Globalstar Cuts Costs While Awaiting New Fleet
PARIS — Mobile satellite services provider Inc., battening down the hatches for what it knew would be a rough 2009 and 2010 as it waits for its new satellites to launch, said Nov. 5 it has reduced operating expenses by 17 percent in the past year and halted the performance decline in its current satellites.
With its in-orbit fleet now expected to maintain current levels of two-way voice and data service after two years of degradation, Globalstar said its revenue per subscriber should remain at current levels until late 2010, when the second-generation satellites will start lifting the business.
In a Nov. 5 conference call with investors, officials with Milpitas, Calif.-based Globalstar said the builder of the company’s 24 second-generation satellites, ThalesAlenia Space of France and Italy, has fallen behind schedule by one to three months because of an April earthquake that destroyed a satellite processing facility in L’Aquila, Italy.
Launch of the first six second-generation satellites is now expected to occur in August aboard a Russian Soyuz rocket operated from the BaikonurCosmodrome in Kazakhstan. The company managing the launch contract, of Evry, France, has said a second launch would occur in 2010, with the two remaining missions slated for 2011.
ThalesAlenia Space and Arianespace have resumed full preparation for Globalstar, including design and development of a dispenser to carry the six satellites inside the Soyuz rocket fairing, following Globalstar’s completion in July of a $738 million funding package. Key to the financing was a loan guarantee by the French export-credit agency, Coface.
Anthony J. Navarra, Globalstar president of global operations, said during the call that two-way voice and data service on the Globalstar system will “improve starting immediately after the first launch.”
While waiting for the new satellites, Globalstar is developing its one-way business that features the Spot Messenger product that provides outdoorsmen with a means of sending alerts in an emergency.
Globalstar Chief Executive Peter J. Dalton said 175,000 Spot Messenger units have been ordered, helping raise Globalstar’s subscriber base by 53,000, to 382,300 as of Sept. 30, in the past year.
Navarra said the degradation of the current Globalstar satellite fleet’s two-way performance has been stopped, meaning the current subscriber base and monthly average subscriber revenue of $27.60 should hold steady until the second-generation satellites begin driving fresh revenue growth.
Globalstar and Globaltouch West Africa Ltd. of Lagos, Nigeria, recently completed a gateway Earth station to extend Globalstar’s coverage to West and Central Africa and parts of the eastern Atlantic Ocean.
For the nine months ending Sept. 30, Globalstar reported revenue of $48.4 million, down 28 percent from a year earlier as the degradation of the two-way service continued to erode the use of the system by subscribers wanting full two-way service.
Globalstar has reduced staff and cut other operating costs by 17 percent, to $90.3 million, in the past year, which has narrowed its operating losses in recent months. For the three months ending Sept. 30, operating loss was $11.7 million, compared to $17.4 million in the same period a year ago.