PARIS — Mobile satellite services provider Globalstar expects an arbitration panel to rule by mid-March on whether the company is within its rights in demanding six new satellites from its prime contractor at prices the contractor says are no longer valid, Globalstar Chief Executive Jay Monroe said.
In a Jan. 11 interview, Monroe said the three-judge panel, which is expected to hear arguments in the case Jan. 24, is likely to decide the issue one way or another within four to six weeks of the hearing.
Covington, La.-based Globalstar and the prime contractor for its second-generation satellite constellation, Thales Alenia Space of France and Italy, disagree on whether Thales is obligated to build six more satellites with prices agreed to several years ago. Thales says the contract terms expired; Globalstar disagrees.
Thales Alenia Space officials have declined to comment on the dispute in detail, but industry officials have said the company is loath to agree to the former contract’s low prices given that the Globalstar contract overall is turning out to be of marginal profitability.
Thales Alenia Space has already built 24 second-generation satellites. Eighteen of these have been launched, the last group of six in December. The six remaining spacecraft are scheduled for launch in the first half of 2012, likely in the spring, once Globalstar and its contractor have satisfied themselves that a momentum-wheel defect that has taken one second-generation satellite out of service is not an issue in the remaining spacecraft.
Monroe said Thales and Globalstar “have made real progress” on a software patch designed to permit the satellites to fly with two momentum wheels instead of three.
He said he regrets that the wider market appears to believe that multiple second-generation satellites have been affected by the momentum-wheel problem.
“We are talking about one satellite that has been removed from service,” Monroe said.
Thales Alenia Space officials, while saying they cannot predict momentum-wheel performance with pinpoint accuracy, have said their assessment of the issue with the Goodrich-built momentum wheels is that any problems are likely to show up early in the satellites’ operational lives.
Satellites whose wheels function correctly a couple of months after launch, they suggest, are not likely to suffer the momentum wheel defect. Globalstar’s second-generation satellites are designed to operate for 15 years, about double the service lives of the first-generation constellation now in orbit.
Performance of the first-generation constellation has been seriously undermined because of suspected radiation effects that have destroyed the satellites’ ability to permit two-way voice communications — the most profitable segment of Globalstar’s business, which includes a popular data-messaging service tied to hand-held GPS devices.
The youngest of the first-generation satellites have the same design as the older spacecraft, meaning Globalstar is in a race against time to introduce the radiation-resistant second generation.
Monroe said the company is already seeing a return of customers now that two-way voice communications are returning with the new satellites.
It takes several months after a launch for the satellites to be drifted into their assigned orbital planes and made ready for commercial use. The 18 second-generation spacecraft were launched, six at a time, in October 2010, July 2011 and December 2011.
Monroe said the last launch was “picture perfect” and that the six spacecraft will be in position to further improve voice service in two or three months. “The results are already being seen by customers,” Monroe said.
Monroe conceded that, however the arbitration panel rules, Globalstar is going to need at least six more satellites in short order and has nowhere else to go besides Thales Alenia Space. An adverse ruling from Globalstar’s view would change the price of the satellites but not the need for the new order, he said.
He said he hopes to settle the issue with Thales Alenia Space in a mutually acceptable way no matter what the arbitration panel decides.
Monroe sought to clarify a public disagreement with Thales Alenia Space that occurred in October. Globalstar announced it had ordered six more satellites, to be built on an accelerated schedule in 2013, and that the financial terms respected the conditions of the 2006 contract for the original second-generation constellation.
That same week, Globalstar issued a fresh statement saying that Thales Alenia Space had refused the order. The same statement said Globalstar’s chief financial officer, who had been with the company just 16 months, had tendered his resignation, effective in November.
“The two events were totally unrelated,” Monroe said. “In fact, for several weeks prior to the announcement, [Chief Financial Officer Dirk Wild] and I had engaged in discussions about his future with Globalstar. Once his final decision was made, an eventual departure date was timed to cause the least impact on Globalstar.”
As for the announcement about the new satellites, he said, this was a requirement of the company’s loan agreement with its banking consortium and the French export-credit agency, Coface, which is backing the financial package.
“We had to place the order by a certain date, and since it is a material event, we had to announce it,” Monroe said.
