<PAGE>
As filed with the Securities and Exchange Commission on
January 15, 1998
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
------------------
STARTEC GLOBAL COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction of incorporation or organization)
52-1660985
(I.R.S. Employer Identification No.)
10411 MOTOR CITY DRIVE
BETHESDA, MARYLAND 20817
(Address, including zip code, of Principal Executive Offices)
AMENDED AND RESTATED STOCK OPTION PLAN
1997 PERFORMANCE INCENTIVE PLAN
(Full title of the plans)
RAM MUKUNDA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
10411 MOTOR CITY DRIVE
BETHESDA, MARYLAND 20817
301-365-8959
(Name, address and telephone number, including area code, of
agent for service)
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Calculation of Registration Fee
Title of Proposed
securities to be Amount to be Maximum Price
be registered(1) Registered(1) Per Share(2)
- ---------------- ------------- ---------------
Common Stock, 1,019,766 $19.00
$.01 par value
Proposed
Maximum
Aggregate Amount of
Offering Registration
Price(2) Fee
- ----------- ------------
$19,375,554 $5,715.79
- -------------------
(1) This registration statement (the "Registration
Statement") covers shares of the Common Stock, $.01 par value
(the "Common Stock"), of Startec Global Communications
Corporation (the "Company"), which may be offered and sold from
time to time pursuant to the Company's Amended and Restated Stock
Option Plan (the "Restated Plan")(25,650 shares) and 1997
Performance Incentive Plan (the "Performance Plan" and, together
with the Restated Plan, the "Plans")(750,000 shares), as well as
certain resales of shares acquired under the Restated Plan
(244,116 shares). Pursuant to Rule 416(a), the number of shares
being registered shall be adjusted to include any additional
shares which may become issuable as a result of stock splits,
stock dividends or similar transactions in accordance with the
anti-dilution provisions of the Plans.
(2) Estimated pursuant to paragraphs (c) and (h) of Rule
457 solely for the purpose of calculating the registration fee,
based upon the average of the reported high and low sales prices
for shares of Common Stock on January 9, 1998, as reported in the
Nasdaq National Market.
=================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
Omitted as permitted pursuant to Rule 428 and Form S-8.
Item 2. Registrant Information.
Omitted as permitted pursuant to Rule 428 and Form S-8.
<PAGE>
PROSPECTUS
_________________________________________________________________
STARTEC GLOBAL COMMUNICATIONS CORPORATION
244,116 SHARES
COMMON STOCK, $.01 PAR VALUE
_________________________________________________________________
This Prospectus relates to an aggregate of up to 244,116
shares (the "Shares") of Common Stock, $0.01 par value per share
(the "Common Stock") of Startec Global Communications
Corporation, a Maryland corporation (the "Company"), which may be
offered for sale from time to time by the selling stockholders
(the "Selling Stockholders") named herein. The Shares were
purchased by the Selling Stockholders from the Company pursuant
to the terms of options granted to the Selling Stockholders under
the Company's Amended and Restated Stock Option Plan (the
"Restated Plan").
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF
COMMON STOCK OFFERED HEREBY.
The Selling Stockholders and any brokers executing selling
orders on behalf of the Selling Stockholders may be deemed to be
"underwriters" for purposes of the Securities Act of 1933, as
amended (the "Securities Act"), in which event commissions
received by such brokers may be deemed to be underwriting
commissions under the Securities Act. See "PLAN OF
DISTRIBUTION." The Company will pay all expenses incident to the
offering and sale of the Shares to the public other than
commissions and discounts of underwriters, dealers or agents.
The Company will not receive any of the proceeds from sales of
Shares by Selling Stockholders.
There is no assurance that the Selling Stockholders will
sell any or all of the Shares. The Common Stock trades in the
Nasdaq National Market under the symbol STGC. On January 9,
1998, the closing price of the Common Stock was $19.00 per share
in the Nasdaq National Market.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UP-
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------------------------------------
No person has been authorized in connection with the
offering made hereby to give any information or to make any
representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon
as having been authorized by the Company or any subsidiary or any
underwriter. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities
offered hereby to any person or by anyone in any jurisdiction in
which it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the
information contained herein is current as of any date subsequent
to the date hereof.
-----------------------------------------
One or more supplements to this Prospectus may be filed
pursuant to Rule 424, or otherwise, under the Securities Act to
describe any material arrangements for sale of the Shares
differing from the arrangements described herein, if such
arrangements are entered into by any Selling Stockholder.
The date of this Prospectus is January 15, 1998
<PAGE>
TABLE OF CONTENTS
Available Information. . . . . . . . . . . . . . . . . . . . .
Documents Incorporated by Reference. . . . . . . . . . . . . .
The Company. . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments. . . . . . . . . . . . . . . . . . . . . .
Selling Stockholders . . . . . . . . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . . . .
Indemnification. . . . . . . . . . . . . . . . . . . . . . . .
AVAILABLE INFORMATION
The Company files periodic reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such reports, proxy statements and
other information concerning the Company may be inspected and
copies may be obtained at the Commission's Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates, as well as at the following regional offices:
New York Regional Office, Seven World Trade Center, 13th Floor,
New York 10048; and Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. In addition,
reports, proxy statements, and other information concerning the
Company may be reviewed at the Commission's site on the World
Wide Web service of the Internet, at http://www.sec.gov.
The Company's Common Stock is traded in the Nasdaq National
Market. Reports, proxy statements and other information may be
inspected and copied at the offices of the Nasdaq Stock Market,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration
Statement on Form S-8 (of which this Prospectus is a part) under
the Securities Act with respect to the securities offered hereby
(the "Registration Statement"). This Prospectus does not include
all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules
and regulations of the Commission. For additional information,
reference is made to the Registration Statement, including the
exhibits filed therewith. Such information may be inspected, and
copies thereof may be obtained, at the places and in the manner
set forth above.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of the Company filed with the
Commission are incorporated by reference into this Prospectus:
A. The Company's latest Prospectus filed pursuant to Rule
424(b) under the Securities Act (File No. 333-32753).
B. The description of the Common Stock contained in the
Company's Registration Statement on Form S-1 (File No. 333-
32753), filed with the Commission on August 4, 1997, incorporated
by reference in the Company's Form 8-A (File No. 0-23087), filed
with the Commission on September 15, 1997, including any other
amendment or report filed for the purpose of updating such
description.
All reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold
or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed
to be incorporated in this Prospectus by reference shall be
deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also
is or is deemed to be incorporated in this Prospectus by
reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written
or oral request of such person, a copy of any and all of the
information that has been or may be incorporated by reference in
this Prospectus (not including exhibits to the information that
is incorporated by reference unless such exhibits are
specifically incorporated by reference into such information).
Requests for such copies should be directed to the Office of the
Secretary, Startec Global Communications Corporation, 10411 Motor
City Drive, Bethesda, Maryland 20817, or by calling (301)
365-8959.
<PAGE>
THE COMPANY
Startec Global Communications Corporation is a rapidly
growing, facilities-based international long distance carrier
which markets its services to select ethnic U.S. residential
communities that have significant international long distance
usage. Additionally, to maximize the efficiency of its network
capacity, the Company sells its international long distance
services to some of the world's leading carriers. The Company
provides its services through a flexible network of owned and
leased transmission facilities, resale arrangements and a variety
of operating agreements and termination arrangements, all of
which allow the Company to terminate traffic in every country
which has telecommunications capabilities. The Company currently
owns and operates a switch in Washington, D.C. and leases
switching facilities from other telecommunications carriers. The
Company recently purchased an international gateway switch and
installed it in New York City. The Company will gradually
migrate the traffic from the Washington switch to the New York
site, and then move the Washington switch to the Midwest by the
end of 1998. The Company has contracted to purchase and install
a third international gateway switch in Los Angeles, California,
which is expected to be operational in the third quarter of 1998.
The Company's mission is to dominate select international
telecom markets by strategically building network facilities that
allow it to manage both sides of a telephone call. The Company
intends to own multiple switches and other network facilities
which will allow it to originate and terminate a substantial
portion of its own traffic. Further, the Company intends to
implement a network hubbing strategy, linking foreign-based
switches and other telecommunications equipment together with the
Company's marketing base in the United States. To implement this
hubbing strategy, the Company intends to: (i) build transmission
capacity to expand its ability to originate and transport
traffic; (ii) acquire additional termination facilities to
increase routing flexibility; and (iii) expand its customer base
through focused marketing efforts.
Residential customers of the Company access its network by
dialing a carrier identification code ("CIC Code") prior to
dialing the number they are calling. Using a CIC Code to access
the Company's network is known as "dial-around" or "casual
calling," because customers can use the Company's services at any
time without changing their existing long distance carrier.
Additionally, the customer's monthly bill from the local exchange
carrier ("LEC") reflects the charges for the international
carrier services rendered by the Company. As part of the
Company's marketing strategy, it maintains a comprehensive
database of customer information which is used for the
development of marketing programs, planning, and other strategic
purposes.
Increased deregulation and the globalization of the
telecommunications industry have resulted in accelerated growth
in the use of international long distance services. The
international switched telecommunications market was
approximately $56 billion in aggregate carrier revenues for 1995,
of which $14 billion was U.S.-originated international traffic.
According to the Company's market research, during the period
from 1990 to 1995, the U.S.-originated international
telecommunications market grew at an annual compound rate of
11.7%, from $8 billion to $14 billion, compared with an annual
compound growth rate of 7.25% in the U.S. domestic long distance
market. The Company believes that the international
telecommunications market will continue to experience growth for
the foreseeable future as a result of numerous factors,
including: (i) global economic development with corresponding
increases in the number of telephones, particularly in developing
countries; (ii) continuing deregulation of foreign
telecommunications markets; (iii) reductions in rates stimulating
higher traffic volumes; (iv) increases in the availability of
transmission capacity; and (v) increases in investment in
telephone infrastructure and consequent increases in access to
telecommunications services.
The Company currently markets its services to ethnic
residential communities throughout the United States through a
variety of media including print advertising, direct marketing,
radio and television. These marketing efforts have resulted in
significant growth in the Company's residential billed customer
base from approximately 5,500 as of September 30, 1994 to over
58,500 as of September 30, 1997.
To achieve the economies of scale necessary to maintain
cost effective operations, the Company in late 1995 began
reselling its international carrier capacity to other carriers.
As a result, the Company has experienced significant growth in
revenues and in the number of its carrier customers. As of
September 30, 1997, the Company had 41 carrier customers who were
active users of the Company's international long distance
services. The Company will continue to market its international
long distance services to existing and new carrier customers.
On July 1, 1997, the Company entered into a Secured
Revolving Line of Credit Facility Agreement with Signet Bank (the
"Signet Agreement"), which provides for maximum borrowings of up
to $10 million through the end of 1997, and the lesser of $15
million or 85% of eligible accounts receivable thereafter until
maturity on December 31, 1999. The Company has used some amounts
available under the Signet Agreement to begin implementing its
strategic plan to build its transmission capacity, acquire
additional termination facilities, and expand its customer base.
Proceeds received under the Signet Agreement may be allocated to
the Company's marketing programs, the acquisition of rights in
transatlantic digital undersea fiber optic cable, and the
addition of monitoring equipment and software upgrades to
help support the expanded network and the anticipated increase
in traffic.
RECENT DEVELOPMENTS
In its effort to increase the size of its domestic network,
the Company purchased and installed an international gateway
switch in New York City. The Company has also contracted to
purchase and install an additional international gateway switch
in Los Angeles, California.
The Company began the international expansion of its network
by purchasing indefeasible Rights of Use (IRUs) on the CANTAT-3
undersea digital fiber optic cable connecting Canada and the
United Kingdom and the CANUS-1 cable connecting the U.S. to
Canada. The Company believes that the ownership of cable through
the acquisition of IRUs will enable it to achieve substantial
savings by lowering its leased line costs.
The Company also obtained an International Simple Resale
(ISR) License for the U.K., which allows for the resale of
traffic originating in the U.K., as well as the leasing of
domestic lines.
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The Company was incorporated in Maryland in 1989. The
principal executive offices of the Company are located at 10411
Motor City Drive, Bethesda, Maryland 20817, and its telephone
number is (301) 365-8959. The Company changed its name from
STARTEC, Inc. to Startec Global Communications Corporation in
August 1997.
<PAGE>
RISK FACTORS
In addition to the other information contained in this
Prospectus, the following risk factors should be considered
carefully by prospective investors prior to making an investment
in the Common Stock offered hereby. Information contained in
this Prospectus contains "forward-looking statements" which can
be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," or "anticipates"
or the negative thereof or other variations thereon or comparable
terminology or as discussions of strategy. No assurance can be
given that the future results covered by the forward-looking
statements will be achieved or that the events contemplated
thereby will occur or have the effects anticipated. The
following matters constitute cautionary statements identifying
important factors with respect to such forward-looking
statements, including certain risks and uncertainties that could
cause actual results to vary materially from the anticipated
results covered in such forward-looking statements. Other
factors could also cause actual results to vary materially from
the anticipated results covered in such forward-looking
statements.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE OPERATING RESULTS
Although the Company has experienced significant revenue
growth in recent years, the Company had an accumulated deficit of
approximately $6.3 million as of September 30, 1997 and its
operations have generated a net loss and negative operating cash
flows in each of the last three fiscal years. There can be no
assurance that the Company's revenue will continue to grow or be
sustained in future periods or that the Company will be able to
achieve or maintain profitability in any future period.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have fluctuated in
the past and may fluctuate significantly in the future as a
result of a variety of factors which can affect revenues, cost of
services and other expenses. These factors include costs
relating to entry into new markets, variations in carrier
revenues from return traffic under operating agreements,
variations in user demand, the mix of residential and carrier
services sold, the introduction of new services by the Company or
its competitors, pricing pressures from increased competition,
prices charged by the Company's providers of leased facilities,
and capital expenditures and other costs relating to the
expansion of operations. In addition, general economic
conditions, specific economic conditions affecting the
telecommunications industry, and the effects of governmental
regulation or regulatory changes on the telecommunications
industry may also cause fluctuations in the Company's quarterly
operating results. Certain of these factors are outside of the
Company's control. In the event that one or more of such factors
cause fluctuations in the Company's quarterly operating results,
the price of the Common Stock could be materially adversely
affected.
CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FINANCING
The Company expects that it will need to raise additional
capital from public or private equity or debt sources in order to
finance its future growth, including financing construction or
acquisition of additional transmission capacity, expanding
service within its existing markets and into new markets, and the
introduction of additional or enhanced services, all of which can
be capital intensive. In addition, the Company may need to raise
additional capital to fund unanticipated working capital needs
and capital expenditure requirements and to take advantage of
unanticipated business opportunities, including accelerated
expansion, acquisitions, investments or strategic alliances.
There can be no assurance that additional financing will be
available to the Company on satisfactory terms or at all.
Moreover, the Signet Agreement significantly limits the Company's
ability to obtain additional financing. In the event that the
Signet Agreement is extinguished or otherwise refinanced with a
new credit facility, the Company intends to expense, as an
extraordinary item (if material), the then-existing unamortized
debt discount and deferred financing cost related to the Signet
Agreement, which was approximately $1.1 million as of September
30, 1997. If additional financing is obtained through the
issuance of equity securities, the percentage ownership of the
Company's then-current stockholders would be reduced and, if such
equity securities take the form of preferred stock, the holders
of such preferred stock may have rights, preferences or
privileges senior to those of holders of Common Stock. If the
Company is unable to obtain additional financing in a timely
manner or on satisfactory terms, it may be required to postpone
or reduce the scope of its expansion, which could adversely
affect the Company's ability to compete, as well as its business,
financial condition and results of operations.
MANAGEMENT OF GROWTH
The Company's recent growth and its strategy to continue
such growth has placed, and is expected to continue to place, a
significant strain on the Company's management, operational and
financial resources and increased demands on its systems and
controls. In order to manage its growth effectively, the
Company must continue to implement and improve its operational
and financial systems and controls, accurately forecast customer
demand and its need for transmission facilities, attract
additional managerial, technical and customer service personnel,
and train and manage its personnel base. There can be no
assurance that the Company will be successful in these
activities. Failure of the Company to satisfy these requirements
or the emergence of unexpected difficulties in managing its
expansion could materially adversely affect the Company's
business, financial condition and results of operations.
COMPETITION
The long distance telecommunications industry is intensely
competitive. In many of the markets targeted by the Company there
are numerous entities which are currently competing with each
other and the Company for the same residential and carrier
customers and others which have announced their intention to
enter those markets. International and interstate
telecommunications providers compete on the basis of price,
customer service, transmission quality, breadth of service
offerings and value-added services. Residential customers
frequently change long distance providers in response to
competitors' offerings of lower rates or promotional incentives,
and, in general, because the Company is a dial-around provider,
the Company's customers can switch carriers at any time. In
addition, the availability of dial-around long distance services
has made it possible for residential customers to use the
services of a variety of competing long distance providers
without the necessity of switching carriers. The Company's
carrier customers generally also use the services of a number of
international long distance telecommunications providers. The
Company believes that competition in its international and
interstate long distance markets is likely to increase as these
markets continue to experience decreased regulation and as new
technologies are applied to the telecommunications industry.
Prices for long distance calls in several of the markets in which
the Company competes have declined in recent years and are likely
to continue to decrease.
The U.S. based international telecommunications services
market is dominated by AT&T, MCI and Sprint. The Company also
competes with numerous other carriers in certain markets, some of
which focus their efforts on the same customers targeted by the
Company. Recent and pending deregulation initiatives in the U.S.
and other countries may encourage additional new entrants. The
Telecommunications Act of 1996 (the "Telecommunications Act" or
the "1996 Act"), permits, and is designed to promote, additional
competition in the intrastate, interstate and international
telecommunications markets by both U.S. based and foreign
companies, including the RBOCs. In addition, pursuant to the
terms of the WTO Agreement on basic telecommunications, countries
who are signatories have committed, to varying degrees, to allow
access to their domestic and international markets to competing
telecommunications providers, to allow foreign ownership
interests in existing telecommunications providers and to
establish regulatory schemes and policies designed to accommodate
telecommunications competition. The Company also is likely to be
subject to additional competition as a result of mergers or the
formation of alliances among some of the largest
telecommunications carriers. Many of the Company's competitors
are significantly larger, have substantially greater financial,
technical and marketing resources than the Company, own or
control larger networks, transmission and termination facilities,
offer a broader variety of services than the Company, and have
strong name recognition, brand loyalty, and long-standing
relationships with many of the Company's target customers. In
addition, many of the Company's competitors enjoy economies of
scale that can result in a lower cost structure for transmission
and other costs of providing services, which could cause
significant pricing pressures within the long distance
telecommunications industry. If the Company's competitors were
to devote significant additional resources to the provision of
international long distance services to the Company's target
customer base, the Company's business, financial condition and
results of operations could be materially adversely affected.
DEPENDENCE ON AVAILABILITY OF TRANSMISSION FACILITIES
Substantially all of the telephone calls made by the
Company's customers to date have been connected through
transmission lines of facilities-based long distance carriers
which provide the Company transmission capacity through a
variety of lease and resale arrangements. The Company's ability
to maintain and expand its business is dependent, in part, upon
whether the Company continues to maintain satisfactory
relationships with these carriers, many of which are, or
may in the future become, competitors of the Company. The
Company's lease arrangements generally do not have long terms and
its resale agreements generally permit price adjustments on short
notice, which makes the Company vulnerable to adverse price and
service changes or terminations. Although the Company believes
that its relationships with these carriers generally are
satisfactory, the failure to continue to maintain satisfactory
relationships with one or more of the carriers could have a
material adverse effect upon the Company's cost structure,
service quality, network diversity, results of operations and
financial condition. During the fiscal year ended December 31,
1996, VSNL, Cherry Communications, Inc., and WorldCom accounted
for approximately 25%, 13% and 13%, respectively, of the
Company's acquired transmission capacity (on a cost of services
basis). During the nine month period ending September 30, 1997,
VSNL and WorldCom accounted for approximately 10% and 15%,
respectively, of the Company's acquired transmission capacity (on
a cost of services basis). No other supplier accounted for 10%
or more of the Company's acquired transmission capacity during
either 1996 or the first nine months of 1997.
The future profitability of the Company will depend in part
on its ability to obtain transmission facilities on a cost
effective basis. Presently, the terms of the Company's
agreements for transmission lines subject the Company to the
possibility of unanticipated price increases and service
cancellations. Although the rates the Company is charged
generally are less than the rates the Company charges its
customers for connecting calls through these lines, to the
extent these costs increase, the Company may experience reduced
or, in certain circumstances, negative margins for some services.
As its traffic volume increases in particular international
markets, however, the Company may reduce its use of variable
usage arrangements and enter into fixed leasing arrangements
on a longer-term basis and/or construct or acquire additional
transmission facilities of its own. To the extent the Company
enters into such fixed arrangements and/or increases its owned
transmission facilities and incorrectly projects traffic volume
in particular markets, it would experience higher fixed costs
without any concomitant increase in revenue. Acquisition of
ownership positions in, and other access rights to, digital
undersea fiber optic cable transmission lines is a key element of
the Company's business strategy. Because digital undersea fiber
optic lines typically take several years to plan and construct,
international long distance service providers generally make
investments based on anticipated traffic. The Company does not
control the planning or construction of digital undersea fiber
optic cable transmission lines, and must seek access to such
facilities through partial ownership positions or through lease
and other access arrangements on negotiated terms that may vary
with industry and market conditions. There can be no assurance
that digital undersea fiber optic cable transmission lines will
be available to the Company to meet its current and/or projected
international traffic volume, or that such lines will be
available on satisfactory terms.
DEPENDENCE ON FOREIGN CALL TERMINATION ARRANGEMENTS
The Company currently offers U.S.-originated international
long distance service globally through a network of operating
agreements, resale arrangements, transit and refile agreements,
and various other foreign termination arrangements. The
Company's ability to terminate traffic in its targeted foreign
markets is an essential component of its service, and, therefore,
the Company is dependent upon its operating agreements and other
termination arrangements. While to date the Company has
negotiated and maintained operating agreements and termination
arrangements sufficient for its current business and traffic
levels, there can be no assurance that the Company will be able
to negotiate additional operating agreements or termination
arrangements or maintain agreements or arrangements with its
current foreign partners in the future. Cancellation of
certain operating agreements or other termination arrangements
could have a material adverse effect on the Company's business,
financial condition and results of operations. Moreover, the
failure to enter into additional operating agreements and
termination arrangements could limit the Company's ability to
increase its services to its current target markets, gain entry
into new markets, or otherwise increase its revenues.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS
In the normal course of its business, the Company must
record and process significant amounts of data quickly and
accurately in order to bill for the services it has provided to
customers and to ensure that it is properly charged by vendors
for services it has used. The Company is currently upgrading its
management information systems to meet anticipated demands.
These systems have not grown at the same rate as the Company's
business and it is anticipated that additional investment in
these systems will be needed. The successful implementation and
integration of any additional or new management information
systems resources is important to the Company's ability to
monitor costs, bill customers, achieve operating efficiencies,
and otherwise support its growth. There can be no assurance,
however, that the Company will not encounter difficulties in the
acquisition, implementation, integration and ongoing use of any
additional management information systems resources, including
possible delays, cost-overruns, or incompatibility with the
Company's current information systems resources or its business
needs.
CUSTOMER CONCENTRATION
During the fiscal year ended December 31, 1996, the
Company's five largest carrier customers, including one related
party, accounted for approximately 40% of the Company's net
revenues, with one of the carrier customers, WorldCom, accounting
for approximately 23% of net revenues during that year. In
addition, during the nine month period ending September 30, 1997,
the Company's five largest carrier customers, including one
related party, accounted for approximately 40% of the Company's
net revenues, with two of the carrier customers, WorldCom and
Frontier, accounting for approximately 22% and 11%, respectively,
of net revenues during that period. The Company's agreements and
arrangements with its carrier customers generally may be
terminated on short notice without penalty, and do not require
the carriers to maintain their current levels of use of the
Company's services. Carriers may terminate their relationship
with the Company or substantially reduce their use of the
Company's services for a variety of reasons, including the entry
of significant new competitors offering lower rates than the
Company, problems with transmission quality and customer
service, changes in the regulatory environment, increased use of
the carriers' own transmission facilities, and other factors. A
loss of a significant amount of carrier business could have a
material adverse effect on the Company's business, financial
condition and results of operations.
In addition, this concentration of carrier customers
increases the risk of non-payment or difficulties in collecting
the full amounts due from customers. The Company's four largest
carrier customers represented 35% and 37% of gross accounts
receivable as of December 31, 1996 and September 30, 1997,
respectively. The Company performs initial and ongoing credit
evaluations of its carrier customers in an effort to reduce the
risk of non-payment. There can be no assurance that the Company
will not experience collection difficulties or that its
allowances for non-payment will be adequate in the future. If
the Company experiences difficulties in collecting accounts
receivable from its significant carrier customers, its business
financial condition and results of operations could be materially
adversely affected.
RESPONSE RATES; RESIDENTIAL CUSTOMER ATTRITION
The Company is significantly affected by the residential
customer response rates to its marketing campaigns and
residential customer attrition rates. Decreases in residential
customer response rates or increases in the Company's residential
customer attrition rates, could have a material adverse impact on
the Company's business, financial condition and results of
operations.
RISKS OF INTERNATIONAL TELECOMMUNICATIONS BUSINESS
The Company has to date generated substantially all of its
revenues by providing international long distance
telecommunications services and expects that this will continue
in the future. There are certain risks inherent in doing
business on an international level, such as unexpected changes in
regulatory requirements, tariffs, customs, duties and other trade
barriers, political risks, and other factors which could
materially adversely impact the Company's current and planned
operations. The international telecommunications industry is
changing rapidly due to deregulation, privatization of Post
Telephone and Telegraphs (the "PTTs"), technological
improvements, expansion of telecommunications infrastructure and
the globalization of the world's economies. There can be no
assurance that one or more of these factors will not vary in a
manner that could have a material adverse effect on the Company.
A key component of the Company's business strategy is its
planned expansion into additional international markets. The
Company is currently making arrangements in various European
countries to allow it to originate and transmit traffic in those
countries. These arrangements include, but are not limited to,
the attainment of licenses, the construction of facilities, and
the recruitment of additional personnel with international
telecommunications and marketing experience. In many of these
markets, substantial competition from incumbent carriers and new
entrants already exists. There can be no assurance that the
Company will successfully complete its arrangements to offer its
services in Europe.
The Company's strategy also includes expansion into
industriallizing nations. In many of these markets, the
government may control access to the local networks and otherwise
exert substantial influence over the telecommunications market,
either directly or through ownership or control of the PTT. In
addition, incumbent U.S. carriers serving international markets
may have better brand recognition and customer loyalty, and
significant operational advantages over the Company. Further,
the existing carrier may take many months to allow competitors
such as the Company to interconnect to its switches within the
market. The Company has limited recourse if its foreign partners
fail to perform under their arrangements with the Company, or if
foreign governments, PTTs or other carriers take actions that
adversely affect the Company's ability to gain entry into those
markets.
The Company is also subject to the Foreign Corrupt Practices
Act ("FCPA"), which generally prohibits U.S. companies and their
intermediaries from bribing foreign officials for the purpose of
obtaining or maintaining business. While Company policy
prohibits such actions, the Company may be exposed to liability
under the FCPA as a result of past or future actions taken
without the Company's knowledge by agents, strategic partners,
and other intermediaries.
GOVERNMENT REGULATION
The Company's business is subject to varying degrees of
federal and state regulation. Federal laws and the regulations
of the Federal Communications Commission (the "FCC") apply to the
Company's international and interstate facilities-based and
resale telecommunications services, while applicable state
regulatory authorities ("PSCs") have jurisdiction over
telecommunications services originating and terminating within
the same state. At the federal level the Company is subject to
common carriage requirements under the Communications Act of
1934, as amended (the "Communications Act"). Comprehensive
amendments to the Communications Act were made by the
Telecommunications Act, which was signed into law on February 8,
1996. In addition, although the laws of other countries only
directly apply to carriers doing business in those countries, the
Company may be affected indirectly by such laws insofar as they
affect foreign carriers with which the Company does business.
International telecommunications carriers are required to
obtain authority from the FCC under Section 214 of the
Communications Act in order to provide international service that
originates or terminates in the United States. U.S.
international common carriers also are required to file and
maintain tariffs with the FCC specifying the rates, terms, and
conditions of their services. In 1996, the FCC established new
rules that streamlined its Section 214 authorization and tariff
regulation processes to provide for shorter notice and review
periods for certain U.S. international carriers including the
Company. On August 27, 1997, the Company was granted global
facilities-based Section 214 authority under the FCC's new
streamlined processing rules. Facilities-based global Section
214 authority permits the Company to provide international basic
switched, private line, data, television and business services
using previously authorized U.S. facilities to virtually every
country in the world. The Company also holds a Section 214
authorization granted in 1989 covering the provision of
facilities-based satellite and resold international services.
Additionally, U.K. Department of Trade and Industry issued
to the Company an International Simple Resale (ISR) License for
the United Kingdom in October 1997. The ISR License allows the
Company to resell traffic originating in the U.K. Pursuant to
regulatory restructure in the U.K. introduced in December 1997,
the ISR License will be replaced by the International Simple
Voice Resale (ISVR) License. The Company expects final approval
of its application for the ISVR License in the first quarter of
1998.
The FCC's streamlined rules also provide for global Section
214 authorization to resell switched and private line services of
other carriers by non-dominant international carriers. The FCC
decides on a case-by-case basis, however, whether to grant
Section 214 authority to U.S. carriers to resell the switched
private lines of affiliated foreign carriers to countries where a
foreign carrier is dominant, based on a showing that there are
equivalent resale opportunities for U.S. carriers in the foreign
carrier's market. To date, the FCC has found that Australia,
Canada, the U.K., Sweden and New Zealand provide equivalent
resale opportunities. The FCC has also found that equivalent
resale opportunities do not exist in Germany, Hong Kong and
France. The FCC also is considering applications for equivalency
determinations with respect to Australia, Chile, Denmark,
Finland and Mexico. On October 30, 1997, the FCC found that
equivalent resale opportunities exist for resale of switched
private lines in Mexico but conditioned an authorization granted
on the basis of that finding on a commitment from Telmex that it
would reduce the rate at which it settles international traffic
within the next two years. U.S. international carriers have
sought review of the FCC's decision. It is possible that
interconnected private line resale to additional countries may be
allowed in the future. Pursuant to FCC rules and policies, the
Company's authorization to provide service via the resale of
interconnected international private lines will be expanded to
include countries subsequently determined by the FCC to afford
equivalent resale opportunities to those available under United
States law, if any. As a result of the recent signing of the WTO
Agreement, the FCC has replaced the equivalency test with a
rebuttable presumption in favor of resale of interconnected
private lines to WTO member countries. Under new FCC rules which
are not expected to take effect any earlier than February 9,
1998, pending the effective date of the WTO Agreement, the FCC
will authorize the provision of switched service over private
lines between the U.S. and a WTO member country if either the
settlement rates for at least 50 percent of the settled
U.S.-billed traffic between the U.S. and that country are at
or below the FCC's benchmark settlement rate for that country
only if both the settlement rates for at least 50 percent of
the U.S.-billed traffic between the U.S. and that country are
at or below the relevant benchmark and the country satisfied
the FCC's equivalency test.
The FCC is currently considering whether to limit or
prohibit the practice whereby a carrier routes, through its
facilities in a third country, traffic originating from one
country and destined for another country. The FCC has
permitted third country calling where all countries involved
consent to this type of routing arrangements, referred to as
"transiting." Under certain arrangements referred to as
"refiling," the carrier in the destination country does not
consent to receiving traffic from the originating country and
does not realize the traffic it receives from the third country
is actually originating from a different country. The FCC to
date has made no pronouncement as to whether refile arrangements
comport either with U.S. or ITU regulations. It is possible that
the FCC may determine that refiling, as defined, violates U.S.
and/or international law. To the extent that the Company's
traffic is routed through a third country to reach a destination
country, such an FCC determination with respect to transiting and
refiling could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company must also conduct its international business in
compliance with the FCC's international settlements policy
("ISP"). The ISP establishes the parameters by which U.S.-based
carriers and their foreign correspondents settle the cost of
terminating each other's traffic over their respective networks.
The precise terms of settlement are established in a
correspondent agreement (also referred to as an "operating
agreement"), which also sets forth the term of the agreement, the
types of service covered by the agreement, the division of
revenues between the carrier that bills for the call and the
carrier that terminates the call, the frequency of settlements,
the currency in which payments will be made, the formula for
calculating traffic flows between countries, technical standards,
and procedures for the settlement of disputes.
The Company's provision of domestic long distance service in
the United States is subject to regulation by the FCC and certain
PSCs, who regulate, to varying degrees, interstate and intrastate
rates, respectively, ownership of transmission facilities, and
the terms and conditions under which the Company's domestic
services are provided. In general, neither the FCC nor the PSCs
exercise direct oversight over cost justification for domestic
carriers' rates, services or profit levels, but either or both
may do so in the future. Domestic carriers such as the Company,
however, are required by federal law and regulations to file
tariffs listing the rates, terms and conditions applicable to
their interstate services.
The FCC adopted an order on October 29, 1996, requiring that
non-dominant interstate carriers, such as the Company, eliminate
FCC tariffs for domestic interstate long distance service. This
order was to take effect as of December 1997. However, on
February 13, 1997, the U.S. Court of Appeals for the District of
Columbia Circuit ruled that the FCC's order be stayed pending
judicial review of appeals challenging the order. Should the
appeals fail and the FCC's order become effective, the Company
may benefit from the elimination of FCC tariffs by gaining more
flexibility and speed in dealing with marketplace changes. The
absence of tariffs, however, will also require that the Company
secure contractual agreements with its customers regarding many
of the terms of its existing tariffs or face possible claims
arising because the rights of the parties are no longer clearly
defined. To the extent that the Company's customer base involves
"casual calling" customers, the potential absence of tariffs
would require the Company to establish contractual methods to
limit potential liability to such customers. On August 20, 1997,
the FCC partially reconsidered its order by allowing dial-around
carriers such as the Company the option of maintaining tariffs on
file with the FCC.
In addition, the Company generally is also required to
obtain certification from the relevant state PSC prior to the
initiation of intrastate service and to file tariffs with each
such state. The Company currently has the certifications required
to provide service in 35 states, and has filed or is in the
process of filing requests for certification in 6 additional
states. Although the Company intends and expects to obtain
operating authority in each jurisdiction in which operating
authority is required, there can be no assurance that one or more
of these jurisdictions will not deny the Company's request for
operating authority. Any failure to maintain proper federal and
state certification or tariffs, or any difficulties or delays in
obtaining required certifications, could have a material adverse
effect on the Company's business, financial condition and results
of operations.
The FCC and certain PSCs also impose prior approval
requirements on transfers or changes of control, including pro
forma transfers of control and corporate reorganizations, and
assignments of regulatory authorizations. Such requirements may
have the effect of delaying, deterring or preventing a change in
control of the Company. The Company also is required to obtain
state approval for the issuance of securities. Seven of the
states in which the Company is certificated provide for prior
approval or notification of the issuance of securities by the
Company. Although these state filing requirements may have been
preempted by the National Securities Market Improvement Act of
1996, there is no case law on this point.
The 1996 Act is designed to promote local telephone
competition through federal and state deregulation. As part of
its pro-competitive policies, the 1996 Act frees the RBOCs from
the judicial orders that prohibited their provision of long
distance services outside of their operating territories (which
are called, Local Access and Transport Areas ("LATAs"). The 1996
Act provides specific guidelines that allow the RBOCs to provide
long distance interLATA service to customers inside the RBOC's
region but not before the RBOC has demonstrated to the FCC and
state regulators that it has opened up its local network to
competition and met a "competitive checklist" of requirements
designed to provide competing network providers with
nondiscriminatory access to the RBOC's local network. To date,
the FCC has denied applications for in-region long distance
authority filed by Ameritech Corporation in Michigan and
Southwestern Bell Corporation ("SBC") in Oklahoma. Bell South
recently filed a similar application for Mississippi. If
granted, such authority would permit RBOCs to compete with the
Company in the provision of domestic and international long
distance services. On December 31, 1997, in striking down an FCC
order concerning certain RBOC requests to enter the long distance
market, a Federal district Court in Texas found unconstitutional
certain provisions of the 1996 Act restricting the RBOCs from
offering such services in their operating regions until they
could demonstrate that their networks have been made available to
competitive providers of local exchange services in those
regions. The United States and several long distance companies
have requested a stay of this decision and it is expected that
they, and others, will seek its reversal on appeal. In the
meantime, other similar FCC decisions concerning other RBOCs may
remain in effect. The scope of the District Court Order, the
timing of a ruling on the request for stay and the timing of the
ultimate resolution of the case are all uncertain. If the
District Court's decision ultimately is permitted to stand, it
may result in RBOC's providing interexchange service in their
operating regions sooner than previously expected.
To originate and terminate calls in connection with
providing their services, long distance carriers such as the
Company must purchase "access services" from LECs or CLECs.
Access charges represent a significant portion of the Company's
cost of U.S. domestic long distance services and, generally, such
access charges are regulated by the FCC for interstate services
and by PSCs for intrastate services. The FCC has undertaken a
comprehensive review of its regulation of LEC access charges to
better account for increasing levels of local competition. Under
alternative access charge rate structures being considered by the
FCC, LECs would be permitted to allow volume discounts in the
pricing of access charges. While the outcome of these
proceedings is uncertain, if these rate structures are adopted,
many long distance carriers, including the Company, could be
placed at a significant cost disadvantage to larger competitors.
In February 1997, the World Trade Organization ("WTO")
announced that 69 countries, including the United States, Japan,
and all of the member states of the European Union ("EU"),
reached an agreement (the "WTO Agreement"), within the framework
of the General Agreement of Trade Services ("GATS") to facilitate
trade in basic telecommunication services. The WTO agreement was
originally scheduled to take effect on January 1, 1998, pending
ratification by the WTO member countries. the effective date has
been delayed and is not anticipated to occur any earlier than
February 1, 1998. Pursuant to the terms of the WTO Agreement,
signatories have committed to varying degrees to allow access to
their domestic and international markets by competing
telecommunications providers, allow foreign ownership interests
in domestic telecommunications providers and establish regulatory
schemes to develop and implement policies to accommodate
telecommunications competition. At this time, the Company is
unable to predict the effect the WTO Agreement and related
developments might have on its business, financial condition and
results of operations.
There can be no assurance that future regulatory, judicial
and legislative changes will not have a material adverse effect
on the Company, that U.S. or foreign regulators or third parties
will not raise material issues with regard to the Company's
compliance or noncompliance with applicable laws and
regulations, or that regulatory activities will not have a
material adverse effect on the Company's business, financial
condition and results of operations. Moreover, the FCC and the
PSCs generally have the authority to condition, modify, cancel,
terminate or revoke the Company's operating authority for failure
to comply with federal and state laws and applicable rules,
regulations and policies. Fines or other penalties also may be
imposed for such violations. Any such action by the FCC and/or
the PSCs could have a material adverse effect on the Company's
business, financial condition and results of operations.
EFFECT OF RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is characterized by rapid
and significant technological advancements and introductions of
new products and services employing new technologies.
Improvements in transmission equipment, the development of
switching technology allowing the simultaneous transmission of
voice, data and video, and the commercial availability of
Internet-based domestic and international switched voice, data
and video services at prices lower than comparable services
offered by the Company are all possible developments that could
adversely affect the Company. The Company's profitability will
depend on its ability to anticipate and adapt to rapid
technological changes, acquire or otherwise access new
technology, and offer, on a timely and cost-effective basis,
services that meet evolving industry standards. There can be no
assurance that the Company will be able to adapt to such
technological changes, maintain competitive services and prices
or obtain new technologies on a timely basis, on satisfactory
terms or at all. Failure to adapt to rapid technological changes
could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISK OF NETWORK FAILURE
The success of the Company is largely dependent upon its
ability to deliver high quality, uninterrupted telecommunications
services. Any failure of the Company's network or other systems
or hardware that causes interruptions in the Company's operations
could have a material adverse effect on the Company. Increases
in the Company's traffic and the build-out of its network will
place additional strains on its systems, and there can be no
assurance that the Company will not experience system failures.
Frequent, significant or prolonged system failures, or
difficulties experienced by customers in accessing or maintaining
connection with the Company's network could substantially damage
the Company's reputation and could have a material adverse effect
on the Company's business, financial condition and results of
operations.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon
the continued contributions of its management team and technical,
marketing and customer service personnel. The Company's success
also depends on its ability to attract and retain additional
qualified management, technical, marketing and customer service
personnel. Competition for qualified employees in the
telecommunications industry is intense and, from time to time,
there are a limited number of persons with knowledge of and
experience in particular sectors of the industry. The process of
locating personnel with the combination of skills and attributes
required to implement the Company's strategies is often lengthy,
and there can be no assurance that the Company will be successful
in attracting and retaining such personnel. The loss of the
services of key personnel, or the inability to attract additional
qualified personnel, could have a material adverse effect on the
Company's operations, its ability to implement its business
strategies, and its efforts to expand. Any such event could have
a material adverse effect on the Company's business, financial
condition and results of operations.
RISKS RELATED TO USE OF STARTEC NAME
Certain other telecommunications companies and related
businesses use names or hold registered trademarks that include
the word "star." In addition, several other companies in
businesses that the Company believes are not telecommunications-
related use variations of the "star-technology" word combination
(e.g., Startek and Startech). Although the Company holds a
registered trademark for "STARTEC," there can be no assurance
that its continued use of the STARTEC name will not result in
litigation brought by companies using similar names or, in the
event the Company should change its name, that it would not
suffer a loss of goodwill. In addition, the Company is filing
for federal registration of the trademark of "Startec Global
Communications Corporation." While no guarantee can be made that
this application will be successful and mature into a federal
trademark registration, the established rights in and
registration of STARTEC provides the basis for expanding the
trademark rights to include the supplemental terms "Global
Communications Group."
RISKS ASSOCIATED WITH STRATEGIC ALLIANCES, ACQUISITIONS AND
INVESTMENTS
The Company intends to pursue strategic alliances with, and
to acquire assets and businesses or make strategic investments
in, businesses that it believes are complementary to the
Company's current and planned operations. The Company, however,
has no present commitments, agreements or understandings with
respect to any strategic alliance, acquisition or investment.
Any future strategic alliances, investments or acquisitions would
be accompanied by the risks commonly encountered in strategic
alliances with, or acquisitions of, or investments in, other
companies. Such risks include those associated with assimilating
the operations and personnel of the companies, potential
disruption of the Company's ongoing business, inability of
management to maximize the financial and strategic position of
the Company by the successful incorporation of the acquired
technology, know-how, and rights into the Company's business,
maintenance of uniform standards, controls, procedures and
policies, and impairment of relationships with employees and
customers as a result of changes in management. There can be no
assurance that the Company would be successful in overcoming
these risks or any other problems encountered with such strategic
alliances, investments or acquisitions.
Further, if the Company were to proceed with one or more
significant strategic alliances, acquisitions or investments in
which the consideration given by the Company consists of cash, a
substantial portion of the Company's available cash could be used
to consummate such strategic alliances, acquisitions or
investments. If the Company were to consummate one or more
significant strategic alliances, acquisitions or investments in
which the consideration given by the Company consists of stock,
stockholders of the Company could suffer a significant dilution
of their interests in the Company. Many of the businesses that
might become attractive acquisition candidates for the Company
may have significant goodwill and intangible assets, and
acquisitions of these businesses, if accounted for as a purchase,
would typically result in substantial amortization charges to the
Company. The financial impact of acquisitions, investments and
strategic alliances could have a material adverse effect on the
Company's business, financial condition and results of operations
and could cause substantial fluctuations in the Company's future
quarterly and yearly operating results.
CONTROL OF COMPANY BY CURRENT STOCKHOLDERS
The executive officers and directors of the Company
beneficially own 4,008,491 shares of Common Stock, representing
46.2% of the Common Stock, including options to purchase 60,000
shares of Common Stock exercisable over time. Of these amounts,
Ram Mukunda, President of the Company beneficially owns 3,579,675
shares of Common Stock. Mr. Mukunda, Vijay Srinivas and Usha
Srinivas have entered into a voting agreement dated as of July
31, 1997 (the "Voting Agreement"), pursuant to which Mr. Mukunda
has the power to vote all of the shares held by Mr. and Mrs.
Srinivas. The Voting Agreement terminated on December 31, 1997.
The Company's executive officers and directors as a group, or Mr.
Mukunda, acting individually, exercise significant influence over
such matters as the election of the directors of the Company,
amendments to the Company's charter, and other fundamental
corporate transactions such as mergers, asset sales, and the sale
of the Company.
RESTRICTIONS IMPOSED BY SIGNET AGREEMENT
The Signet Agreement contains a number of affirmative and
negative covenants, including covenants restricting the Company
and its subsidiaries with respect to the conduct of business and
maintenance of corporate existence, the incurrence of additional
indebtedness, the creation of liens, transactions with Company
affiliates, the consummation of certain merger or consolidating
transactions or the sale of substantial amounts of the Company's
assets, the sale of capital stock of any subsidiary, the making
of investments or acquisition of assets, and the making of
dividend and similar payments or distributions. In addition, the
Signet Agreement includes a number of financial covenants,
including covenants requiring the Company to maintain certain
financial ratios and thresholds. A material breach of any of
these obligations or covenants could result in an event of
default pursuant to which Signet Bank could declare all amounts
outstanding due and payable immediately. There can be no
assurance that one or more of such breaches will not occur or
that the assets or cash flows of the Company, or other sources of
financing, would be sufficient to repay in full all borrowings
outstanding under the Signet Agreement in the event of such
breach. Beginning on January 1, 1998 (and extending to July 1,
1998 upon the occurrence of defined events), should Signet Bank
determine and assert based on its reasonable assessment that a
material adverse change to the Company has occurred, it could
declare all amounts outstanding to be immediately due and
payable. The warrants issued to Signet Bank in connection with
the Signet Agreement also contain provisions which may adversely
affect the Company's ability to raise additional capital through
the sale or issuance of its Common Stock, options, warrants or
other rights to purchase Common Stock, or securities convertible
into Common Stock without providing Signet Bank with the right to
maintain its percentage ownership in the Company.
In addition, the Company's repayment and other obligations
under the Signet Agreement are secured by (i) a first priority
security interest in all of the Company's tangible and intangible
assets, including all customer lists and other intellectual
property of all direct and indirect subsidiaries; (ii) a pledge
of all of the capital stock of the Company owned by Ram Mukunda,
the Company's President, director and principal shareholder, and
Vijay Srinivas, a Company director and his wife, Usha Srinivas;
and (iii) all leased or owned real estate and all fixtures and
equipment. A breach of any of the Company's obligations or
covenants under the Signet Agreement could result in an event of
default pursuant to which Signet Bank could also seek to
foreclose on the security provided by the Company, Mr. Mukunda
and Mr. and Mrs. Srinivas. If Signet Bank were to take
possession of and control over the shares subject to the pledge,
it would acquire voting control of a significant percentage of
the issued and outstanding shares of Common Stock.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION,
BYLAWS AND MARYLAND LAW
The Company's Amended and Restated Articles of
Incorporation (the "Charter") and Bylaws (the "Bylaws") include
certain provisions which may have the effect of delaying,
deterring or preventing a future takeover or change in control of
the Company such as notice requirements for stockholders,
staggered terms for its Board of Directors, limitations on the
stockholders' ability to remove directors, call meetings, or to
present proposals to the stockholders for a vote, and
"super-majority" voting requirements for amendments to certain
key provisions of the Charter, unless such takeover or change in
control is approved by the Company's Board of Directors. Such
provisions may also render the removal of directors and
management more difficult. In addition, the Company's Board of
Directors has the authority to issue up to 100,000 shares of
preferred stock (the "Preferred Stock") and to determine the
price, rights, preferences and privileges of those shares without
any further vote or action by the stockholders. The rights of
the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of
Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the
Company. The Company has no present plan to issue any shares of
Preferred Stock.
The Company is also subject to the anti-takeover provisions
of the Maryland General Corporation Law, which prohibit the
Company from engaging in a "business combination" with an
Interested Stockholder (as defined) for a period of five
years after the date of the transaction in which the person first
becomes an Interested Stockholder, unless the business
combination is approved in a prescribed manner. The Company is
also subject to the control share acquisition provisions of the
Maryland General Corporation Law, which provide that shares
acquired by a person with certain levels of voting power have no
voting rights unless the share acquisition is approved by the
vote of two-thirds of the votes entitled to be cast, excluding
shares owned by the acquiror and by the Company's officers and
employee-directors, and in certain circumstances, such shares may
be redeemed by the Company. The application of these statutes
and certain other provisions of the Company's Charter could have
the effect of discouraging, delaying or preventing a change of
control of the Company not approved by the Board of Directors,
which could adversely affect the market price of the
Company's Common Stock. Additionally, certain Federal regulations
require prior approval of certain transfers of control which
could also have the effect of delaying, deferring or preventing a
change of control.
POSSIBLE VOLATILITY OF STOCK PRICE
Historically, the market prices for securities of emerging
companies in the telecommunications industry have been highly
volatile. Future announcements concerning the Company or its
competitors, including results of operations, technological
innovations, government regulations, proprietary rights or
significant litigation, may have a significant impact on the
market price of the Common Stock. In addition, the stock markets
recently have experienced significant price and volume
fluctuations that particularly have affected telecommunications
companies and have resulted in changes in the market prices
of the stocks of many companies which have not been directly
related to the operating performance of those companies. Such
market fluctuations may materially adversely affect the market
price of the Common Stock.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common
Stock and has no plans to do so in the foreseeable future. The
declaration and payment of any dividends in the future will be
determined by the Board of Directors, in its discretion, and will
depend on a number of factors, including the Company's earnings,
capital requirements and overall financial condition. In
addition, the Company's ability to declare and pay dividends is
substantially restricted under the terms of the Signet Agreement.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock in the public market following
this Offering by the current stockholders of the Company, or the
perception that such sales could occur, could adversely affect
the market price for the Common Stock. The Company's principal
stockholders hold a significant portion of the Company's
outstanding Common Stock and a decision by one or more of these
stockholders to sell shares pursuant to Rule 144 under the
Securities Act or otherwise could materially adversely affect the
market price of the Common Stock.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as of January 9, 1998, the
names of the Selling Stockholders, the nature of any position,
office or other material relationship which a Selling Stockholder
has had within the past three years with the Company and its
affiliates, the number of shares of Common Stock owned by each
Selling Stockholder prior to the offering described herein, the
number of Shares that may be offered and sold for each Selling
Stockholders' account and the amount and percentage of Common
Stock to be owned by each Selling Stockholder after completion of
the offering described herein:
Common Stock To
Be Owned After
Common Stock the Offering
Name and Owned Prior To Shares To Number and
Position the Offering Be Sold 1/ Percent 2/
- ----------- -------------- --------- ---------------
Prabhav Maniyar,
Sr. VP, Secretary 107,616 -- 107,616 1.0
Dhruva Kumar 29,950 -- 29,950 --
Teferi Dejene 28,050 -- 28,050 --
Subhash Pai 21,000 -- 21,000 --
T. J. Master 16,000 -- 16,000 --
Sossina Tafari 10,000 -- 10,000 --
Brenda Buskirk 9,000 -- 9,000 --
Tony Das 7,500 -- 7,500 --
Dereje Demessi 8,000 -- 8,000 --
Tom Bowers 3,000 -- 3,000 --
Akbar Merchant 4,000 -- 4,000 --
_____________________
1/ One or more supplements to this Prospectus may be filed
pursuant to Rule 424, or otherwise, under the Securities Act to
describe any material arrangements for sale of the Shares, if
such arrangements are entered into by any Selling Stockholder.
2/ Represents less than 1% unless otherwise indicated.
Some of the Selling Stockholders may be deemed to be
"affiliates" of the Company, as that term is defined under the
Securities Act.
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling
Stockholders (or by their pledgees, donees, transferees or other
successors in interest). In addition to any such amount sold
hereunder, the Selling Stockholders may, at the same time, sell
any shares of Common Stock owned by him pursuant to the exemption
under Rule 144 under the Securities Act, regardless of whether
such shares are Shares covered by this Prospectus.
Such sales may be made in the Nasdaq National Market,
otherwise in the over-the-counter market, on one or more
securities exchanges, or otherwise at prices and at terms then
prevailing or at prices related to the then-current market price
or in negotiated transactions. The Shares may be sold by one or
more of the following methods, without limitation: (a) a block
trade in which the broker-dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transactions; (b) purchases
by a broker-dealer as principal and resale by such broker-dealer
for its account pursuant to this Prospectus; (c) ordinary broker-
age transactions and transactions in which the broker-dealer
solicits purchasers; (d) an exchange distribution in accordance
with the rules of such exchange; and (e) face-to-face
transactions between sellers and purchases without a
broker-dealer. In effecting sales of the Shares, broker-dealers
engaged by the Selling Stockholder may arrange for the
participation of other broker-dealers. Broker-dealers may
receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholder in
amounts to be negotiated immediately prior to the sale. Such
broker-dealers and any other participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities
Act in connection with such sales, and any commissions received
by them and any profit on the resale of Shares positioned by them
may be deemed to be underwriting discounts and commissions under
the Securities Act.
Once the Company has been notified by a Selling Stockholder
that any material arrangement has been entered into with a
broker-dealer for the sale of Shares through a block trade,
special offering, exchange or secondary distribution or a
purchase by a broker-dealer, a supplement to this Prospectus will
be filed, if required, pursuant to Rule 424 under the Securities
Act, disclosing (a) the name of each such Selling Stockholder and
the participating broker-dealer(s); (b) the number of Shares
involved; (c) the price at which such Shares were sold; (d) the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable; (e) that such
broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this
Prospectus (as supplemented); and (f) other facts material to the
transaction.
There is no assurance that the Selling Stockholders will
sell any or all of the Shares offered hereby.
The Company will pay all expenses incident to the offering
and sale of the Shares to the public other than commissions and
discounts of underwriters, dealers or agents.
<PAGE>
INDEMNIFICATION
Section 2-418 of the Corporations and Associations Article
of the Annotate Code of Maryland and the Company's Bylaws provide
for the indemnification under certain conditions of directors,
officers, employees or agents, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be made
a party by reason of their services in those or other capacities,
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the Annotate Code
of Maryland, the Company's Bylaws or otherwise, the
Company has been informed that in the opinion of the Commission,
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION
STATEMENT AND NOT REQUIRED IN PROSPECTUS
Item 3. Incorporation of Documents by Reference
The following documents of Startec Global Communications
Corporation, a Maryland corporation (the "Company"), filed with
the Securities and Exchange Commission (the "Commission"), are
incorporated by reference into this Registration Statement:
A. The Company's latest Prospectus filed pursuant to Rule
424(b) under the Securities Act (File No. 333-32753).
B. The description of the Company's Common Stock, $.01 par
value, contained in the Company's Registration Statement on Form
S-1 (File No. 333-32753), filed with the Commission on August 4,
1997, incorporated by reference in the Company's Form 8-A (File
No. 0-23087), filed with the Commission on September 15, 1997,
including any other amendment or report filed for the purpose of
updating such description.
All reports and other documents subsequently filed by
the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered pursuant to
this Registration Statement have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or
deemed to be incorporated in this Registration Statement by
reference shall be deemed to be modified or superseded for
purposes of this Registration Statement to the extent that a
statement contained in this Registration Statement or in any
other subsequently filed document which also is or is deemed to
be incorporated in this Registration Statement by reference
modifies or supersedes such statement. Any statement so modified
shall not be deemed in its unmodified form, and any statement so
superseded shall not be deemed, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
Section 2-418 of the Corporations and Associations Article
of the Annotated Code of Maryland permits a corporation to
indemnify its present and former officers and directors, among
others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of
their services in those or other capacities, unless it is
established that (a) the act or omission of the director or
officer was material to the matter giving rise to the proceeding
and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty; or (b) the director or officer
actually received an improper personal benefit in money,
property, or services; or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. Maryland law
permits a corporation to indemnify a present and former officer
to the same extent as a director, and to provide additional
indemnification to an officer who is not also a director. In
addition, Section 2-418(f) of the Corporations and Associations
Article of the Annotated Code of Maryland permits a corporation
to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses (including attorney's fees)
incurred by a present or former director or officer made a party
to the proceeding by reason of his service in that capacity,
provided that the corporation shall have received (a) a written
affirmation by the director or officer of his good faith belief
that he has met the standard of conduct necessary for
indemnification by the corporation; and (b) a written undertaking
by or on his behalf to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the
standard of conduct was not met.
The Registrant has provided for indemnification of
directors, officers, employees, and agents in Article VIII of its
charter. This provision reads as follows:
(a) To the maximum extent permitted by the laws of the State
of Maryland in effect from time to time, any person who is or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person (i) is or was a director or officer of the Corporation or
of a predecessor of the Corporation, or (ii) is or was a director
or officer of the Corporation or of a predecessor of the
Corporation and is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, limited
liability company, partnership, joint venture, trust, other
enterprise, or employee benefit plan, shall be indemnified by the
Corporation against judgments, penalties, fines, settlements and
reasonable expenses (including, but not limited to attorneys'
fees and court costs) actually incurred by such person in
connection with such action, suit or proceeding, or in connection
with any appeal thereof (which reasonable expenses may be paid or
reimbursed in advance of final disposition of any such suit,
action or proceeding).
(b) To the maximum extent permitted by the laws of the State
of Maryland in effect from time to time, any person who is or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person (i) is or was an employee or agent of the Corporation or
of a predecessor of the Corporation, or (ii) is or was an
employee or agent of the Corporation or of a predecessor of the
Corporation and is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, limited
liability company, partnership, joint venture, trust, other
enterprise, or other employee benefit plan, may (but need not) be
indemnified by the Corporation against judgments, penalties,
fines, settlements and reasonable expenses (including, but not
limited to, attorneys' fees and court costs) actually incurred by
such person in connection with such action, suit or proceeding,
or in connection with any appeal thereof (which reasonable
expenses may be paid or reimbursed in advance of final
disposition of any such suit, action or proceeding).
(c) Neither the amendment nor repeal of this Article, nor
the adoption or amendment of any other provision of the charter
or bylaws of the Corporation inconsistent with this Article,
shall apply to or affect in any respect the applicability of this
Article with respect to indemnification for any act or failure to
act which occurred prior to such amendment, repeal or adoption.
(d) The foregoing right of indemnification and advancement
of expenses shall not be deemed exclusive of any other rights of
which any officer, director, employee or agent of the Corporation
may be entitled apart from the provisions of this Article.
Under Maryland law, a corporation is permitted to limit by
provision in its charter the liability of directors and officers,
so that no director or officer of the corporation shall be liable
to the corporation or to any stockholder for money damages except
to the extent that (i) the director or officer actually received
an improper benefit in money, property, or services, for the
amount of the benefit or profit in money, property or services
actually received, or (ii) a judgment or other final adjudication
adverse to the director or officer is entered in a proceeding
based on a finding in the proceeding that the director's or
officer's action, or failure to act, was the result or active and
deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The Registrant has limited the
liability of its directors and officers for money damages in
Article VII of its charter, as amended. This provision reads as
follows:
No director or officer of the Corporation shall be liable to
the Corporation or to any stockholder for money damages except to
the extent that (i) the director or officer actually received an
improper personal benefit in money, property, or services, for
the amount of the benefit or profit in money, property or
services actually received, or (ii) a judgment or other final
adjudication adverse to the director or officer is entered in a
proceeding based on a finding in the proceeding that the
director's or officer's action, or failure to act, was the result
of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. Neither the amendment
nor repeal of this Article, nor the adoption or amendment of any
provision of the charter or bylaws of the Corporation
inconsistent with this Article, shall apply to or affect in any
respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
Item 7. Exemption from Registration
The Shares were issued in reliance upon an exemption or
exemptions from registration under the Securities Act by reason
of Section 4(2) thereof or Regulation D promulgated thereunder,
or Rule 701 promulgated under Section 3(b) of the Securities Act,
as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts
relating to compensation.
Item 8. Exhibits
Exhibit
Number Name of Exhibit
- ------- -----------------------------------------------
5 Opinion of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A.
15 N/A
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A. (Included in Exhibit 5)
24 Powers of Attorney (included on signature page)
99 N/A
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement; notwithstanding the
foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
this Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if this Registration Statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Com-
mission such indemnification is against public policy as ex-
pressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
Montgomery County, State of Maryland, on January 9, 1998.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
By: /s/ PRABHAV V. MANIYAR
--------------------------------
Prabhav V. Maniyar
Senior Vice President and Chief
Financial Officer
<PAGE>
Each person whose signature appears below constitutes
and appoints Ram Mukunda, President and Chief Executive Officer
of the Company, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any
and all other documents and instruments incidental thereto, and
to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission
and any other regulatory authority, granting unto said
attorney-in-fact and agent, or his substitute, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and
purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- -------------------------- ----------------- ---------------
/s/ RAM MUKUNDA President, Chief January 9, 1998
- ---------------------- Officer, Treasurer
Ram Mukunda And Director
(Principal Executive Officer)
/s/ PRABHAV V. MANIYAR Senior Vice January 9, 1998
- ---------------------- President, Chief
Prabhav V. Maniyar Financial Officer,
Secretary and Director
(Principal Financial and Accounting Officer)
/s/ VIJAY SRINIVAS Director January 9, 1998
- ----------------------
Vijay Srinivas
/s/ NAZIR G. DOSSANI Director January 9, 1998
- ----------------------
Nazir G. Dossani
/s/ RICHARD K. PRINS Director January 9, 1998
- ----------------------
Richard K. Prins
<PAGE>
EXHIBIT INDEX
Exhibit
Number Name of Exhibit Page
- ------- ----------------------------------------------- -----
5 Opinion of Shulman, Rogers, Gandal, Pordy & 39
Ecker, P.A.
15 N/A
23.1 Consent of Arthur Andersen LLP 40
23.2 Consent of Shulman, Rogers, Gandal, Pordy &
Ecker, P.A. (Included in Exhibit 5)
24 Powers of Attorney (included on signature page)
99 N/A
<PAGE>
Exhibit 5.1
January 9, 1998
Startec Global Communications Corporation
10411 Motor City Drive, Suite 301
Bethesda, Maryland 20817
Re: Startec Global Communications Corporation:
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as securities counsel for Startec Global
Communications Corporation, a Maryland corporation (the
"Company"), in connection with the preparation by the Company of
a registration statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933 relating to the
registration of 1,019,766 shares (the "Shares") of the
Company's Common Stock, par value $0.01 per share (the "Common
Stock"), which may be offered from time to time by the Company or
the selling security holders named in the Registration Statement.
In connection with the preparation of the Registration
Statement, we have examined such documents, instruments, records,
certificates and matters as we have considered appropriate and
necessary to render this opinion. We have assumed for the
purpose of this opinion the authenticity of all documents
submitted to us as originals and the conformity with the
originals of all documents submitted to us as copies, and the
genuineness of all signatures thereon.
Based on the foregoing and in reliance thereon, it is our
opinion that the issuance of the Shares have been duly authorized
and, after the Registration Statement becomes effective and after
any post-effective amendment required by law is duly completed,
filed and becomes effective (such Registration Statement as it
become effective, or, if required to be post-effectively amended,
then as it is so amended, is referred to hereinafter as the
"Final Registration Statement"), and when the applicable
provisions of "Blue Sky" or other state securities laws shall
have been complied with, and when the options are duly exercised
and Shares are issued and/or sold in accordance with the terms
described in the prospectus forming a part of the Final
Registration Statement, the Shares will be validly issued, fully
paid and nonassessable.
We hereby consent to the inclusion of our opinion as Exhibit
5.1 to the Registration Statement and further consent to the
references to this firm in the Registration Statement. In giving
this consent, we do not hereby admit that we are in the category
of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the
Commission thereunder.
This opinion is rendered solely for your benefit in
accordance with the subject transaction and is not to be
otherwise used, circulated, quoted or referred to without our
prior written consent. This opinion is limited to the laws of
the State of Maryland and the federal laws of the United States.
Very truly yours,
/S/ Shulman, Rogers, Gandal, Pordy
& Ecker, P.A.
<PAGE>
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form
S-8 of our reports dated September 11, 1997, included in Startec
Global Communication Corporation's Registration Statement on Form
S-1, as amended (File No. 333-32753), and to all references to
our Firm included in this Registration Statement.
/s/ Arthur Andersen LLP
Washington, D.C.
January 14, 1998
