly used multiple frequency reuse ("MFR") systems which provide for only
one transmission path for a given message at a particular frequency. In
comparison with MFR systems, the Company's technology provides superior
in-building penetration and response times and enables the Company to
incrementally deploy additional capacity as required, instead of in larger
increments as required by most wireless networks.
- 4 -
Business Strategy
-----------------
The Company's objective is to maximize its revenues by delivering value-added
services to end users in specific market segments. To meet this objective and to
capitalize upon the competitive advantages resulting from the combination of its
satellite and terrestrial networks, the Company intends to: (i) offer business
customers a broad range of nationwide wireless service and end-to-end data
solutions; (ii) integrate and leverage the advantages of its nationwide
terrestrial and satellite data networks; (iii) enhance market penetration by
lowering customers' "total cost of ownership"; and (iv) expand the use of
alternate distribution channels to accelerate network loading.
Offer Business Customers a Broad Range of Nationwide Wireless Solutions. The
Company believes its corporate customers prefer a single-source service provider
capable of delivering a broad range of efficient and cost effective solutions to
meet their need for mobile wireless communications. The Company believes that it
has and will continue to have a unique strategic advantage in being able to
provide one-stop shopping across a broad range of products, including two-way
paging and advanced messaging, packaged e-mail and LAN solutions, custom data
applications, dual mode terrestrial/satellite data, and satellite voice and
dispatch functions.
Integrate and Leverage Network Advantages. The Company has spent over a decade
developing and deploying its nationwide terrestrial and satellite networks and
now seeks to accelerate growth by leveraging its integrated network. Unlike many
competitors with plans to build out limited city-wide or regional terrestrial
networks or to launch satellites, the Company's technology infrastructure is in
place and operational today, with future network expansion requirements arising
primarily from increased customer demand. The Company believes that this
integrated terrestrial/satellite network provides key competitive advantages
currently unmatched by any competitor: virtually 100% nationwide geographic
coverage, guaranteed message delivery, and, in the areas covered by the ARDIS
network, deep in-building penetration. By integrating the operations of its
terrestrial and satellite networks, the Company expects to achieve operating
efficiencies and economies of scale that it believes will lead to improved
operating margins.
Enhance Market Penetration By Reducing Customers' "Total Cost of Ownership."
Historically, the most significant obstacle to the implementation of
enterprise-wide wireless data applications has been the relatively high total
cost of ownership. The total cost of ownership is comprised of three primary
elements: the cost of the subscriber unit, the required investment in software
development, and the monthly cost of network access and usage. In most of the
Company's applications, the monthly cost of network access and usage has been
the least prohibitive of these elements. Until recently, subscriber unit costs
in excess of $3,000 and custom software investments of up to several million
dollars were common. By working with business partners and vendors, and making
strategic software investments, the Company has succeeded in significantly
lowering the total cost of ownership for its customers. New subscriber units,
including low-cost two-way messaging units and laptop modem cards, are now
available for $500 or less and substantial development work is underway with
several of the Company's vendors to accelerate reductions of equipment cost,
unit weight and size. In the future, the Company expects that the increased
subscriber unit volumes associated with recent large contract awards will lead
- 5 -
to additional unit price reductions. In addition, customers can now use
off-the-shelf software applications that are relatively inexpensive, or in the
case of the Company's two-way messaging service, free. The Company believes that
these lower price points will accelerate the adoption of the Company's services
in its historical markets, and will enable the Company to develop new markets,
such as wireless point-of-sale and telemetry.
Expand Alternate Distribution Channels. The Company sells it service primarily
through a direct sales force and resellers. In order to accelerate network
loading, the Company expects to expand its use of indirect distribution
channels. To date, the Company has entered into agreements with resellers to
penetrate markets where such resellers have a market presence and significantly
greater resources than the Company, including dedicated sales personnel. In
addition, the Company is in the process of establishing relationships with
existing paging companies, paging resellers, and other targeted distribution
partners to market two-way guaranteed messaging services. The Company believes
that the resale of its network is an alternative that paging companies will
consider either as an expansion of the current two-way messaging product or as
an alternative to investment in network infrastructure for two-way messaging.
The Company intends to utilize paging companies and other similar partners with
well established distribution capabilities to develop markets outside of the
Company's historical market segments.
Marketing and Distribution
--------------------------
The Company markets its services through four primary distribution channels:
direct sales, vertical resellers, horizontal resellers and dealers.
Direct Sales
- ------------
The Company has a direct sales force that focuses on the requirements of
business customers. This sales organization is comprised of a national accounts
group that profiles and targets specific Fortune 500 accounts, and a network of
regionally based representatives who specialize in specific industry segments.
Sales to national account targets generally require a sustained marketing effort
lasting several months. Prior to making a buying decision, a majority of the
accounts exercise a due diligence process where competitive alternatives are
evaluated. The Company's employees often assist in developing justification
studies, application design support, hardware testing, planning and training.
Vertical Resellers
- ------------------
In order to penetrate quickly certain market segments characterized by
specialized technical requirements and/or unique business applications, the
Company leverages the capabilities of specialized distribution partners. These
relationships enable the Company to penetrate new market segments without
investing in the product, training and development requirements typically
associated with entry into a new market segment.
The Company's resale arrangements are specifically designed to accelerate entry
into the wireless telemetry (utility and alarm monitoring), point-of-sale,
maritime and government market segments. These business partners are responsible
for development of the end-user solutions, and purchase capacity on the
Company's data network.
- 6 -
Value added service providers ("VASPs") represent the Company's primary
distribution channel for maritime satellite telephony. VASPs purchase bulk
minutes, resell at a margin, set the price, take risk of collection and perform
all service and billing functions.
The Company currently utilizes three specialized government resellers, one of
which has included the Company's products on the General Services Administration
schedule. The Company intends to expand the distribution opportunities for its
terrestrial data products by also including them in these programs.
The Company also has various private network customers ("PNCs") that purchase
bulk satellite capacity from the Company in the form of dedicated capacity
increments or channels. PNCs use this capacity to support their own proprietary
networks and products, and maintain all associated business risks and
responsibilities.
Horizontal Resellers
- --------------------
The Company utilizes a series of resale relationships designed to reach a large
segment of the mobile workforce that does not require integration with
centralized systems, but still has a broad need for two-way messaging and
wireless e-mail access. Because these applications are generic across numerous
industries, the segment is horizontally addressable, and requires some level of
retail presence. To achieve this presence, the Company is in the process of
establishing relationships with existing paging companies, paging resellers and
other targeted distribution partners to market two-way guaranteed messaging
services. The Company also maintains relationships with manufacturers of
personal handheld computing devices, that include the Company's marketing
material with the device packaging to provide the purchaser the option of
wirelessly enabling a handheld computing device.
Dealer Channels
- ---------------
The Company also uses dealers who distribute the Company's nationwide dispatch
and satellite telephony products. These dealers typically have strong business
relationships with regional public safety entities, as well as with smaller
field service fleets. The Company believes that opportunities exist to
capitalize on the strengths of this channel by introducing a low cost
terrestrial data device with minimum integration requirements. Typically these
dealers serve as agents for sales and service and do not set pricing or provide
billing and collection services. These dealers are generally compensated with a
modest percentage of the service revenue for which they are responsible.
Customer Concentration
- ----------------------
After giving pro forma effect to the Acquisition, five existing customers
(including IBM) accounted for 40% of the Company's recurring service revenue for
the twelve months ended December 31, 1998. The loss of one or more of such
customers, or any event, occurrence or development which adversely affects the
relationship between the Company and such customer could have a material adverse
effect upon the Company.
- 7 -
Equipment; Supplier Relationships
---------------------------------
The Company has contracts with multiple vendors to supply equipment
configurations designed to operate on each of its networks. These devices are
designed to meet the requirements of specific end-user applications. The Company
continues to pursue enhancements to these devices that will result in additional
desirable features and reduced cost of ownership. Although many of the
components of the Company's products are available from a number of different
suppliers, the Company does rely upon a few key suppliers.
In connection with its mobile data communications service, the Company presently
has an agreement with Conexant Systems, Inc. (formerly Rockwell Semiconductor
Systems) to provide multi-mode data communications equipment and Vistar
Telecommunications Inc., a Canadian company, to provide multi-mode data terminal
equipment. The Company also has contracted with Vistar Telecommunications for
the development and manufacture of a new multi-mode terminal. The new terminal,
scheduled to begin delivery in the second half of 1999, will incorporate design
changes that lower the total cost of ownership. The Company believes that the
price of multi-mode terminals will continue to decline in the coming years.
There are currently over 30 different types of subscriber units available from
15 manufacturers that can operate on the terrestrial network. Examples of
portable subscriber units include ruggedized laptop computers, small external
modems, handheld or palmtop "assistants," pen based "tablets," and two-way
messaging devices, such as the Research in Motion (RIM) Inter@ctive PagerTM.
Significant developers of devices that are compatible with the network include
RIM and Itronix. RIM manufactures modems designed to be integrated into handheld
field service terminals, telemetry devices, utility monitoring and security
systems as well as other computing systems. RIM has also developed the
Inter@ctive PagerTM that operates on the Company's two-way messaging service.
RIM has developed a new generation Inter@active PagerTM that will begin delivery
in the second half of 1999. Itronix manufactures the XC-6000, a fully ruggedized
laptop computer with a standard keyboard and an integrated wireless modem.
Mobile satellite voice telephones are offered in a number of different
configurations that deliver a variety of features and options to meet specific
market needs. Mobile satellite telephones are currently available in land mobile
vehicle installed, fixed site, maritime, aeronautical, and fully transportable
(i.e., battery powered and packaged in a briefcase) configurations. Subscriber
equipment for satellite telephone service and nationwide dispatch service
includes data interface ports to allow connection to communications accessories
such as personal computers, and global positioning satellite ("GPS") tracking
devices. Recent enhancements allow users to use the dispatch product remotely
from the vehicle, via a wireless tether. The primary suppliers for the voice
terminal equipment are Westinghouse Wireless Solutions, Inc. ("Westinghouse")
and Mitsubishi Electronics America ("Mitsubishi"). The Company currently
believes it has sufficient inventory of voice terminal equipment on hand to meet
its customers' needs for the next two years and continues working with
Westinghouse and Mitsubishi to provide support and service to its voice
customers.
Tandem computer provides the ARDIS network switching computers under a
multi-year lease that extends through the year 2000, while AT&T provides network
services including a nationwide wireline data network, and leased sites which
house regional ARDIS switching equipment.
- 8 -
The Company also has a relationship with AT&T as its vendor for switched inbound
and outbound public switched telephone network services. The satellite system
terminates calls from its telephone product via both the AT&T and Sprint
networks.
ARDIS has executed multiple agreements with Motorola that provide for certain
continued support from Motorola with respect to: supply and support for the
ARDIS DataTAC network infrastructure; ongoing maintenance and service of the
ARDIS base stations; and lease administration services for approximately 37% of
ARDIS' base station site leases.
Hughes Network Systems Ltd, of the United Kingdom, manufactures and supports the
key component to the Company's multi-mode and satellite messaging products,
which is the Land Earth Station ("LES"). There are currently four LES's
operational. The platform for the Company's voice products, the communications
ground segment ("CGS"), depends upon products from multiple vendors, most of
which are generally commercially available. Northern Telecom manufactures and
supports the core voice switch. Digital Equipment Corporation supplies the
computing platform that runs the CGS.
American Mobile owns certain patents, technical data and other intellectual
property, developed in connection with its communications network. American
Mobile has joint ownership with the Canadian mobile satellite service provider,
TMI Communications and Company, Limited Partnership ("TMI") of certain other
intellectual property, and licenses intellectual property from other vendors for
operation of its network. The Company believes its ownership of and rights to
intellectual property for its system is sufficient for its business purposes.
The ARDIS network, and certain of its competitive strengths such as deep
in-building penetration, is based upon SFR technology. Motorola holds the patent
for SFR technology. ARDIS has entered into support agreements with Motorola to
provide for certain support of the operations of the ARDIS network. However,
there can be no assurance that Motorola will not enter into arrangements with
the Company's competitors, or that if it does, such arrangements would not have
a material adverse effect on the Company.
Satellite Lease and Purchase Agreements
---------------------------------------
As previously reported, on December 4, 1997, the Company entered into
simultaneous agreements with African Continental Telecommunications Ltd.
("ACTEL") to lease the Company's MSAT-2 satellite for redeployment by ACTEL over
subsaharan Africa and with TMI to acquire a one-half interest in TMI's MSAT-1
satellite. As previously reported, closing of each of the lease and purchase
were subject to the satisfaction of a number of conditions, including the
completion of financing by ACTEL. As ACTEL has not obtained the requisite
financing, the agreements were terminated on March 24, 1999.
Following the termination of the ACTEL-related agreements, the Company and TMI
each maintain operations on their two satellites, and continue to provide each
other emergency back-up and restoral services in accordance with long-standing
arrangements. See "Business-Satellite Back-up and Technology".
- 9 -
Satellite Back-up and Technology
--------------------------------
The Company has an agreement with TMI, the Canadian mobile satellite owner and
operator of MSAT-1, for back-up, restoral and additional capacity usage if the
Company's satellite fails or the Company needs additional capacity. In return,
the Company has agreed to provide TMI with similar back-up service on the
Company's MSAT-2 satellite. Each of the MSAT-1 and MSAT-2 satellites has in the
past experienced some technological malfunctions. While recent MSAT-2
malfunctions have involved either spare components or ones that did not have a
material impact on current operations, it is possible that either or both
satellites could experience future malfunctions at any time.
MSAT-2 has an expected end of service life of 2006 subject to potential
technological failures and other factors. For example, random failure of
satellite components could result in damage to or loss of MSAT-2. It is also
possible that the satellite could be damaged by electromagnetic storms or
collisions with other objects, although such occurrences are rare. Although the
actual service life of the satellite may exceed its expected service life, the
Company cannot guarantee that the expected service life will be achieved or
exceeded. Although the Company has in-orbit insurance for a failure of MSAT-2,
it is unlikely that any recovery under such insurance would fully compensate
American Mobile for losses it would sustain for such a failure. In addition, the
in-orbit insurance policy is subject to annual or biannual renewal, and American
Mobile cannot guarantee that insurance on favorable terms and at commercially
reasonable rates will remain available for coverage of MSAT-2.
Competition
-----------
The wireless communications industry is highly competitive and is characterized
by constant technological innovation. The Company competes by providing
comprehensive, end-to-end solutions and a premium level of service in the
markets it serves. End-to-end solutions have been assembled working with a
select group of business partners who develop and manufacture software,
middleware and hardware components. The Company differentiates itself with its
unmatched geographic coverage, in-building penetration, guaranteed message
delivery, and guaranteed reliability.
The Company competes with a full array of companies, from small startups to
Fortune 500 companies. Many of these competitors have greater financial,
technical and marketing resources than the Company's. Because the Company
competes in several market segments with a broad range of services, competitors
and competing technologies may address one or more of the market segments. The
Company has identified seven major classes of technologies or services that
offer capabilities competitive with the Company's services: Terrestrial
Packetized Data; Cellular/PCS; Specialized Mobile Radio ("SMR")/Enhanced
Specialized Mobile Radio ("ESMR"); Private Land Mobile Systems;
Paging/Narrowband PCS; Two-Way Messaging and Mobile Satellite Services.
Terrestrial Packetized Data. Companies using packetized data technologies
provide wireless data services that compete directly with a number of the
Company's data products. Packetized data technology relies on radio frequencies
to transmit short-burst data messages. Primary competitors using this technology
include BellSouth Wireless Data Limited Partnership ("BS Wireless Data")
(formerly RAM Mobile Data), Metricom, Teletrac and Cellnet. BS Wireless Data, a
wholly-owned subsidiary of BellSouth Corporation, operates a terrestrial-only
network that provides data services to customers primarily in the field service,
- 10 -
transportation and utility industries. The Company believes that its network
provides broader coverage, and superior in- building penetration compared to BS
Wireless Data's network. In addition, the Company is upgrading its network in
major cities so that it will operate at faster speeds than the BS Wireless Data
network. Metricom's Ricochet service provides wireless, mobile access to the
Internet, private intranets, local area networks and e-mail. Metricom currently
offers its service in limited regions comprised of San Francisco, Seattle,
Houston and Washington, D.C. Teletrac provides primarily location and vehicle
monitoring and two-way data transfer services in major metropolitan areas and
Cellnet provides wireless meter reading services.
Cellular and PCS. Cellular and PCS services compete with the Company's satellite
and terrestrial voice and data services, and presently serve the majority of
mobile communications users in the United States, with over 61,000,000 units.
Approximately 2,300 cellular and PCS systems collectively provide service
throughout most of the United States, with no single competitor providing the
breadth of coverage that is available through the Company's network. Cellular
Digital Packet Data ("CDPD"), the cellular industry's standard packet data
service, is available principally in metropolitan areas containing approximately
44% of the nation's population at the end of 1998. Some cellular and PCS
carriers offer short message capabilities, depending on the protocol they use,
and expect to offer larger capacity packet data services in the near future.
Most cellular and PCS providers have structured their services and distribution
principally to meet switched voice service requirements of broad-market users.
There is minimal direct competition between the Company's voice products and
most other cellular carriers' voice products owing to differences in equipment,
service pricing and product characteristics. HighwayMaster Communications, Inc.,
however, offers data and voice communications to the long-haul trucking industry
using its proprietary messaging and billing technologies and circuit-switched
cellular capacity which it purchases in bulk from cellular carriers.
Specialized Mobile Radio (SMR) and Enhanced Specialized Mobile Radio (ESMR)
Services. SMR is a terrestrial trunked dispatch voice and mobile telephone
service in the 800 and 900 MHz bands. ESMR is a wide-area form of SMR. SMR
services have been expanding rapidly over the past ten years and converting from
analog to digital technology. Within the limitations of available spectrum and
coverage, SMR operators compete with the Company's voice dispatch services by
providing mobile communications services, including mobile telephone, dispatch,
paging and limited data services. For certain applications, such as mobile
telephone interconnect, SMR systems are less expensive than the Company's
services, although the shared channel configuration and the economics of these
systems have traditionally caused SMR systems to be less frequently used for
voice telephone services.
ESMR systems compete with the Company's voice and data dispatch services in
metropolitan areas. NEXTEL Communications, Inc. ("Nextel") provides ESMR
services in numerous large metropolitan service areas in the United States and
is the leading provider of SMR using digital technology, frequency reuse and
lower power transmitters to transform its current SMR service into cellular-like
services, including voice telephone services. Nextel, however, does not provide
nationwide voice dispatch or data services comparable to those offered by the
Company.
Private Land Mobile Systems. Individual companies that have chosen to develop
their own private wireless data network constitute a large percentage of the
wireless marketplace for corporate fleets. An example of such a customer is
Federal Express. While these companies already have made significant investments
in their systems, in some cases recurring maintenance, upgrade and expansion
- 11 -
costs, coupled with recent steps by the FCC to charge private system owners for
the use of the radio frequencies, have caused these organizations to turn to
commercial providers such as the Company.
Narrowband PCS/Enhanced Paging. A large number of paging companies offer
messaging services on a regional or nationwide basis. Despite the low cost of
one-way paging, most traditional paging services do not provide full-function
two-way communications. Although some paging companies, such as MTel, have begun
to offer limited two-way messaging services, initial challenges in coverage,
responsiveness and throughput currently limit their adoption by the Company's
targeted business customers.
Two-Way Messaging. Unlike two-way paging, two-way messaging provides
approximately equal amounts of throughput both to and from the mobile user. Some
traditional paging companies, such as PageNet, and certain companies providing
packetized data to vertical markets, such as BS Wireless Data, are expanding
into this horizontal offering. Typical applications include wireless e-mail,
near-real time delivery of stock quotes and other time sensitive information,
and mobile workforce communications. The Company considers this to be one of the
most dynamic markets in which it competes, offering considerable opportunity and
risk because it is untested.
Mobile Satellite Services. The Company's voice and data services face
competition from a number of companies selling or developing services using a
variety of satellite technologies. The principal competing satellite-based
communications system available to the trucking market is Qualcomm
Incorporated's ("Qualcomm") OmniTracs nationwide data service. Qualcomm
currently provides low-speed mobile data services using terminals which are
priced competitively with the Company's satellite-only terminals. Qualcomm's
OmniTracs service does not provide a terrestrial communications path or
least-cost routing capabilities similar to the Company's multi-mode product. As
a result, transmissions to and from a vehicle must be routed exclusively over a
satellite network and are subject to line of sight blocking and higher
transmission costs, limiting the product's functionality and cost-effectiveness
in segments that require urban coverage or large volumes of data transmission.
NORCOM Networks Inc. ("NORCOM") is in the process of commercially deploying a
satellite-based packet data service that competes with the Company's data
services in the transportation and field service segments. NORCOM currently
purchases channel capacity on the Company's satellite over which it operates its
network, and combines its satellite data service product with terrestrial
services provided by BS Wireless Data and by the Company.
The Company's satellite services also compete for mobile maritime subscribers
with TMI, a Canadian company operating a satellite comparable to MSAT-2, and
with Inmarsat, a consortium of 70 countries that is authorized to provide
maritime voice and data services along the North American coasts. Because
Inmarsat's current system operates at a much lower power level than does the
Company's satellite, its mobile terminals must be equipped with antenna systems
that are larger and more expensive than those required for the Company's
network. The Inmarsat system also has per minute charges significantly higher
than those charged by the Company. Comsat, the U.S. signatory for Inmarsat,
applied to the FCC for authority to provide mobile satellite services ("MSS") in
the United States through Inmarsat facilities. TMI, which is technically capable
of providing service within the United States, has also applied for authority to
provide MSS to domestic customers over MSAT-1. Although the FCC has consistently
denied Comsat's application, most recently on January 9, 1998, there can be no
assurances that Comsat, TMI, or any other satellite provider, will not become
authorized to provide MSS in the United States. The FCC has granted SatCom
- 12 -
Systems, Inc., a reseller of TMI's service, temporary authority to operate a
limited number of mobile terminals in the United States so that it may conduct
market trials. (See "Regulation").
Recently, several Low Earth Orbit ("LEO") and Medium Earth Orbit ("MEO")
satellite systems have commenced deployment. These systems, which are more
complex and costly than the Company's geosynchronous network, include Iridium
LLC; Globalstar Telecommunications, Ltd., and ICO Global. When deployed, these
systems will offer certain advantages over the Company's voice telephony
service, including the ability to support small handheld telephones and, in
certain instances, reduced transmission delay. However, the Company does not
expect that these systems will provide a nationwide dispatch service or support
data service in excess of 4,800 bps. Moreover, these companies are focused
primarily on consumer-oriented and global traveler applications and not the
business markets that are the focus of the Company. Further, because these are
satellite systems, they are not expected to compete against urban in-building
data services provided by the Company.
In addition to relatively complex LEO systems designed to provide mobile voice
services, there are relatively simple "little" LEO systems that would provide
only low-speed packet data services. These systems, including ORBCOMM Global,
L.P., and LEO One USA, have access to comparatively limited spectrum and are
expected to compete for customers who require specialty applications such as
asset tracking services for unpowered trailers.
Regulation
----------
American Mobile's satellite network and ARDIS terrestrial two-way wireless data
network are regulated to varying degrees at the federal, state, and local
levels. Various legislative and regulatory proposals under consideration from
time to time by Congress and the FCC have in the past materially affected and
may in the future materially affect the telecommunications industry in general,
and American Mobile in particular. In addition, many aspects of regulation at
the federal, state and local level currently are subject to judicial review or
are the subject of administrative or legislative proposals to modify, repeal, or
adopt new laws and administrative regulations and policies. The following is a
summary of significant laws, regulations and policies affecting the operation of
American Mobile business.
General
- -------
The ownership and operation of American Mobile's satellite network and ARDIS
terrestrial network are subject to the rules and regulations of the FCC, which
acts under authority established by the Communications Act and related federal
laws. Among other things, the FCC allocates portions of the radio frequency
spectrum to certain services and grants licenses to and regulates individual
entities using that spectrum.
American Mobile operates pursuant to various licenses granted by the FCC.
American Mobile is a Commercial Mobile Radio Service ("CMRS") provider and
therefore is regulated as a common carrier. The Company must offer service at
just and reasonable rates on a first-come, first-served basis, without any
unjust or unreasonable discrimination, and it is subject to the FCC's complaint
processes. The FCC has forborne from applying numerous common carrier provisions
of the Communications Act to CMRS providers. In particular, American Mobile is
not subject to traditional public utility rate-of-return regulation, and the
Company is not required to file tariffs with the FCC for its domestic services.
- 13 -
As providers of interstate telecommunications services, American Mobile is
required to contribute to the FCC's universal service fund, which supports the
provision of affordable telecommunications to high-cost areas, and the provision
of advanced telecommunications services to schools, libraries, and rural health
care providers. Under the FCC's current rules, American Mobile is required to
contribute a percentage of the end-user telecommunications revenues it derives
from the retail sale of telecommunications services. Currently excluded from a
carrier's universal service contribution base are end-user revenues derived from
the sale of information and other non-telecommunications services and wholesale
revenues derived from the sale of telecommunications. A significant portion of
the ARDIS network revenue falls within the excluded categories, thereby reducing
American Mobile's universal service assessments. Current rules also do not
require that American Mobile imputes to its contribution base retail revenues
derived when it uses its own transmission facilities to provide a service that
includes both information service and telecommunications components. There can
be no assurances that the FCC will retain the exclusions described herein or its
current policy regarding the scope of a carrier's contribution base. A number of
parties have filed petitions for review of the FCC's universal service policy
and these appeals have been consolidated in the U.S. Court of Appeals for the
Fifth Circuit. American Mobile may also be required to contribute to state
universal service programs. The requirement to make these state universal
service payments, the amount of which in some cases may be subject to change and
is not yet determined, may have a material adverse impact on the conduct of its
business.
American Mobile is subject to the Communications Assistance for Law Enforcement
Act ("CALEA"). Under CALEA, American Mobile must ensure that law enforcement
agencies can intercept certain communications transmitted over its networks.
American Mobile must also ensure that law enforcement agencies are able to
access certain call-identifying information relating to communications over its
networks. The Company must comply with the CALEA requirements and any rules
subsequently promulgated by June 30, 2000 or face possible sanctions, including
substantial fines and possible imprisonment of company officials. It is not
clear whether the Company will be able to comply with CALEA's requirements or
will be able to do so in a timely manner. CALEA establishes a federal fund to
compensate telecommunications carriers for all reasonable costs directly
associated with modifications performed by carriers in connection with
equipment, facilities, and services installed or deployed on or before January
1, 1995. For equipment, facilities, and services deployed after January 1, 1995,
the CALEA fund is supposed to compensate carriers for any reasonable costs
associated with modifications required to make compliance "reasonably
achievable." It is possible that all necessary modifications will not qualify
for this compensation and that the available funds will not be sufficient to
reimburse American Mobile. The requirement to comply with CALEA could have a
material adverse effect on the conduct of its business.
As a matter of general regulation by the FCC, American Mobile is subject to,
among other things, payment of regulatory fees, restrictions on the level of
radio frequency emissions of its systems' mobile terminals and base stations,
and "rate integration" regulations requiring that providers of interstate
interexchange telecommunications services charge the same rates for these
services in every state, including Puerto Rico and the U.S. Virgin Islands. Any
of these regulations may have an adverse impact on the conduct of its business.
The FCC licenses of American Mobile are subject to restrictions in the
Communications Act that (i) certain FCC licenses may not be held by a
corporation of which more than 20% of its capital stock is directly owned of
record or voted by non-U.S. citizens or entities or their representatives and
(ii) that no such FCC license may be held by a corporation controlled by another
- 14 -
corporation ("indirect ownership") if more than 25% of the controlling
corporation's capital stock is owned of record or voted by non-U.S. citizens or
entities or their representatives, if the FCC finds that the public interest is
served by the refusal or revocation of such license. However, with the
implementation of the Basic Telecommunications Agreement ("BTA"), negotiated
under the auspices of the World Trade Organization ("WTO") and to which the
United States is a party, the FCC will presume that indirect ownership interests
in excess of 25% by non-U.S. citizens or entities will be permissible to the
extent that the ownership interests are from WTO-member countries. The BTA took
effect on February 5, 1998, and the FCC's implementing regulations took effect
on February 9, 1998.
American Mobile's Satellite Network
- -----------------------------------
American Mobile is licensed by the FCC to provide a broad range of mobile voice,
data and dispatch services via satellite to land, air and sea-based customers in
a service area consisting of the continental United States, Alaska, Hawaii,
Puerto Rico, the U.S. Virgin Islands and U.S. coastal waters and airspace.
American Mobile is also authorized to provide fixed site voice and data services
via satellite to locations within this service area, so long as such services
remain incidental to American Mobile's mobile communications services. American
Mobile is authorized to build, launch and operate three geosynchronous
satellites in accordance with a specified schedule. American Mobile is not in
compliance with the schedule for commencement and construction of its second and
third satellites and has petitioned the FCC for changes to the schedule. Certain
of these extension requests have been opposed by third parties. The FCC has not
acted on American Mobile's requests. The FCC has the authority to revoke the
authorizations for the second and third satellites and, in connection with such
a revocation, could exercise its authority to rescind American Mobile's license.
American Mobile believes that the exercise of such authority to rescind the
license is unlikely. The term of the license for each of American Mobile's three
authorized satellites is ten years, beginning when American Mobile certifies
that the respective satellite is operating in compliance with American Mobile's
license. The ten-year term of MSAT-2 began August 21, 1995. Although American
Mobile anticipates that the authorizations are likely to be extended in due
course to correspond to the useful lives of the satellites and that new licenses
will be granted for replacement satellites, there is no assurance of such
extension or grant.
On July 2, 1998, American Mobile filed an application for authority to launch
and operate its second-generation mobile satellite system. This satellite is
intended to support American Mobile's existing satellite services and also allow
the provision of an extended array of services, such as higher data rate
services and services to lower-power terminals. There is no guarantee that the
FCC will grant this application. The filing of the application does not commit
American Mobile to expend any resources toward this project; however, should
American Mobile decide to proceed with the construction of the follow-on
satellite, American Mobile would be required to raise substantial additional
capital to fund this project.
American Mobile's current foreign ownership level, for which the indirect
ownership limits are applicable, is at least 14%. This figure does not include
any foreign ownership of Motorola, Inc. which holds approximately a 20.23%
interest in American Mobile. Singapore, which is the domicile of Singapore
Telecom, one of American Mobile's largest shareholders, is a WTO-member country.
MSAT-2 is designed to be able to operate over the 1530-1559/1631.5-1660.5 MHz
bands (the "L-band"). American Mobile is currently licensed to operate in the
1544-1559/1645-1660.5 MHz bands (the "upper L-band"). The FCC has designated
American Mobile as the licensee for both MSS and Aeronautical Mobile Satellite
- 15 -
(Route) Service ("AMS(R)S"). AMS(R)S includes satellite communications related
to air traffic control, as well as aeronautical safety-related operational and
administrative functions. As a condition to its authorization, American Mobile
is required by the FCC to be capable of providing priority and preemptive access
for AMS(R)S traffic in the upper L-band and to be interoperable with and capable
of transferring AMS(R)S traffic to international and foreign systems providing
such service. American Mobile currently anticipates it will be able to meet
these requirements without any material adverse effect on its business. If
American Mobile is unable to meet these requirements, the FCC may authorize and
give priority spectrum access to one or more additional satellite systems that
meet the specified requirements.
American Mobile has applied for authorization to operate in the additional
1530-1544/ 1631.5-1645.5 MHz bands (the "lower L-band"). If American Mobile is
assigned spectrum in the lower L-band, it will be required by the FCC to provide
similar priority and preemptive access in that spectrum to maritime distress and
safety communications. With respect to its mobile voice terminals, American
Mobile currently anticipates it will be able to meet this requirement without
any material adverse effect on its business. The Federal Aviation Administration
("FAA") filed comments, however, in connection with American Mobile's
application to operate up to 30,000 mobile data terminals that were transitioned
from leased space segment to MSAT-2 in late 1995, stating its concern that the
mobile data terminals cannot be operated in compliance with American Mobile's
obligation to provide priority and preemptive access in the upper L-band. The
FAA has proposed that American Mobile operate the mobile data terminals in the
lower L-band. American Mobile has received successive six-month grants of
special temporary authority ("STA"), under a two-year waiver of the FCC's rules
on priority and preemptive access, to operate up to 15,100 mobile data terminals
in the lower L-band. This number was increased to 33,100 terminals pursuant to
American Mobile's acquisition of the mobile data equipment and services
previously licensed to Rockwell. The two-year waiver expired on August 1, 1997,
but remains in effect while American Mobile's request for a two-year extension
of that waiver is pending at the FCC. American Mobile will need additional
authority to increase the number of mobile data terminals that it is authorized
to operate in order to achieve planned growth in its data services. American
Mobile will also need permission from the FCC to operate mobile data terminals
with a different transmission design than those operated under its current lower
L-band authorization. Transmissions from these terminals require a wider band
width than do transmissions from American Mobile's existing terminals. American
Mobile was granted a six-month STA to operate up to 10,000 of these mobile data
terminals on February 12, 1999. American Mobile will be need additional
authorization from the FCC to operate up to 100,000 of these terminals as
contemplated. There can be no assurance that American Mobile will continue to
receive authority to operate these new mobile data terminals or any other
additional mobile data terminals in the lower L-band.
American Mobile's mobile terminal authorizations are subject to compliance with
certain requirements regarding interference protection to the Global Positioning
System ("GPS"). With the consent of the FAA, the FCC granted American Mobile's
application subject to certain conditions, including that the grant may be
modified after the interference issue is studied. The FCC is now proposing to
impose more stringent limits on the out-of-band emissions from certain mobile
terminals, including those used in connection with American Mobile's system, in
order to protect GPS and the Russian Global Navigation Satellite System
("Glonass"). Some of American Mobile's existing mobile terminals may not comply
with this proposed standard. Under the Commission's proposal, all mobile
terminals commissioned after January 1, 2002 must comply with this new limit,
and any terminals not meeting the new specifications must be retired or
retrofitted by 2005. While American Mobile believes that it will be able to
comply with the proposed 2002 deadline for newly commissioned terminals,
American Mobile will oppose the 2005 deadline for the retirement or retrofitting
- 16 -
of existing, non-compliant terminals. If adopted by the FCC, this policy could
have a material adverse effect on American Mobile's business.
American Mobile's license authorizes MSAT-2 to operate using certain telemetry,
transfer and control frequencies in the Ku-band. American Mobile operates MSAT-2
at the 101 degrees W.L. orbital location. GE American Communications, Inc. ("GE
American"), also operates a satellite at the 101 degrees W.L. orbital location.
American Mobile and GE American have an agreement covering MSAT-2 that may
require American Mobile to modify its operations or make certain payments to GE
American if American Mobile's operations cause interference to those of GE
American. While there can be no assurances, the Company does not anticipate any
interference in the operations of MSAT-2 and those of GE American.
American Mobile's subscriber equipment will operate in L-band frequencies that
are limited in available bandwidth. The feeder-link earth stations and the
network communications controller of the CGS operate in the more plentiful fixed
satellite service Ku-band frequencies. Of the 30 MHz in the upper L-band
frequencies, American Mobile is currently licensed to operate in the
1544-1559/1645.5-1660.5 MHz bands. Of the 30 MHz assigned to American Mobile by
the FCC, one MHz is limited to AMS(R)S and one-way paging and two MHz are
limited to distress and safety communications. American Mobile does not plan to
operate on these three MHz of bandwidth.
In June 1996, the FCC issued a notice of proposed rulemaking proposing to assign
to American Mobile the first 28 MHz of internationally coordinated L-band
spectrum from either the upper or lower portion of the MSS L-band. Under the
FCC's proposal, American Mobile would have first priority access to use the
lower L-band spectrum as necessary to compensate for spectrum unavailable for
coordination in the upper L-band. In the event the United States is able to
coordinate more than 28 MHz of L-band spectrum, the FCC has proposed allowing
other applicants to apply for assignment of those frequencies. Certain entities
have filed with the FCC petitions to deny American Mobile's application and
comments opposing the assignment of additional frequencies to American Mobile.
While there can be no assurances, American Mobile believes the FCC is likely to
grant American Mobile's application.
In the Ku-band frequencies, American Mobile is currently licensed to operate
MSAT-2 using 200 MHz within the bands 10.75-10.95 GHz for downlink transmissions
and 13.0-13.15 GHz and 13.2-13.25 GHz for uplink transmissions. American Mobile
has applied for authority to operate using an additional 200 MHz of spectrum
within the same bands.
Spectrum availability, particularly in the L-band, is a function not only of how
much spectrum is assigned to American Mobile by the FCC, but also the extent to
which the same frequencies are used by other systems in the North American
region, and the manner of such use. All spectrum use must be coordinated with
other parties that are providing or plan to provide mobile satellite-based
communications in the same geographical region using the same spectrum. At this
time, the other parties with which spectrum use must be coordinated include
Canada, Mexico, the Russian Federation and Inmarsat. In addition, a new Japanese
system that is to be launched this year proposes to operate in a manner that
would interfere with American Mobile's system and other systems in this region,
and this Japanese system's spectrum use will have to be coordinated with these
regional operators.
- 17 -
Use of the spectrum is determined through a series of negotiations between the
United States government and the other user agencies, pursuant to the rules and
regulations of the International Telecommunication Union ("ITU"). For the past
several years, each of the countries and international organizations that have
used or will use L-band frequencies within the North American region have been
meeting regularly to negotiate and coordinate their current and future use of
that spectrum. American Mobile estimates that international coordination will
make approximately 20 MHz of L-band spectrum available to the United States for
MSAT-2. Since the coordination process involves many parties and there is
uncertainty about the total outcome, the actual amount of spectrum available may
be more or less than that estimated. The operation of the new Japanese system
may have the effect of further reducing American Mobile's access to spectrum.
Some of the spectrum that may be available to American Mobile may include a
portion of the 28 MHz lower L-band spectrum adjacent to the frequencies already
assigned to American Mobile by the FCC.
The ITU's Radio Regulations include a table of frequency allocations that
prescribe the permitted uses of the radio spectrum. As a result of the ITU
satellite plan for parts of the Ku-band, there also may be restrictions on
American Mobile's ability to deploy feederlink earth stations in Alaska, Hawaii,
Puerto Rico, and the U.S. Virgin Islands.
During the course of the licensing process for American Mobile and several times
since, the FCC has stated that there is only enough spectrum in the MSS L-band
for the FCC to authorize a single MSS system to provide service in the United
States. In 1995, however, Comsat applied for authority to provide MSS in the
United States in the L-band over the Inmarsat satellite system. Comsat
subsequently filed an application seeking a blanket authorization for the
operation of 5,000 mobile terminals in the United States, as well as a request
for an STA to operate 50 mobile terminals in the United States. On January 9,
1998, the FCC denied Comsat's request for an STA and required that Comsat amend
its underlying applications to conform with the requirements established in the
FCC's November 1997 order on market access by foreign-licensed satellite
systems. This order conforms the FCC's regulations with the BTA and makes it
easier for foreign satellite systems from WTO-member countries to access the
United States market, while at the same time making clear that the FCC may deny
access to such satellite applicants on the basis of spectrum availability,
applicants' technical, legal, or financial qualifications, or foreign or
domestic policy factors. The order also requires Comsat to make an appropriate
waiver of immunity from any suit as part of any application to provide domestic
services over Inmarsat's system. On January 12, 1998, Comsat filed an appeal of
this order with the U.S. Court of Appeals for the D.C. Circuit, and American
Mobile is opposing this appeal as an intervenor. On February 6, 1998, Comsat
filed an application for review of the FCC's denial of its request for an STA,
and a petition for waiver of the FCC's new market access rules to permit it to
offer MSS on a temporary basis in the United States. American Mobile has opposed
these filings, which remain pending.
In its January 9, 1998 denial of Comsat's STA request, the FCC stated that it
would be willing to authorize Comsat to provide international service if Comsat
amended its blanket license application to show that service through its
terminals and Inmarsat's MSS system could be limited to international traffic.
Comsat has amended its application in order to make this showing. American
Mobile has opposed this application, which remains pending.
On October 23, 1998, the FCC issued an order permitting Comsat to provide
aeronautical services via Inmarsat to the domestic legs of the same aircraft in
international flight. As the FCC noted, this action has a minimal effect on
American Mobile's access to L-band spectrum. Additionally, the Company does not
believe this action will have any effect on revenues.
- 18 -
TMI, which is technically capable of providing service within the United States,
also hopes to provide MSS to domestic customers over MSAT-1. On March 10, 1998,
SatCom Systems, Inc. filed an application for a blanket license to operate up to
25,000 mobile terminals in the United States over MSAT-1 on a permanent basis.
American Mobile has opposed this application, which remains pending. On July 20,
1998, the International Bureau of the FCC granted SatCom an STA to operate up to
500 mobile terminals for 180 days on a private carrier basis so that it may
conduct marketing trials; this STA was subsequently extended to July 12, 1999.
On July 30, 1998, American Mobile filed an Application for Review and a Motion
for Stay of this STA grant with the FCC, and these filings remain pending.
On March 30, 1998, TMI filed its own application for a blanket license to
operate up to 100,000 mobile terminals in the United States over MSAT-1 on a
permanent basis. American Mobile has opposed this application, which remains
pending.
On January 30, 1998, Kitcomm Satellite Communications Ltd. ("Kitcomm") filed a
letter of intent with the FCC to provide MSS to U.S. customers over its proposed
foreign-licensed satellite system. Kitcomm proposes to provide two-way remote
data collection, tracing, and messaging services over a global system in the
lower L-band at 1525-1530/1626.5-1631 MHz. American Mobile has opposed the
operation of this proposed system in the United States, since such operations
would likely reduce the spectrum available to American Mobile either directly or
as a result of international frequency coordination. In order to provide
domestic service, Kitcomm will also have to request authority to operate mobile
terminals in the United States, and American Mobile will oppose any FCC
application by Kitcomm that would reduce the spectrum available to American
Mobile either directly or as a result of international frequency coordination.
In addition to providing additional competition to American Mobile, a grant of
domestic authority by the FCC to one of these foreign systems would
significantly increase the demand for spectrum in the international coordination
process and could adversely affect American Mobile's business.
American Mobile is operating under waivers of certain FCC rules. In 1996, the
FCC issued an order requiring all CMRS providers to offer what are known as
"enhanced 9-1-1 services" including the ability to automatically locate the
position of all transmitting mobile terminals. American Mobile would not have
been able to offer this automatic location information without adding
substantially to the cost of its mobile equipment and reconfiguring its CGS
software. The FCC decided not to impose specific new requirements on MSS
providers, including American Mobile, at that time. The FCC did state its
expectation that such providers eventually would be required to provide
"appropriate access to emergency services." A decision to impose this
requirement on MSS providers could have a material adverse effect on American
Mobile.
The FCC enacted "rate integration" regulations requiring that providers of
interstate interexchange telecommunications services charge the same rates for
these services in every state, including Puerto Rico and the U.S. Virgin
Islands. American Mobile has opposed the imposition of this rate integration
requirement on its MSS system, so that it may preserve the flexibility to charge
more for service in areas covered by satellite beams that require more satellite
power. The FCC has denied American Mobile's request for a permanent exemption
from its rate integration requirement, but has not yet ruled on American
Mobile's request for a temporary waiver of a year or more. The FCC has granted
American Mobile an interim waiver from its rate integration requirement until
its decision on American Mobile's temporary waiver request.
- 19 -
American Mobile's ARDIS Terrestrial Network
- -------------------------------------------
American Mobile's ARDIS terrestrial network consists of base stations licensed
in the Business Radio and Specialized Mobile Radio Service, all operating in the
800 MHz frequency band. The ARDIS network is interconnected with the public
switched data network.
The FCC's licensing regime in effect when it issued licenses for the ARDIS
network provided for the issuance of individual licenses for specific channels
at specific sites. With respect to the part of the band in which all of the
ARDIS base stations operate, however, the FCC has implemented a new licensing
regime. The new licensing regime involves the auctioning of licenses for
specific channels for wide geographic areas, within which the licensee will have
substantial flexibility to operate any number of base stations, including base
stations that may operate on the same channels as incumbent licensees such as
American Mobile. The FCC proposes to prohibit the new geographic licensees from
causing interference to incumbents, but there is concern that such interference
may occur and that practical application of these rules is uncertain.
American Mobile believes that it has licenses for sufficient channels to meet
its current needs for capacity on the ARDIS network. To the extent that it needs
additional capacity, it may be required to either participate in the upcoming
auctions or acquire channels from other licensees. As part of its new licensing
regime, the FCC permits a wide-area geographic licensee, with prior FCC
approval, to sell a portion of its geographic area to another entity. This
partitioning authority may increase American Mobile's flexibility to operate
additional base stations, but the practical utility of this option is uncertain
at this time.
American Mobile operates the ARDIS network under a number of waivers of the
FCC's technical rules, including rules on station identification, for-profit use
of excess capacity, system loading, and multiple station ownership. Several of
these waivers were first obtained individually by IBM and Motorola, which
operated separate wireless data systems until forming the ARDIS joint venture in
1990. The FCC incorporated a number of these waivers into its regulations when
it implemented Congress' statutory provision creating the CMRS classification,
and American Mobile no longer requires those waivers. As of March 3, 1999, ARDIS
completed its planned construction of base stations for which extended
implementation was granted by the FCC in 1996.
The foregoing does not purport to describe all present and proposed federal,
state, and local regulation and legislation relating to the industries in which
American Mobile operates. Other existing federal, state, and local regulations
currently are the subject of a variety of judicial proceedings, legislative
hearings, and administrative and legislative proposal which could change, in
varying degrees, the manner in which American Mobile operates. Neither the
outcome of these proceedings nor their impact on American Mobile's operations
can be predicted at this time.
Year 2000 Readiness
-------------------
American Mobile has developed and is implementing a Year 2000 Readiness Program
("Year 2000 Readiness Program") to address Year 2000 issues. "Year 2000 Ready,"
or "Year 2000 Readiness," means that customers will experience no material
difference in performance and functionality of the Company's networks prior to,
during or after the year 2000.
- 20 -
The Company's Year 2000 Readiness Program uses the phased approach that is
standard in its industry. The Awareness, Inventory and Assessment phases have
been completed, and American Mobile is at various stages of the Renovation,
Validation/Test and Implementation/Rollout phases, depending on the particular
system involved.
The Inventory and Assessment Phases concentrated on the Company's core business
systems: those systems, both hardware and software, whose failure could have a
material impact on its financial condition and operations. Vendors providing
critical products and services to American Mobile are also included in this
definition of core business systems. Although the core business systems are the
top priority in the Company's Year 2000 Readiness Program, American Mobile
assessed all of its software and hardware for Year 2000 Readiness.
American Mobile's plans for the Renovation, Validation/Test and
Implementation/Rollout Phases call for it to be Year 2000 Ready by the end of
the third quarter of 1999. In addition, the Company is currently scheduled to
complete renovation, implementation and rollout of its internal systems
(including its voice customer billing software, CMIS) in the fourth quarter of
1999; these internal software systems do not affect the Company's ability to
pass customer traffic and therefore will not affect Year 2000 Readiness.
The complex of hardware and software that the Company maintains consists of
commercial off-the-shelf (COTS) software, as well as custom software developed
specifically for American Mobile's networks. In certain cases, American Mobile's
Year 2000 Readiness Program involves upgrading COTS software that is unsupported
by the vendor or whose Year 2000 Readiness could not be determined. Upgrading
such COTS software, as planned, provides greater certainty regarding the Year
2000 Readiness of such products and ensures that vendor support will be
available.
The total cost of American Mobile's Year 2000 Readiness Program was
approximately $2.4 million in 1998. Expenditures for the Year 2000 Readiness
Program in 1999 are estimated to be up to $7.4 million. Some modification costs,
including the purchase of software upgrades and consulting services, are
expensed as incurred while other modification costs, such as hardware purchases,
are being treated as capital expenditures.
The estimated cost and date on which American Mobile believes its network will
be Year 2000 Ready are based on management's best estimates. However, there is
no guarantee that the Company will achieve these results and actual results
could differ materially from those anticipated. Some of American Mobile's
critical business systems depend significantly on software programs and third
party services that are not within the Company's control. Failure to solve Year
2000 errors within American Mobile's critical business systems could result in
possible service outages, miscalculations or disruption of operations that could
have a material impact on the Company's business. Because of the Company's heavy
dependence on software, some Year 2000 problems may not be found or the
remediation efforts may introduce new bugs that are not identified before they
impact operations. This applies to both COTS software and custom software.
If American Mobile's customers fail to become Year 2000 ready on time with their
own hardware and software systems, their applications may not function even if
American Mobile's systems are Year 2000 Ready. This will result in reduced
traffic and revenues. Also, suppliers of goods and services may suffer Year
2000-related failures from which the Company cannot adequately protect its
business.
- 21 -
While management believes that the Company will be able to achieve Year 2000
Readiness in a timely manner, the schedule for completing the implementation of
several core business systems extends to the third quarter 1999 and there is a
possibility that American Mobile may not become Year 2000 Ready on time or
within budget. Contingency planning, as discussed below, is currently underway
to minimize the risk of business interruptions caused by Year 2000 problems
within the core business systems.
American Mobile has contingency plans in place to minimize service interruptions
that can mitigate, although not eliminate, interruptions caused by problems
resulting from Year 2000 issues. For example, the Company has backup power
supplies and generators in place for certain portions of its networks in the
event of electrical power outages. In addition, for some services American
Mobile has contracted with more than one service provider. These plans, systems
and services are being incorporated into the Company's Year 2000 contingency
planning. To the extent that it is commercially reasonable to do so, American
Mobile will include other redundant or alternative sources of services in its
Year 2000 contingency planning efforts. American Mobile anticipates having
additional Year 2000 contingency plans in place by June 1999.
Employees
---------
At March 29, 1999, the Company had approximately 470 employees. None of the
Company's employees is represented by a labor union. The Company considers its
relations with its employees to be good.
Item 2. Properties.
- ------- -----------
The Company leases approximately 94,000 square feet at its headquarters office
space and network operations center in Reston, Virginia. The lease has a term
which runs through August 3, 2003 (which may be extended at the Company's
election for an additional five years). In addition, the Company leases a
back-up Ku-band radio frequency facility in Alexandria, Virginia. The Company
also leases approximately 86,000 square feet of space for office space and an
operations center in Lincolnshire, Illinois, the lease for which expires
December 31, 2000 (which may be extended at the Company's election for an
additional five years), and approximately 7,800 square feet for a remote data
center in Lexington, Kentucky, the lease for which expires April 30, 2001. The
Company also leases site space for approximately 1,700 base stations and
antennas across the country for the terrestrial network under one- to five-year
lease contracts with renewal provisions. The Company anticipates that it will be
able to gain access to additional base station sites when necessary on
acceptable terms.
Item 3. Legal Proceedings.
- ------- ------------------
As previously reported, in 1992, a former director of American Mobile filed a
lawsuit against the Company alleging violations of the Communications Act and of
the Sherman Act and breach of contract. The suit was dismissed on November 10,
1998 prior to commencement of trial pursuant to an agreement to settle the suit
by payment of $250,000, which represents the Company's estimate of its cost of
going to trial.
- 22 -
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
No matters were submitted to a vote of the Company's Stockholders during the
fourth quarter of fiscal 1998.
- 23 -
PART II
-------
Items 5, 6, 7 and 8.
- --------------------
The information called for by Items 5 through 8 of Part II is presented in a
separate section of this Annual Report on Form 10-K commencing on the page
numbers specified below:
Form 10-K Item Page
- -------------- ----
Item 5 - Market for the Registrant's Common Equity and Related Matters F-56
Item 6 - Selected Financial Data F-57
Item 7- Management's Discussion and Analysis of Financial Condition
and Results of Operations F- 1
Item 8 - Financial Statements and Supplementary Data F-19
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. None
- 24 -
PART III
--------
Items 10, 11, 12 and 13.
- ------------------------
The information called for by Part III (Items 10, 11, 12 and 13) is incorporated
herein by reference from the material included under the captions "Nominees,"
"Executive Officers," "Executive Compensation," "Security Ownership of Certain
Beneficial Owners and Management," "Agreements Among Stockholders,"
"Compensation and Stock Option Committee Interlocks and Insider Participation"
and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive proxy statement (to be filed) for its Annual Meeting of Stockholders
to be held May 26, 1999 (the "Proxy Statement"). The Proxy Statement is being
prepared and will be filed with the Securities and Exchange Commission pursuant
to Regulation 14A, and furnished to the Company's Stockholders, on or about
April 21, 1999.
- 25 -
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- -------- -----------------------------------------------------------------
(a) 1. Financial Statements.
---------------------
The following consolidated financial statements of the Company and its
subsidiaries are included in a separate section of this Annual Report on Form
10-K commencing on the page numbers specified below:
INDEX
- -----
Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... F- 2
Report of Independent Public Accountants................................. F- 19
Consolidated Statements of Loss.......................................... F -20
Consolidated Balance Sheets.............................................. F -21
Consolidated Statements of Stockholders' (Deficit) Equity................ F -22
Consolidated Statements of Cash Flows.................................... F -24
Notes to Consolidated Financial Statements............................... F -25
Quarterly Financial Data................................................. F -56
Selected Financial Data.................................................. F -57
- 26 -
2. Financial Statement Schedules.
------------------------------
Financial Statement Schedules not included with the one listed below have been
omitted because they are not required or not applicable, or because the required
information is shown in the financial statements or notes thereto.
I. Condensed Financial
Information of Registrant.................................Page S-1
2. Exhibits
3.1 - Restated Certificate of Incorporation of AMSC (as restated
effective May 1, 1996) (Incorporated by reference to Exhibit
3.1a to the Company's Quarterly Report on Form 10-Q filed
for the periods ending March 31, 1996 and June 30, 1996
(File No. 0-23044))
3.2 - Amended and Restated Bylaws of AMSC (as amended and restated
effective March 25, 1999)(filed herewith)
9.1 - Amended and Restated Stockholders' Agreement dated as of
December 1, 1993, between AMSC and certain holders of its
capital stock (Incorporated by reference to Exhibit 9.1 to
the Company's Registration Statement on Form S-1 (Reg. No.
33- 70468))
10.1 - Contract for an MSAT Spacecraft, dated December 7, 1990
between AMSC and Hughes Aircraft Company, amended June 15,
1993 (Amendment Nos. 1 through 4) and further amended
November 11, 1993 (Amendment No. 5), between AMSC Subsidiary
Corporation, as assignee of AMSC, and Hughes Aircraft
Company (Incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-1 (Reg. No.
33-70468))
10.1a - Amendment No. 6 to the AMSC Hughes MSAT Spacecraft
Contract, dated October 11, 1994, between AMSC Subsidiary
Corporation, as assignee to AMSC, and Hughes Aircraft
Company (Incorporated by reference to Exhibit 10.3a to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (File No. 0-23044))
10.1b - Mutual Final Release, dated October 11, 1994, between
AMSC Subsidiary Corporation, Hughes Aircraft, Spar
Aerospace Limited and Lockheed Missiles & Space Company,
Inc. (Incorporated by reference to Exhibit 10.3b to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 0-23044))
- 27 -
10.1c - Amendment No. 7 to the AMSC Hughes MSAT Spacecraft
Contract, dated October 11, 1994, between AMSC Subsidiary
Corporation, as assignee to AMSC, and Hughes Aircraft
Company (Incorporated by reference to Exhibit 10.3c
previously filed with the Report on Form 10-K for the
period ending December 31, 1997 (File No. 0-23044)))
10.2 - Memorandum of Agreement for Satellite Capacity, dated
February 17, 1992, between AMSC Subsidiary Corporation and
Telesat Mobile Inc., as amended by Amending Agreement dated
October 18, 1993 among AMSC, AMSC Subsidiary Corporation and
TMI Communications and Company, Limited Partnership, as
successor in interest to Telesat Mobile Inc., and as further
amended by letter agreement dated October 18, 1993
(Incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70468))
10.3 - Agreement for Cooperation in Joint Procurement of MSS
Systems, dated September 19, 1988, between American Mobile
Satellite Consortium Inc. and Telesat Mobile Inc.
(Incorporated by reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70468))
10.4 - Joint Operating Agreement, dated April 25, 1990, between
AMSC and Telesat Mobile Inc. as amended by Amending
Agreement dated October 18, 1993 among AMSC, AMSC Subsidiary
Corporation and TMI Communications and Company, Limited
Partnership, as successor in interest to Telesat Mobile Inc.
(Incorporated by reference to Exhibit 10.33 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70468))
10.5 - Right of First Offer Agreement dated as of November 30, 1993
among AMSC, Hughes Communications Satellite Services, Inc.,
Singapore Telecommunications Ltd., Satellite Communications
Investments Corporation, Space Technologies Investments,
Inc., Satellite Mobile Telephone Company L.P., Transit
Communications, Inc., MTel Space Technologies, L.P. and MTel
Space Technologies Corporation (Incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement on
Form S-1 (Reg. No. 33-70468))
10.5a - Amendment No. 1 dated June 28, 1996, to Right of First
Offer Agreement among American Mobile Satellite
Corporation, Hughes Communications Satellite Services,
Inc., Singapore Telecommunications Ltd., Satellite
Communications Investments Corporation, Space Technologies
Investments, Inc., and Transit Communications, Inc.
(Incorporated by reference to Exhibit XI to the Amended
and Restated Schedule 13D dated July 1, 1996, filed by
Hughes Communications Satellite Services, Inc., Hughes
Communications, Inc., Hughes Aircraft Company, Hughes
Electronics Corporation and General Motors Corporation
with respect to shares of Common Stock, $.01 par value, of
American Mobile Satellite Corporation)
- 28 -
10.6*- Amended and Restated Stock Option Plan (as amended effective
May 20, 1998) (Incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement on Form S-8 (Reg.
No.333-30099))
10.6a* - Amended Form of Employee Stock Option Agreement
(Incorporated by reference to Exhibit 10.3b to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (File No. 0-23044))
10.7*- Employee Stock Purchase Plan, as amended June 25, 1998
(filed herewith).
10.8*- Form of Directors and Officers Indemnification Agreement
(Incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (File No. 0-23044))
10.9*- 1994 Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Exhibit 10.53 to the Company's
Annual Report on Form 10-K filed for the period ended
December 31, 1996 (File No. 0-23044))
10.10*- Form of Executive Agreements (Incorporated by reference to
Exhibit 10.54 to the Company's Annual Report on Form 10-K
filed for the period ending December 31, 1996 (File No.
0-23044))
10.11*- Form of Restricted Stock Agreement (Incorporated by
reference to Exhibit 10.13b to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997
(File No. 0-23044))
10.12 - Mobile Terminal Production Agreement, dated October 6, 1992,
between AMSC Subsidiary Corporation and Westinghouse
Electric Corporation acting through Westinghouse Electronic
Systems Company (Incorporated by reference to Exhibit 10.17
to the Company's Registration Statement on Form S-1 (Reg.
No. 33-70468))
10.12a - Amendment No. 1 to Mobile Terminal Production Agreement,
dated November 21, 1994, between AMSC Subsidiary
Corporation and Westinghouse Electric Corporation acting
through Westinghouse Electronic Systems Company
(Incorporated by reference to Exhibit 10.17a to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 0-23044))
10.12b - Amendment No. 2 to Mobile Terminal Production Agreement,
dated January 23, 1995, between AMSC Subsidiary
Corporation and Westinghouse Electric Corporation acting
through Westinghouse Electronic Systems Company
(Incorporated by reference to Exhibit 10.17b to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 0-23044))
- 29 -
10.12c - Amendment No. 3 to Mobile Terminal Production Agreement,
dated March 21, 1995, between AMSC Subsidiary
Corporation and Westinghouse Electric Corporation acting
through Westinghouse Electronic Systems Company
(Incorporated by reference to Exhibit 10.17c the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 0-23044))
10.13 - Mobile Termination Production Contract, dated November 30,
1992, between AMSC Subsidiary Corporation and Mitsubishi
Electric Corporation (Incorporated by reference to Exhibit
10.18 to the Company's Registration Statement on Form S-1
(Reg. No. 33-70468))
10.14 - Deed of Lease at Reston, Virginia, dated February 4, 1993
and amended June 21, 1993, between AMSC Subsidiary
Corporation and Trust Company of the West as Trustee
(Incorporated by reference to Exhibit 10.20 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70468))
10.14a - Amendment No. 4 to Deed of Lease, dated October 7, 1994,
between AMSC Subsidiary Corporation and Trust Company of
the West as Trustee (Incorporated by reference to
Exhibit 10.20a to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (File
No. 0-23044))
10.15 - Master Lease Agreement, dated June 23, 1993, between AMSC
Subsidiary Corporation and Digital Equipment Corporation and
Amendment to Master Lease Agreement between AMSC Subsidiary
Corporation and Digital Equipment Corporation dated August
2, 1993 (Incorporated by reference to Exhibit 10.25 to the
Company's Registration Statement on Form S-1 (Reg. No.
33-70468))
10.16 - Telemetry, Tracking and Control Satellite Service Agreement,
dated as of August 5, 1993, between AMSC Subsidiary
Corporation and Hughes Communications Satellite Services,
Inc. (Incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-1 (Reg. No.
33-70468))
10.17 - Agreement dated as of December 14, 1992 between AMSC
Subsidiary Corporation and GTE Spacenet Corporation
(Incorporated by reference to Exhibit 10.35 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70468))
10.17a - Amendment No. 1 dated as of November 7, 1997 to the
Agreement dated as of December 14, 1992, by GTE Spacenet
Corporation and AMSC Subsidiary Corporation
(Incorporated by reference to Exhibit 10.65 previously
filed with the Report on Form 10-K for the period ending
December 31, 1997 (File No. 0-23044))
- 30 -
10.18 - Master Agreement dated March 30, 1994, between Washington
International Teleport, Inc., and AMSC (Incorporated by
reference to Exhibit 10.36a to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993
(File No. 0-23044))
10.18a - Contract Amendment No. A001, dated July 1, 1994, between
Washington International Teleport, Inc., and AMSC
(Incorporated by reference to Exhibit 10.36b to the
Company's Quarterly Report on Form 10-Q filed for the
period ending September 30, 1994 (File No. 0-23044))
10.18b - Contract Amendment No. A002, dated July 1, 1994, between
Washington International Teleport, Inc., and AMSC
(Incorporated by reference to Exhibit 10.36c to the
Company's Quarterly Report on Form 10-Q filed for the
period ending September 30, 1994 (File No. 0-23044))
10.19 - Asset Sale Agreement dated as of November 22, 1996, by and
among Rockwell Collins, Inc. American Mobile Satellite
Corporation and AMSC Subsidiary Corporation (Incorporated by
reference to Exhibit 10.61 to the Company's Current Report
on Form 8-K dated November 22, 1996, and filed on December
9, 1996 (File No. 0-23044))
10.20 - Stock Purchase Agreement for the Acquisition of Motorola
ARDIS Acquisition, Inc. and Motorola ARDIS, Inc. by AMSC
Acquisition Company, Inc., a Wholly-Owned Subsidiary of
American Mobile Satellite Corporation, Dated as of December
31, 1997 (Incorporated by reference to Exhibit 10.65
previously filed with the Report on Form 10-K for the period
ending December 31, 1997 (File No. 0-23044)).
10.20a - Amendment No. 1 dated March 31, 1998 to the Stock
Purchase Agreement for the Acquisition of Motorola ARDIS
Acquisition, Inc. and Motorola ARDIS, Inc. by AMSC
Acquisition Company, Inc., a Wholly-Owned Subsidiary of
American Mobile Satellite Corporation (Incorporated by
reference to Exhibit 4.2 to the Schedule 13D dated March
31, 1998, filed by Motorola, Inc.).
10.21 - Participation Rights Agreement by and among Motorola, Inc.,
American Mobile Satellite Corporation, and the parties
listed on Schedule A, dated as of December 31, 1997
(Incorporated by reference to Exhibit 10.65 previously filed
with the Report on Form 10-K for the period ending December
31, 1997 (File No. 0-23044)).
10.21a - Registration Rights Agreement by and among Motorola,
Inc., American Mobile Satellite Corporation dated as
of March 31, 1998 (Incorporated by reference to
Exhibit 4.4 to the Schedule 13D dated March 31, 1998,
filed by Motorola, Inc.)
- 31 -
10.22 - Credit Agreement by and between Motorola Inc. and ARDIS
Company dated June 17, 1998 (Incorporated by reference to
Exhibit 10.61 to the Company's Current Report on Form 10-Q
dated June 30, 1998 (File No. 0-23044)).
10.23 - Indenture of AMSC Acquisition Company, Inc., Series A and
Series B, 12 1/4% Senior Notes Due 2008, dated March 31,
1998 (Incorporated by reference to Registration Statement on
Form S-4 filed on May 15, 1998 (File No. 333-52777)).
10.24 - Debt Registration Rights Agreement dated March 31, 1998 by
and among AMSC Acquisition Company, Inc., Bear, Stearns &
Co. Inc., J.P. Morgan Securities Inc., TD Securities (USA)
Inc. and BancAmerica Robertson Stephens, and guarantors
party thereto (Incorporated by reference to Registration
Statement on Form S-4 filed on May 15, 1998 (File No.
333-52777)).
10.25 - Unit Agreement Among American Mobile Satellite Corporation,
AMSC Acquisition Company, Inc. and State Street Bank and
Trust Company as Unit Agent, dated March 31, 1998
(Incorporated by reference to Registration Statement on Form
S-4 filed on May 15, 1998 (File No. 333-52777)).
10.26 - Warrant Agreement between American Mobile Satellite
Corporation as Issuer and State Street Bank and Trust
Company as Warrant Agent dated March 31, 1998 (Incorporated
by reference to Registration Statement on Form S-4 filed on
May 15, 1998 (File No. 333-52777)).
10.27 - Warrant Registration Rights Agreement dated March 31, 1998
By and Among American Mobile Satellite Corporation and Bear,
Stearns & Co. Inc., J.P. Morgan Securities Inc., T.D.
Securities (USA) Inc., BancAmerica Robertson Stephens
(Incorporated by reference to Registration Statement on Form
S-4 filed on May 15, 1998 (File No. 333-52777)).
10.28 - Pledge and Security Agreement by and among AMSC Acquisition
Company, Inc., State Street Bank and Trust Company, as
Trustee and State Street Bank and Trust Company, as
Collateral Agent dated March 31, 1998 (Incorporated by
reference to Registration Statement on Form S-4 filed on May
15, 1998 (File No. 333-52777)).
10.29 - Guaranty Issuance Agreement, dated as of March 31, 1998,
among Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P.
and American Mobile Satellite Corporation and AMSC
Acquisition Company, Inc. (Incorporated by reference to
Exhibit 1 to the Schedule 13D dated March 31, 1998, filed by
Hughes Communications Satellite Services, Inc. )
10.29a - Amendment No. 1 to the Guaranty Issuance Agreement, dated
as of January 15, 1999, among Hughes Electronics
Corporation, Singapore Telecommunications Ltd., and Baron
Capital Partners, L.P. and American Mobile Satellite
Corporation and AMSC Acquisition Company, Inc. (filed
herewith).
- 32 -
10.29b - Amendment No. 2 to the Guaranty Issuance Agreement, dated
as of March 29, 1999, among Hughes Electronics
Corporation, Singapore Telecommunications Ltd., and Baron
Capital Partners, L.P. and American Mobile Satellite
Corporation and AMSC Acquisition Company, Inc. (filed
herewith).
10.30 - Warrant No. 1 for the Purchase of 3,750,000 Shares (subject
to adjustment) of Common Stock of American Mobile Satellite
Corporation issued to Hughes Electronics Corporation, dated
June 28, 1996 (Incorporated by reference to Exhibit XIII to
the Amended and Restated Schedule 13D dated July 1, 1996,
filed by Hughes Communications Satellite Services, Inc.,
Hughes Communications, Inc., Hughes Aircraft Company, Hughes
Electronics Corporation and General Motors Corporation with
respect to shares of Common Stock, $.01 par value, of
American Mobile Satellite Corporation).
10.30a - Amendment No. 1 to the Warrant Certificate, dated as of
March 27, 1997, by and among American Mobile Satellite
Corporation and Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P.
(Incorporated by reference to Exhibit 4 to the
Schedule 13D dated March 31, 1997, filed by Hughes
Communications Satellite Services, Inc. )
10.30b - Amendment No. 2 to the Warrant Certificate, dated as of
March 31, 1998, by and among American Mobile Satellite
Corporation and Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P.
(Incorporated by reference to Exhibit 4 to the Schedule
13D dated March 31, 1998, filed by Hughes Communications
Satellite Services, Inc. )
10.30c - Amendment No. 3 to the Warrant Certificates for the
Purchase of Shares of Common Stock of American Mobile
Satellite Corporation, dated as of April 1, 1999, by
and among American Mobile Satellite Corporation
and Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners,
L.P. (filed herewith, as an exhibit to Exhibit 10.29b
herein)
10.31 - Registration Rights Agreement dated as of June 28, 1996,
among American Mobile Satellite Corporation, Hughes
Electronics Corporation, Singapore Telecommunications Ltd.,
and Baron Capital Partners, L.P. (Incorporated by reference
to Exhibit XIV to the Amended and Restated Schedule 13D
dated July 1, 1996, filed by Hughes Communications Satellite
Services, Inc., Hughes Communications, Inc., Hughes Aircraft
Company, Hughes Electronics Corporation and General Motors
Corporation with respect to shares of Common Stock, $.01 par
value, of American Mobile Satellite Corporation).
(Incorporated by reference to Exhibit 10.57 to the Company's
Quarterly Report on Form 10-Q filed for the period ended
June 30, 1996 (File No. 0-23044))
- 33 -
10.32 - Warrant for the Purchase of Shares of Common Stock of
American Mobile Satellite Corporation, dated as of March 31,
1998 (Incorporated by reference to Exhibit 2 to the Schedule
13D dated March 31, 1998, filed by Hughes Communications
Satellite Services, Inc. )
10.32a - Amendment No. 1 to Warrant Certificates for the
Purchase of Shares of Common Stock of American Mobile
Satellite Corporation, dated as of April 1, 1999 by
and among Hughes Electronics Corporation, Singapore
Telecommunications Ltd. and Baron Capital Partners, L.P.
(filed herewith, as an exhibit to Exhibit 10.29b herein)
10.33 - Amended and Restated Registration Rights Agreement, dated as
of March 31, 1998, among American Mobile Satellite
Corporation and Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P.
(Incorporated by reference to Exhibit 3 to the Schedule 13D
dated March 31, 1998, filed by Hughes Communications
Satellite Services, Inc.)
10.34 - Term Credit Agreement dated as of March 31, 1998 among
American Mobile Satellite Corporation, Morgan Guaranty Trust
Company of New York, Toronto Dominion (Texas), Inc. and
other banks party thereto (Incorporated by reference to
Exhibit 10.61 to the Company's Current Report on Form 10-Q