Globalstar plays up spectrum strategy as debt deadline looms

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WASHINGTON — Low-Earth-orbit satellite fleet operator Globalstar is meeting with telecom regulators around the world in an effort to globally authorize some of its satellite spectrum for mobile broadband services.

Jay Monroe, Globalstar’s chairman and CEO, said Feb. 22 that the company has met with regulators in more than 30 countries to gain approval for terrestrial communications using S-band that, if approved, would cover around 1.1 billion people.

Successful monetization of some 16.5 MHz of S-band spectrum could help Globalstar meet upcoming debt payments that current revenues are insufficient to fulfill, Globalstar Chief Financial Officer Rebecca Clary said during a conference call with investors.

Globalstar generated $112.7 million in revenue for 2017, up 16 percent annually, but not enough to generate a profit. The Covington, Louisiana-based operator reported a loss of $89.1 million for the year and of $132.6 million in 2016.

Clary said Globalstar expects to be short “between $40 and 50 million” for debt payments in December, with the exact amount determined by capital expenditures and operating cash flow.

“We have continued to successfully grow high-margin service revenue while managing our discretionary spending,” she said. “However, we recognize that it is not sufficient to support our current debt-service obligations, and therefore we continue to aggressively pursue various spectrum-related and other business development opportunities to augment the current operating cash flows generated from our core satellite business.”

Globalstar finished launching its second-generation constellation of 24 satellites in 2013, relying on a network of banks through the French export-credit agency Coface (now BPI France Assurance Export) to finance the $1.1 billion system.

In a Feb. 23 filing with the U.S. Securities and Exchange Commission, Globalstar said it has $574.7 million in debt, of which of $467.3 million is owed to BPI-connected banks.

Globalstar owes the remaining $106.1 million to Thermo Capital and $1.3 million from convertible senior notes issued in 2013.

Monroe, who co-founded Thermo and remains a managing partner, has been unwavering in his conviction that Globalstar will succeed in monetizing its S-band spectrum in the U.S. and abroad. Thermo has regularly stepped in to financially support Globalstar in the past.

“With global harmonization, we will have achieved the creation of an asset that is unique in the communications industry: a commercially licensed global spectrum band available for terrestrial global broadband services held by a single company,” Monroe said.

Harmonized spectrum is allocated for the same purpose across large areas or the entire globe, simplifying its use compared to spectrum that may have different purposes in different nations.  

Chardan Capital Markets Senior Research Analyst Jim McIlree wrote in a Feb. 23 research note that while monetizing the spectrum has taken longer than expected, the spectrum remains highly valuable.

“Given the location of Globalstar’s spectrum, adjacent to current popular wireless services, including WiFi, we think its spectrum will fetch a price significantly higher than implied by [Globalstar’s] current share price,” he wrote. “The most likely driver will be the onset of 5G services … whose rollout is still early, but moving at a rapid pace.”

Globalstar told the SEC that the landlocked African nation Botswana is the first country besides the U.S. to have approved the company’s request to use its S-band frequencies for mobile broadband. Monroe said as more countries approve, it should create a “flywheel effect,” leading other nations to give the same approval more readily.

One of Globalstar’s 23 ground stations is located in Botswana, as is one of the company’s subsidiaries. Monroe said having a satellite ground station, or gateway, is not a standard prerequisite to get approval for the terrestrial use of the spectrum. Globalstar will seek to sell satellite and terrestrial products in every country where licensed, he said.

Globalstar subscribers topped 700,000 last year. The company’s “Spot” satellite-enabled tracking devices, often used by adventurists and extreme sports athletes to call for help, surpassed 5,000 rescues last year. Clary said more expensive subscription plans increased average revenues per user, driving up revenue.

Globalstar’s adjusted EBITDA, or earnings before interest, taxes, debt and amortization, increased by 57 percent in 2017 to $32.2 million.