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Globalstar Stays Committed to International Sales Goals Despite Market Conditions

By Caleb Henry | March 1, 2016
      Globalstar Peru

      Artist’s rendering of a Globalstar satellite. Photo: Globalstar

      [Via Satellite 03-01-2016] Globalstar is staying committed to increasing its customer base outside of North America despite challenging conditions in the international market. One of the company’s long-term goals has been increasing subscriber numbers around the world. Globalstar has seen success in this endeavor, but like many U.S. companies, is also being impacted by valuations of foreign currencies relative to the dollar. Still, the company remains confident that international expansion will prove its worth.

      “We continue to invest in our non-North American operations, and these markets account for an ever increasing percentage of our revenue and subscriber base,” Jay Monroe, chairman and CEO of Globalstar said Feb. 25 during an earnings call. “For example, in 2014, non-North American gross subscriber additions across all product lines accounted for 25 percent of our subscribers. In 2015 that number dramatically increased to 41 percent. Although every international carrier has experienced exchange rate headwinds when foreign revenue is translated back into U.S. dollars, we remain fully committed to making investments outside of our core markets.”

      Globalstar has significant traction in Europe, where the company signed deals with the U.K. Forestry Commission, firefighters in Spain, and a distribution and retail sales agreement with Agiltech in France. Last year the company launched its Sat-Fi satellite Wi-Fi device across the Europe, Middle East and Africa (EMEA) region, and initiated pan-African satellite coverage through a new gateway in Botswana.

      Monroe highlighted Africa and Asia as major markets for Globalstar in the future, with the first fruits expected to show in the second half of this year. He said the company will continue to invest in expansion principally through new second generation ground infrastructure and new product development, and plans to do so through a different partnership model than in the past.

      “Whereas historically we relied upon the productivity of partners in foreign countries — we wholesale bundled minutes at comparatively low [Average Revenues Per User] ARPUs — we now operate through more direct ownership over Globalstar service territories. Whether by acquisition, new gateway construction, or leveraging existing infrastructure in new countries, we are seeing significant opportunities outside of North America and we will continue to invest in expansion over the coming years,” said Monroe.

      Globalstar anticipates increased performance capabilities with its second-generation ground system for new and existing products. Last year the company tested and installed Hughes Radio Access Network (RAN) equipment in the U.S., Canada and France. This year another RAN installation is planned for Brazil, and Monroe said one in is a few weeks away from completion in Puerto Rico to bolster coverage in the Caribbean.

      “Having already installed and site-accepted Ericsson core network equipment in North America, the final production acceptance testing, including roaming, short messaging, [and] multi-media messaging services will be complete this quarter,” he added.

      Monroe said the first product Globalstar will bring to market for its second-generation ground infrastructure is Sat-Fi. The modernization effort will help Globalstar drive down the cost of the product, which today is around $1,000. Monroe said Globalstar would drive down the cost of Sat-Fi aggressively to expand the market of customers. He said a final price point has not been determined as a company, but that it will be a small fraction of the current price.
      “When we started out with the Spot product back many years ago, the device at that time — just the core device that was recreated in a different form factor for Spot — was about $500 dollars, and today we manufacture that product for about a tenth of that. So that’s what we have to do. The mechanisms to take a price down lower than what we will start out at are well known to us,” he explained.

      Globalstar has previously stated the goal of growing its non-North American subscriber base to half of the company’s total subscribers. The company attributed its 2015 growth of 49,000 new subscribers, including 26,000 Spot subscribers, in part to this emphasis on international markets. Globalstar’s quarterly Duplex gross additions increased 29 percent from the last quarter of 2014, and gross Spot additions increased 14 percent.

      Another potential benefit of Globalstar’s international expansion is in the value of its spectrum. Jim McIlree, senior research analyst at Chardan Capital Markets, suspects the worth of the company’s spectrum could outshine the other benefits.

      “Assuming the international market is as large as the domestic market, the expected value of the spectrum would double. Assuming the company can monetize the L-band spectrum, that could add $3 or more to the valuation and more if it is able to monetize the international L-band spectrum as well. The improvement in the satellite constellation network has a much lower impact on the total value than changes in monetizable spectrum and MHz-POPs from a larger geographic footprint, but gives the company greater ability to fund network development,” McIlree wrote in a Feb. 29 research note.

      Regarding spectrum, much of the focus on Globalstar remains on the company’s Terrestrial Low Power Service (TLPS), which involves the use of the company’s spectrum in Channel 14 for Wi-Fi service. Globalstar conducted a TLPS deployment demonstration for the U.S. Federal Communications Commission (FCC) at the Washington School for Girls in Washington, D.C. Monroe said students at the school have been using TLPS for connectivity since October.

      “The results of this deployment have further confirmed that TLPS on Channel 14 is not a risk to the performance of existing services. Given that students are now able to use four channels including TLPS, rather than just three channels without it, it’s no wonder that they are receiving superior service in a previously Wi-Fi-challenged environment,” he said.

      Globalstar has faced resistance to TLPS based on disagreements over whether the service can coexist with those in other nearby bands. Monroe did show support for safeguards that minimize the potential risk of TLPS interfering with other services, including an effective equipment certification process, and requirements for Globalstar’s proposed network operating system.

      Globalstar’s revenue for 2015 increased by $400,000 to $90.5 million, and year-end subscribers reached 688,000. For the fourth quarter, Globalstar generated $22.8 million in revenue, compared to $22.1 million for the fourth quarter of 2014.