[Satellite News 08-08-11] Satellite voice and data provider Globalstar increased its service revenues and narrowed its net losses in the 2011 second quarter, however, the company confirmed that a defective momentum wheel found one of its six second-generation satellites launched in October has forced the operator to shut down the same hardware on another satellite.
Globalstar Chairman and Interim CEO Jay Monroe also confirmed that the financing for its additional 24 constellation satellites has not been secured and that it has begun arbitration proceedings to force prime contractor Thales Alenia Space to begin building them. Construction on Globalstar’s current 24 satellites is near complete. The project was financed via French export-credit agency Coface in a loan deal announced in March 2009 that requires Globalstar to have a permanent U.S. license to operate its second-generation satellites in North America by Aug. 31 at the risk of default.
Globalstar Chairman and Interim CEO Jay Monroe also confirmed that the financing for its additional 24 constellation satellites has not been secured and that it has begun arbitration proceedings to force prime contractor Thales Alenia Space to begin building them. Construction on Globalstar’s current 24 satellites is near complete. The project was financed via French export-credit agency Coface in a loan deal announced in March 2009 that requires Globalstar to have a permanent U.S. license to operate its second-generation satellites in North America by Aug. 31 at the risk of default.
Arianespace launched Globalstar’s six new second-generation satellites July 13 from the Baikonur Cosmodrome in Kazakhstan aboard a Soyuz rocket. The launch is the second of four planned launches of six satellites each that are contracted with launch services provider Arianespace.
“The post-quarter launch of six additional new satellites represents another major milestone achievement for Globalstar, as we continue to deploy our second-generation constellation,” Monroe said in a conference call. “Once our launches are complete and all of our new satellites are fully deployed, we anticipate Globalstar will offer the world’s most comprehensive lineup of commercial enterprise and retail consumer MSS products and services in the industry.”
Despite the long list of challenges awaiting Globalstar in the near-term, the company posted increased 2011 second-quarter revenues of $18.9 million compared with $17.6 million in the same period last year. Globalstar’s service revenues grew from $12.9 million in the second quarter of 2010 to $13.3 million in its most recent quarter. Equipment revenues also grew from $4.7 million last year to $5.6 million. Globalstar activated more than 19,500 Spot product family units during the quarter.
“Our revenue increased primarily due to the increased number of Spot and Simplex data subscribers and related service revenue and equipment sales,” Monroe said during a conference call. Activating a record number of Spot units during the quarter continues to demonstrate that we have established our leadership position in the consumer retail MSS marketplace.”
The company narrowed its net loss from $19.24 million to $14.06 million during the quarter ending June 30, but widened its adjusted EBITDA loss from $300,000 to $1.2 million during the same period of time.
“The decreased net loss was primarily due to a change in non-cash items including an increase in derivative gain/loss of approximately $11.9 million offset by an increase in depreciation, amortization and accretion expense of $6.8 million related primarily to the new second-generation satellites coming into service,” said Monroe.
At the end of June, Globalstar completed a private placement with Thermo Capital Partners to raise initial gross proceeds of $38 million before deducting fees and expenses. Thermo, which is partially owned by Monroe, is Globalstar’s principal backer since the operator emerged from bankruptcy protection in 2004.
In the terms of the transaction, Globalstar issued $38 million in 5 percent interest senior debt. Investors will receive warrants to purchase an aggregate of 15.2 million shares of common stock. Globalstar’s financing plan also gives investors the option to invest up to an incremental $12 million during an approximate three-month period on the same principal terms.
Monroe said the proceeds of this financing would be used to meet capital expenditure needs, including the procurement and deployment of its second-generation constellation. “The investment associated with this capital raise once again demonstrates the continued confidence our investors have in Globalstar and our long-term future,” Monroe said in a statement.
