105,000 Globalstar Telephone Subscribers Await Return of Full Service

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PARIS — Mobile satellite services provider Globalstar on May 6 said it has managed to hold on to 105,000 subscribers for its two-way voice service despite the service degradation in the past three years caused by a problem on the company’s satellites.

These telephone customers, the company said, will form the core of Globalstar’s revenue base as it returns to full service when its second-generation satellites are launched starting late this year.

Milpitas, Calif.-based Globalstar said that even as it has struggled to maintain its base of two-way voice subscribers, it has increased its customer base for what the company calls its Simplex messaging service, which has not been affected by the problem onboard the satellites.

The Simplex customer base has more than doubled in the past two years. As of March 31, the company said it had 225,250 Simplex customers, up 3 percent from Dec. 31. Customers coming from Globalstar’s international gateway operator partners totaled 63,800 as of March 31, down 1.4 percent from Dec. 31.

Globalstar has 24 second-generation satellites under construction, with the first six to be launched in September or October aboard a Russian Soyuz rocket from Russia’s Baikonur Cosmodrome in Kazakhstan.

Three more six-satellite launches are scheduled to be carried out in 2011.

Anthony J. Navarra, president of the company’s global operations, said during a conference call with investors that the two-way service should begin to improve noticeably in the months following the first six-satellite launch, with “a robust service in place by late spring or early summer” of 2011.

Navarra said the Globalstar constellation counts 44 satellites offering 98 percent reliability for the Simplex messaging service. He said the degradation of the two-way service has stabilized in recent months.

The loan package Globalstar assembled in 2009, backed in part by France’s Coface export-credit agency, is providing sufficient cash to complete the deployment of the second-generation satellites and to make incremental improvements in the ground network, Globalstar Chief Financial Officer Fuad Ahmad said during the call.

Globalstar had $293 million in cash and cash commitments as of March 31. In the coming months it will need to pay $90 million to the Arianespace launch consortium to manage the satellite launches, $27 million to Thales Alenia Space to continue building the spacecraft, and $40 million to purchase a satellite insurance policy. Another $32 million will be spent on ground network enhancements.

These investments should leave Globalstar with $104 million in remaining cash to manage its business and expand its growing list of products, led by the SPOT Satellite GPS Messenger, for which Globalstar has received more than 230,000 orders since 2007.

Each two-way telephone customer pays an average $23.34 per month in service charges, according to Globalstar. Each Simplex messaging customer pays $6.44, while each international gateway operator customer pays $1.12 per month.

The company said it has reduced the amount of “churn,” meaning the number of customers who quit the service, to 1.1 percent per month for the three months ending March 31, down from 2009, when it averaged between 1.2 and 1.4 percent per month.

For the three months ending March 31, Globalstar reported an operating loss of $8.7 million on revenue of $15.6 million. The revenue line was flat compared with recent quarters, while the operating loss was cut 27 percent compared with the three months ending Dec. 31.