Spot Seeking Out New Markets to Expand Growing Subscriber Base
[Via Satellite 12-2-13] Spot, a Globalstar subsidiary, has seen a great deal of success recently as the company seeks out new markets to expand its subscriber base. The company’s next move is now focused on broadening its individual consumer base as well as expanding its reach internationally, Tim Taylor, VP of finance, Globalstar, told Via Satellite.
Globalstar’s path to success in the satellite industry has been a rocky one. The sub-par performance of several satellites along with other issues limited the company’s growth for many years. But despite the difficulties, the time spent without much profit was not a time spent without much innovation. As seen by the meteoric rise of Spot, the company has discovered how to take satellite powered one-way communication systems to the next level.
Globalstar needed roughly $500 million of debt financing back in 2008-2009. To meet these daunting needs, an export credit facility was structured with five large French banks backed by the French government. The deal worked, and France was able to save jobs while Globalstar got the financing it needed to launch it’s satellites. After this, however, the satellites were delayed, bringing about a number of liquidity issues and a yearlong arbitration process with Thales Alenia Space.
“When you’re a satellite company and you don’t have functioning satellites, it’s certainly difficult to meet all of your operating costs and capital obligations,” said Taylor. “We also had to work through the restructuring of senior department facility and our subordinated debt, which was originally structured to assume the satellites would be launched many years ago. We didn’t have our last satellite in service until August 2013.”
Out of this trouble came the current line of Spot products. The company has now sold more than 400 consumer-based products, and Spot subscribers total approximately 220,000.
“We developed a whole new line of consumer products that we may never have developed if it wasn’t for the constellation issues,” said Taylor.
Now Spot is focusing on learning how to break into new markets in order to continue growing its subscriber base. Spot Trace, the company’s newest product, is the face of its plan to attract the attention of a larger audience. “You have to expand beyond just the outdoor enthusiast, and that’s what we’ve been doing,” said Taylor. “Spot Trace greatly expands the total addressable market, where it is not just wealthy individuals traveling for pleasure.”
Spot Trace is designed to be more cost effective than previous products, in order to encourage greater consumer use. “We learned in the business that if you reduce the form factor, increase the ease of use, and reduce pricing, it has a material impact on the total addressable market,” remarked Taylor. Spot has done this by leveraging preexisting technology and effectively tailoring it to the right use. “It’s very similar to [other products] in terms of the internal guts. We needed some changes internally but they were minimal,” he added.
The three markets that comprise most of Spot’s subscriber base are outdoor enthusiasts, government and enterprise. The company hopes to persuade people that satellite technology can be used for more than just extreme circumstances.
“This is the first time for the market where you have a satellite based system that doesn’t have the same type of limitations as cellular tracking, where if you want to steal a car all you have to do is drive it out of cellular range and it’s essentially gone,” said Taylor. “We’re seeing more and more common consumers that today make up about 40 percent of the number of subscribers being added on our voice front.”
Much of this growth can be attributed to the use Spot products such as Spot Trace are finding in tracking valuable assets. Lower unit prices and subscription rates have caused these products to gain traction. “It used to be these devices made a lot of economic sense if you had a Mercedes,” said Taylor. “Now if you have a Kia it makes economic sense to track. At $400 and $200 a year, it probably does not make economic sense to track a 10k or 12k car, but at 100 bucks, you’d do it all day. That has been the best lesson for us.”
Globalstar also has plans to expand Spot’s presence internationally. Of its 570,000 customers, 90 percent of its subscriber base is in the U.S. or Canada. To increase it’s global market share Globalstar acquired a number of wholesale partners in Asia Africa, South America and Europe, making them fully owned assets. This means the company no longer loses service revenue while operating in these regions.
“It’s a really exciting time as we deploy capital and spend in the right places for building our distribution network and getting our name out there,” said Taylor. “[We] held back for many years as we’ve spent every dollar we had on keeping the lights on and paying the employees and getting satellites in the sky. Now we’re doing everything we can to increase brand awareness.”