Globalstar’s Duplex Voice Service Dials up Double-digit Revenue Growth

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PARIS — Recovering mobile satellite services operator Globalstar on May 9 reported double-digit growth in equipment sales and subscriber revenue for its key two-way voice service.

Covington, Louisiana-based Globalstar, whose second-generation satellite constellation was in orbit as of August 2013, needs to continue to increase revenue for what it calls its Duplex subscriber base, as it is these subscribers who provide the highest profit levels.

Globalstar’s SPOT GPS-based location and emergency message service also grew, in contrast to the company’s Simplex service, or one-way communications capability, where revenue dropped.

It was the Duplex service that collapsed starting in 2007 when Globalstar’s first-generation constellation performance began to degrade. The company kept a core subscriber base by offering cut-rate subscription packages mainly based on usage.

With two-way communications back in service with the new 24-satellite constellation, Globalstar is cleansing its subscriber base of customers who are not paying the new, higher rates commensurate with the restored service.

That makes subscriber comparisons more difficult. In a May 7 submission to the U.S. Securities and Exchange Commission, Globalstar said it removed 26,000 subscribers from its books in the three months ending March 31.

Wiping out 26,000 subscribers resulted in a lower total Duplex subscriber base at March 31 compared with a year ago. But after accounting for those dismissed accounts, Globalstar said its Duplex subscription base rose 1.4 percent, to 58,053 subscribers, in the past year.

For the three months ending March 31, Duplex service revenue grew 21 percent, to $5.9 million. Revenue from the sale of Globalstar telephone handsets grew 22 percent during the period, to $1.36 million.

Monthly Duplex revenue averaged $33.75 per subscriber during the first three months of 2014, up nearly 20 percent.

Total Globalstar revenue for the first three months of 2014 was $20.5 million, up 6 percent from a year earlier.

Globalstar’s business is mainly in North America, but with a healthy global constellation in place it is expanding to Central and South America and to Europe, the company said. To do so, it will need to build or reactivate gateway Earth stations around the world where it wants to capture subscribers.

Unlike competitor Iridium, Globalstar’s constellation does not include intersatellite links that relay signals from one to another satellite before the signal is downlinked to a terrestrial network. That makes Globalstar’s constellation much less expensive to build, but more reliant on infrastructure in many nations.

The company said it completed the repair of a gateway in Brazil during the quarter, and expects a Venezuelan gateway to be completed in June.

“International is essentially a greenfield opportunity for us,” Globalstar Chief Executive Jay Monroe said in May 7 conference call with investors.

Like Iridium, Globalstar’s principal loan facility is backed by a guarantee from France’s export credit agency, Coface. The Globalstar satellites were built by Thales Alenia Space of France and Italy. They were launched by Russian Soyuz rockets from Russia’s Baikonur Cosmodrome under a contract with the France-based Arianespace launch consortium.

During the conference call, Globalstar Chief Accounting Officer Rebecca Clary said the company’s debt payment schedule requires $20 million in cash in 2014. The planned capital expenditures, notably on the ground infrastructure, will need another $24 million in 2014.

The company’s cash balance was $19.6 million as of March 31. Globalstar had a $24 million line of credit at its disposal, plus $5 million from its chief sponsor,  Thermo Capital Partners, which is owned by Monroe and his family. An account with a balance of $38 million as of March 31 is reserved for payments under the Coface facility.

 

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