Most Globalstar Satellites Expected to Lose 2-Way Capability in Early 2009

PARIS
—
Mobile
satellite services provider Globalstar Inc. expects that 42 of the 50 satellites in its current constellation will be unable to provide two-way communications starting in early 2009, threatening the company’s ability to maintain sufficient customer backing to pay for a second-generation constellation that will not be ready for launch until late 2009.

The company’s one-way service, propelled by the Spot Messenger consumer product providing emergency-rescue coordinates, continues to grow and is not affected by the onboard failure that is crippling Globalstar’s more-profitable two-way service.

As Globalstar agrees to more-generous subscription terms to hold subscribers through the next 12 months, it is generating less revenue per subscriber despite the growth of the Spot service, raising the question of how it will maintain payments to contractors on its 48-satellite second-generation constellation, Globalstar said.

In a Nov. 10 filing with the U.S. Securities and Exchange Commission (SEC), Milpitas, Calif.-based Globalstar said it is speeding delivery of the first 24 of its 48 second-generation satellites by agreement with prime contractor ThalesAlenia Space of
France
and
Italy
.

It remains unclear how quickly Globalstar can get the satellites launched aboard Russian Soyuz rockets operated by the Arianespace consortium of
France
. The company launched its last batch of eight first-generation satellites in 2007, and these spacecraft will continue to provide the full range of Globalstar services. But with only eight fully functioning voice-capable satellites as of early 2009, the Globalstar fleet will suffer large periods of time each day when no voice service will be available.

In its SEC filing, Globalstar said it continues to make milestone payments to ThalesAlenia Space, maintaining sufficient cash in an escrow account on which the satellite builder draws. As of Sept. 30, Globalstar had paid ThalesAlenia Space some 224 million euros, or $323.7 million using Globalstar’s exchange-rate calculation. Another 36 million euros is due by the end of this year, and 96 million euros is due in 2009.

Globalstar
had paid $26 million to Arianespace to prepare for the launches and will owe another $128 million in 2009.

In a Nov. 10 conference call with investors, Globalstar Chief Financial Officer Fuad Ahmad said the company has enough cash to last until the second quarter of 2009. “We are looking at various options” for raising additional cash, Ahmad said. “At this point, we’d like the capital markets to improve before” the company seeks to raise more money.

For the nine months ending Sept. 30, Globalstar reported that its subscriber revenue dropped by 17 percent, to $48.8 million, compared to the same period a year earlier. Revenue per subscriber also dropped as Globalstar attempted to keep a subscriber base through low-price offers in return for a commitment through what company officials acknowledge will be a rough period in the coming months.

Globalstar
reported an operating loss of $41 million for the first nine months of 2008, compared to a loss of $16.8 million a year earlier.

Globalstar
Chief Executive Jay Monroe, whose Thermo Capital investment company has been Globalstar’s principal benefactor in the past several years, said Thermo “would anticipate continuing in this role as we have in the past.”

“It has not impacted our liquidity [at Thermo] to do what we feel is necessary” for Globalstar,
Monroe
said. “We have funded it not always with a smile on our face, because it has been tough sometimes.”

Anthony J. Navarra, Globalstar’s president of global operations, said the company hopes to create at least some financial maneuvering room by negotiating with ThalesAlenia Space and Arianespace on “different payment schedules for the satellites and launch. So we are confident on the funding.”