PONTE VEDRA, Fla — Recovering mobile satellite services operatoron Aug. 13 reported slightly lower total revenue but increased use of its two-way voice service — the most profitable of its businesses — as its second-generation constellation of 24 satellites entered service.
All but one of the satellites, whose final batch of six was placed into low Earth orbit in February, are now operational, with the last one set to begin commercial service in late August, Globalstar said.
Globalstar’s voice business has been crippled in recent years by a likely radiation-caused issue aboard its first-generation satellites that degraded two-way voice service. Globalstar has built a parallel business based on its SPOT hand-held messaging products while it waited for the new satellites to enter service and restore the voice business.
As these satellites have come into operation, Globalstar has been cleansing its subscriber base of customers who are not keeping up their payments. The company removed 36,000 such subscribers from its books in the first three months of 2013.
In a conference call with investors, Covington, La.-based Globalstar said it is still looking for third-party investors to strengthen its cash position but that its renegotiated loan from a consortium of French banks has given the company breathing room for the next two to three years.
The $586.3 million loan was guaranteed by France’s Coface export-credit agency, which on July 31 agreed to a substantial modification of the loan’s terms to permit Globalstar to build its business without major repayments until 2016.
The loan’s final maturity date was extended to 2022. Globalstar’s repayment obligations are limited to $4 million in 2014 and $6.4 million in 2015. Repayments rise sharply thereafter.
As a condition of the restructuring, Globalstar’s long-time financial backer, Thermo Group — owned by the family of Globalstar Chief Executive Jay Monroe — was forced to commit a further $85 million to Globalstar.
The latest cash infusion by Thermo “demonstrates our continued belief in the success of Globalstar,” Monroe said during the conference call.
Monroe said Globalstar is focusing on introducing two new products, the SPOT Global Phone and a third-generation SPOT messaging unit, in the coming weeks to broaden its subscriber base.
Revenue from what Globalstar calls its Duplex service, meaning two-way voice communications, has begun to move upward. The average Duplex subscriber paid $21.29 per month in the three months ending June 30, up from $19.24 in the previous three-month period and $17.42 in 2012, Globalstar said.
Total service revenue, from voice and data links, was $15.4 million for the three months ending June 30, up 9 percent from the same period a year ago.
Equipment revenue declined sharply as the company was unable to release its new products until after the end of the second quarter. Total revenue was flat as a result — $19.8 million compared with $20 million a year ago.
Monroe promised investors that the new products, coupled with the full deployment of the second-generation satellites and the amended Coface loan, will result in “a material financial improvement over the coming quarters as Duplex revenue and equipment revenue is expected to drive” increased profitability. The company did not discuss during the call the status of its negotiations with satellite builderof France regarding six additional second-generation satellites, which Globalstar and Thales Alenia Space have said are needed to assure full performance of the second-generation constellation. The two have been at odds over the price of those six satellites.
With 24 second-generation satellites now entering service and starting to generate revenue and its Coface loan restructured, Globalstar’s next challenge will be financing the second-generation ground network that the satellites will use.
In an Aug. 15 filing with the U.S. Securities and Exchange Commission (SEC), Globalstar said a recent agreement with ground network and gateway Earth station provider Hughes Network Systems of Germantown, Md., calls for Globalstar to make three cash payments totaling $15.8 million this year. The first, for $5.8 million, is due by the end of August.
A fourth payment, of $4.9 million, is due to Hughes in January. Hughes had suspended work on the Globalstar system because of previous missed payment deadlines. In addition to the new cash payment schedule, Globalstar has agreed to give Hughes options to purchase Globalstar stock.
Hughes is working under a $101.4 million contract to Globalstar, of which $62.2 million has been paid, Globalstar said.
In is SEC filing, Globalstar said it had not yet signed a contract with Thales Alenia Space for the six additional satellites Globalstar has said it needs to get full performance from its second-generation constellation.