Every time you turn around, the telecommunications industry takes a leap in a new direction. But investing in a basketball franchise? Could be stretching it-unless you’re Bruce Crockett, president and chief executive officer of Comsat Corp.
With its roots in the satellite communications business, Comsat has grown into a multifold enterprise that provides landline and wireless telephone services worldwide, designs and manufactures telecommunications equipment, conducts research in satellite technology, and recently has staked its claim in the world of sports and entertainment.
Sound risky?
According to Comsat, quite the opposite. The company expects varied business ventures will lead to its long-term success. When Crockett became Comsat’s president and CEO in 1992, he inherited a healthy share of the NBA’s Denver Nuggets.
Initially, Crockett planned to sell the team, but changed his mind when the Nuggets started to win, and gained national attention with a victory over the Seattle Supersonics in the NBA finals. Sports franchises recently have become legitimate assets: Comsat now owns the team outright, and Crockett is its number one fan.
Comsat also is pursuing other entertainment endeavors, including acquiring Beacon Communications, an independent television and film production company, and proposing to build a new sports and entertainment complex in Denver that would house the Nuggets and possibly a new National Hockey League team. In addition, Comsat has been talking with cable television operator Tele-Communications Inc. about building a television production facility alongside the arena, Crockett says.
Although sports and entertainment seem a far cry from telecommunications, the industries have grown more closely integrated, explains Crockett. Comsat has “so much international access, (the investments) are natural.” Technologies such as satellite and wideband radio used for voice communications also are used for television and video. Hence, Comsat employs many of these same contacts and communication channels to set up entertainment franchises across the globe.
Telecommunications and entertainment have seen a real convergence, explains Joe Tomkowicz, manager of media relations for Comsat. For Comsat, the opportunity is not just providing the pipe for communication, but getting involved with what goes down that pipe.
But despite Comsat’s success in entertainment and other divisions, it has received skeptical response by some analysts and Wall Street. Moody’s Investors Service Inc. has questioned Comsat’s course, noting the risk of the entertainment field.
But Crockett is confident about Comsat’s direction. “Our ambitious growth plan will affect profitability in the short term, but it is designed to deliver long-term growth and dramatically increase shareholder value.”
Tomkowicz explains that focusing exclusively on the company’s telecommunications domain actually would be a mistake. “With a changing regulatory climate-more liberalization and privatization-three or four years down the road we could be caught short.”
Although Tomkowicz said the company understands and expects Wall Street’s negative reactions, he is quick to remind critics that Comsat’s franchise value is difficult to quantify on paper, as a non-traditional investment. “It’s not going to build earnings per share. (Analysts) need to look at cash flow, not just earnings.” But to date, most of the company’s annual revenue is derived from international wireless telecommunications interests.
