Globalstar Gains Subscribers but Revenue Declines

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  Space News Business

Globalstar Gains Subscribers but Revenue Declines

By PETER B. de SELDING
Space News Staff Writer
posted: 12 May 2008
10:45 am ET



 

PARIS — Mobile satellite services provider Globalstar Inc. reported lower revenue but an increased overall subscriber count as it offered cut-rate subscriptions to keep customers until its second-generation satellite constellation starts coming on line in late 2009 and 2010.

 

The Milpitas, Calif.-based company said its second-generation satellites remain on schedule to begin launching in the third quarter of 2009.

 

In a May 7 conference call, Globalstar Chief Executive Jay Monroe asked investors to stick with the company as it struggles to retain users with a first-generation constellation whose service quality is declining.

 

Monroe also said he suspected that Globalstar’s stock, traded on the U.S. Nasdaq exchange, has been the victim of short sellers and others who have misunderstood the terms of Globalstar’s recent sale of $150 million in convertible debt to help pay for the second-generation constellation, under construction by Thales Alenia Space of France and Italy.

 

Several industry analysts had concluded that the debt package provides Globalstar’s new creditors with a hedge that could make it more profitable for them if Globalstar ends up in bankruptcy and ultimately is sold to a competitor.

 

Monroe dismissed this interpretation and said Globalstar, backed by Monroe’s Thermo Capital, will survive the next 24 months despite the current difficulties.

 

“Sure, sure we understand that in the short term we face some challenges,” Monroe said. “But … these pale in comparison to the enormous financial, technical and engineering hurdles Globalstar has successfully overcome before. This is a marathon, it’s not a sprint, and we’re in it for the long term.”

 

Monroe said Thermo has committed almost $400 million to Globalstar in the past four years. He declined to specify what Thermo’s future backing might be, and he said Globalstar was uninterested in discussing a merger with another mobile satellite services company, at least for now.

 

Anthony J. Navarra, president of Globalstar’s global operations, said the seventh of eight fresh first-generation satellites launched late last year has entered service, and that the eighth would be in service soon.

 

These new spacecraft will provide at least some relief to Globalstar subscribers from the increasing gaps in voice coverage due to a degradation of capacity on the older Globalstar satellites.

 

Navarra said the second-generation satellites, in addition to providing voice service, will offer data-transmission speeds of 256 kilobits per second on the uplink and 1 megabit per second on the downlink.

 

Globalstar Chief Financial Officer Fuad Ahmad said Globalstar’s churn rate, a monthly measure of subscribers who quit the service, dropped to 1.3 percent per month in the three months ending March 31, compared to 2 percent in the previous three-month period. Subscriber count stood at 293,300 on March 31, an increase of 9,100 compared to Dec. 31, Ahmad said.

 

Globalstar has offered reduced-price subscriptions, helping to keep churn down but also resulting in lower subscription revenue – $38.14 per customer per month for the three months ending March 31, compared to $46.45 in the previous three-month period.

 

Capital spending, mainly on the second-generation satellites, totaled $70.2 million for the period.

 

Globalstar reported a net loss of $6.6 million on revenue of $22.1 million for the quarter ending March 31.