Jay Monroe Chairman and CEO, Globalstar
MSS operator and service provider Globalstar has spent the last two years financing and launching 24 new satellites that it hopes will bring the company’s Duplex service back into full capacity. With the last of its next-generation satellites heading into operation, Globalstar now focuses its attention on the mobile satellite voice and data service provider side of its operations and hopes a fully-capable Duplex offering will deliver a boost to its business.
Globalstar chairman and CEO Jay Monroe speaks about his company’s three-year road to recovery, the end of which seems to be in sight following the resolution of negotiations with its Coface-led financial consortium and Thales Alenia Space.
Via Satellite: How close are we to seeing Globalstar at full service capability with its next-generation constellation?
Monroe: We’ve launched three of four batches of satellites for the constellation and are placing satellites from the third launch into their final orbital positions now. We put several in service in the last month. We will put several more in service and will have more or less completed everything we need to accomplish with the first three launches by the end of September. We’ll launch the fourth batch of satellites in the fourth quarter of this year.
Via Satellite: Do you consider the launch of your latest batch of satellites the final financial and technical step in restoring the full capabilities of your offering?
Monroe: Because this is a low-Earth orbit (LEO) constellation, every time one of our satellites goes into service, our coverage and satellite redundancy increases. After we’re finished completing work on our third batch and all of those satellite are in service, our customers will fundamentally see a service that is pretty close to full capability anyway. When we do the fourth launch, it will enhance the flexibility of the constellation so that our customers’ calls will always stay connected at low-elevation angles.
Via Satellite: You mentioned this mainstream consumer market approach at SATELLITE 2012. Do you believe this is a path that the entire market needs to take?
Monroe: The consumer market approach is still our focus and, on a macro level, we absolutely see the MSS market taking a similar approach. We’ve proven this approach with our Spot product, which already has hundreds of thousands of users. It’s a very economical product sold through 10,000 points of retail distribution. In time, we expect the cost of handsets and other satellite phone and data devices to continue to come down. As those prices decrease, the marketplace for those devices increases. For whatever reason, our primary competitors don’t aspire to those same types of customers. Their focus has been on higher ARPU and higher data-consumption customers and that’s a terrific market, but it’s not our preferred market.
Via Satellite: This past spring, Globalstar went through a series of negotiations with its financiers and Thales Alenia Space. Could you tell us what happened and how the relationship stands today?
Monroe: The consortium of banks that have invested in us, along with the French Ministry of Finance and its export credit agency Coface, have been very supportive of Globalstar. They know that we have been able to grow our business after the delivery and launch of the Thales satellites. As we all know, Thales is far behind schedule and therefore, the French government has been very flexible with us in order to give us time to get to the anticipated revenue recovery, which we are able to get just by bringing our satellites into orbit and into service. In short, the problems that we have experienced are all time-based. We are careful to make the French bank group and the government aware of everything that we’re doing so that they understand our business at a very granular level, as well as the improvements that we’ve made.
The business has now been profitable since the fourth quarter of last year with growing profitability in the first quarter of this year. Our second quarter 2012 results are even more positive. Everyone knows we’re making progress. We’re just behind schedule due to satellite delays. Everyone involved in the negotiations worked very hard to see us complete the fourth launch this year and further secure the health of the constellation for the long-term.
Via Satellite: Do you still see 2012 as a catalyst year for Globalstar, or do you see 2013 as the turning point?
Monroe: I am certain that 2013 will be a fantastic year for us. I have no doubt about that. But, I am still very optimistic about our potential in 2012, despite the fact that we’ve progressed through the first half differently than we expected. We’ve been able to accomplish a lot in 2012 by continuing to grow our Simplex business and our Spot consumer business and focusing a little less on our Duplex voice and data revenue. That said, we know Duplex is our bread and butter and we expect that service to grow dramatically once we have the last constellation launched.
Via Satellite: What has the MSS industry learned from LightSquared’s fallout with the FCC concerning spectrum allocation? Does this impact Globalstar’s own hearings on LEO spectrum?
Monroe: I think the FCC made the correct alterations to permit LightSquared. They altered the satellite requirements and the dual-mode handset requirements, as well as a number of other things, in order to accommodate LightSquared. They did this by using waivers and they probably wished that they didn’t follow that mechanism because it was opened up to criticism after the fact. There was a technical issue that related to the use of some of their L-band spectrum and its effect on GPS. The FCC did not anticipate that because the GPS industry had weighed in positively during the early proceedings with LightSuared and didn’t have anything negative to say in the waiver process either. I think the whole situation caught everyone flat-footed. In that proceeding, the FCC set forth the fundamental changes that it wanted to make in harnessing spectrum so that it can be used terrestrially. The more important proceeding now involves Dish Network. The Dish proceeding takes that same set of issues, makes them even clearer and does it through the use of a [Notice of Proposed Rule-Making] NPRM, which unlike the waiver proceeding, gives everybody a complete opportunity to weigh in. I’m sure that the FCC made the decision to use an NPRM instead of a waiver specifically because of the issue with LightSquared. That said, the FCC has informed us that they will take on the big LEO proceeding with our spectrum immediately after the Dish proceeding is completed in September.
Via Satellite: What is the biggest change the MSS market has seen in recent times?
Monroe: The biggest changes, to me, are two-fold. As prices come down, demand goes up. That is something we tested extensively before we had our satellite constellation problems beginning in 2007. We demonstrated compound growth rates of greater than 30 percent because we sold the service and people understood the service in the same way as if they were buying a cell phone. Consumers were buying a bundled service for a specific amount of minutes. They knew exactly what their costs were going to be and we drove those costs down.
That cost progression has somewhat stalled recently. Why? Because we’re not driving it and our competitors in the same marketplace don’t need to drive it right now. The dynamic that has allowed Inmarsat and Iridium to continue to grow is more or less an acknowledgement and awareness of the products that didn’t exist before. If you think about it, MSS is still a relatively new industry. It didn’t really get its true mobile handset environment going until the early 2000s. Now, there is a much greater awareness of it. As you have that awareness, you also see an increased demand to stay connected. Historically, people didn’t expect to be connected everywhere, but it is now a requirement. At work, your boss expects you to be connected. It doesn’t matter whether or not you’re on vacation if you have a Blackberry. The way that we use devices today is so different than the year 2000.