Globalstar Says Satellite Realignment Improved 2-Way Phone Service

PARIS — Globalstar Inc. managers said March 28 it will take another couple of months before the company can evaluate the extent of the degradation of its 40-satellite constellation following a technical review by outside experts. But they said two-way telephone service from the constellation has improved since a December realignment of the satellites in orbit.

In a March 28 conference call, officials from Milpitas, Calif.-based Globalstar declined to disclose whether the service-quality drop in December, and a February announcement that the constellation was degrading faster than expected, has had any effect on revenues or subscriber loyalty.

Globalstar Chief Executive Jay Monroe said the company’s fourth-quarter financial performance, which showed reduced “churn” or subscriber defections compared to earlier periods, “demonstrates the utility of the product. For now, we’re very comfortable that our customer base is sticking with us.” For all of 2006, monthly churn averaged 1.1 percent.

Globalstar competitors, including Iridium Satellite and Inmarsat, have said Globalstar’s February announcement of a faster-than-expected decline in the satellites’ power amplifiers — which permit Globalstar’s S-band antennas to provide two-way communications — would take several months to show up in Globalstar’s subscriber numbers.

Globalstar Chief Financial Officer Ahmad Fuad said during the conference call that Globalstar reconfigured its current low-orbiting constellation of satellites in December to prepare for the addition of eight new satellites, to be launched next May and June.

That reshuffling resulted in “somewhat degraded services” during the period, he said. But Monroe said the maneuver has permitted the company to improve overall service quality and led to “a marked improvement in two-way voice service.”

Globalstar President Anthony J. Navarra said an ongoing review by outside experts of the Globalstar satellite fleet should be concluded by mid year. The review will give a clearer assessment of the state of health of the constellation.

Monroe conceded that Globalstar’s February announcement on the satellites’ degrading performance, which caused the company’s stock to drop more than 20 percent on the U.S. Nasdaq exchange, “didn’t make for the most pleasant weeks thereafter. The competition is doing all they can to make hay out of it.”

Matthew J. Desch, chief executive of Iridium Satellite LLC, like Globalstar an operator of a global fleet of satellites for two-way communications, said Globalstar’s service outages were known to Iridium well before Globalstar’s February disclosure to the U.S. Securities and Exchange Commission (SEC).

“When they came clean it wasn’t a surprise,” Desch said March 20 at the Mobile Satellite 2007 conference in London. “I want to thank them for that great 8K [the SEC disclosure]. It was a boon to our business. We are seeing customers move. Our first-quarter business is stronger than what we were expecting. But they [Globalstar] have a lot of prepaid, bundled plans so you won’t see the results until after the second quarter.”

Monroe repeated his earlier assertion that the eight new satellites to be added this year, plus Globalstar technicians’ ability to minimize the effect of the S-band antennas’ degradation, would permit the company to provide uninterrupted service until the second-generation Globalstar satellites are launched beginning in late 2009.

Monroe said Globalstar recently signed a contract valued at $12 million – about 9 million euros — with Alcatel Alenia Space of France and Italy to upgrade Globalstar’s satellite operating centers in preparation for the second-generation constellation, now under construction at Alcatel Alenia Space.

Globalstar’s contract with Alcatel Alenia Space to design and build 48 new-generation Globalstar satellites is valued at 661 million euros, or $871 million.

Globalstar has said it expects to be able to launch and insure these 48 satellites for a total cost of about $329 million. The company has issued a request for bids to prospective launch-service suppliers at a time of generally rising launch costs. A launch contract with one or more suppliers is expected before the end of the year.

Globalstar reported March 28 that as of Dec. 31 it had 263,000 subscribers worldwide, a 34 percent increase over the same period a year earlier. Annual revenue increased 7 percent to $136.7 million. The company’s net profit for the year increased 26 percent to $23.6 million.