Phoenix Rises In Satellite Communications
Company reaches for the stars while emerging from bankruptcy.
An infusion of funding, some corporate restructuring and a new business plan are re-energizing one commercial satellite company as it creates new capabilities. These improvements could increase support of military operations and homeland security efforts. They have already lowered prices for satellite telephone users and helped a health care association put a backup communications system into place in rural areas sooner than planned.
Ubiquitous communications are taken for granted in most urban areas on the planet. But when adequate infrastructure is lacking, it is necessary to reach for the stars—man-made stars, that is. From a financial standpoint, a number of companies have been pursuing the business opportunity; however, they have experienced varying levels of success. New requirements in the government, military and commercial sectors are reinvigorating the satellite communications industry, making it a potentially lucrative business.
Globalstar, a satellite telecommunications company headquartered in San José, California, has spent more than two years repositioning itself to take advantage of these new opportunities. In November 2001, the firm announced the likelihood of a Chapter 11 filing, revealing that the demand for the company’s services continued to grow, but the cost of servicing its debt had outpaced its revenues. During the past two and a half years, Globalstar has continued to serve its customers while working on ways not only to stay in business but also to flourish. Revenues for the company were at their highest point at the close of 2003, and company officials predict that revenue could double in 2004.
Last November, Thermo Capital Partners Limited Liability Corporation, New Orleans, received court approval to acquire a majority interest in Globalstar. Regulatory approval of the transaction is expected early this year. In exchange for up to $43 million in investment funding, Thermo now owns 81.25 percent of the reorganized company’s assets and operations. The remaining 18.75 percent is available to Globalstar for distribution to its creditors, who also have the right to purchase additional equity interests.
As a result of the acquisition, Globalstar is now a private company rather than a limited partnership. Globalstar USA services the United States; Globalstar Canada provides services in Canada; and Globalstar European Satellite Services handles the European market. The company also is interested in acquiring groundstations in other countries.
Globalstar’s president, Anthony Navarra, is upfront about what caused the company’s financial problems and enthusiastic about the firm’s future. He explains that the two companies that gave birth to Globalstar—Loral and Qualcomm—were knowledgeable about satellites and communications capacity but did not build up the number of service providers. As a result, the company’s marketing efforts did not bring in a sufficient customer base to support the amount of debt the firm had incurred. The current restructuring of the company addresses this issue, transforming Globalstar from a wholesale provider to a direct sales firm. To improve business, Globalstar is combining sales forces and increasing marketing efforts. In addition, Navarra says the company is working diligently to deploy both its voice and data services to the coalition forces in Afghanistan and Iraq. The service primarily supports administrative and morale-boosting efforts such as facilitating soldiers’ calls home. Non-U.S. troops in locations such as Kosovo, Iraq and Afghanistan also have used Globalstar to communicate information such as position location and asset tracking.
Although satellite telephones commonly are associated with mobile communications, Globalstar also offers a fixed-location product. Up to three telephones connected to a single antenna situated on a roof can be installed inside a tent or building so troops can use them as they would wired pay telephones. In the future, Navarra says the company expects to use the new investment funds from Thermo to offer encrypted satellite telephone service that would provide the communications protection required by government security services.
On the data side, Navarra explains that the company’s products offer a rate of 9.6 kilobits per second, which allows individual users to conduct simple tasks such as checking e-mail, all the way up to 128 kilobits per second for activities that require faster data sharing of large files.
Last year, Globalstar introduced simplex modems. Developed in cooperation with AeroAstro Incorporated, the modems feature a one-way, low-data-rate data-sending capability. The modems can be attached to cargo containers and can transmit automatically to a central control office the global positioning system information on each container.
This capability allows real-time tracking as the containers are moved around North America via truck or rail. When the modems are attached to liquefied petroleum gas tanks in both the United States and Canada, they alert the gas supply company when tanks are running low on fuel. This eliminates the need for manual meter reading. The simplex modem also can be used to send intrusion detection information to a central location, Navarra proposes.
In the interest of security, Globalstar cannot share the names of all of the military and government organizations it services. However, Navarra reveals that the military has installed the company’s equipment on mobile platforms, allowing multiple users to stay connected to the Internet while in-transit, and the firm also supports surveillance efforts.
Globalstar’s products are being used to support non-military efforts as well. For example, the U.S. Coast Guard, the Forest Service, the Department of Homeland Security and the Department of Veterans Affairs are some of the organizations currently employing the company’s service. The U.S. Air Force is working with the Italian air force and using the equipment for surveillance work to share information about suspicious activity.
Immediately after September 11, 2001, the National Communications System began distributing Globalstar telephones to federal agencies throughout the United States so they would have an emergency communications capability. Navarra relates that the company’s equipment also has been purchased by utility companies as a back-up communications system to be used when power systems fail.
In some areas of the country, satellite communications is the only alternative to landlines. For example, in rural parts of New York state, the infrastructure for cellular service does not exist. Federal homeland security requirements call for first responder and emergency organizations to have an interoperable wireless network in place, and the governor’s office currently is working on a statewide wireless network plan. However, the project will take at least five years to complete. In the meantime, hospitals in 57 counties outside New York City each received only $10,000 in federal funds to improve emergency preparedness capabilities.
The Iroquois Healthcare Association (IHA) decided to find a more immediate communications solution. Using a $200,000 grant, the association purchased one in-hospital telephone, one portable telephone and one laptop computer with an Internet connection through Globalstar for each of 29 hospitals in 12 counties. Jackie Talcik, senior vice president, IHA, explains that the systems act as a redundant communications system. Although the pilot project ended in December 2003, the association has paid for a year of Globalstar service in advance, so each hospital has 30 minutes of airtime each month until November 2004, she adds.
Navarra explains that corporations also could purchase Globalstar’s services as an emergency communications system. However, he reveals that the company’s uncertain financial situation caused large corporations to be leery about committing to such purchases. As Globalstar emerges from its financial problems, companies have been contacting the firm for information about setting up a conference bridge. Navarra shares that during an emergency these companies, as well as the military, do not want to rely on the public exchange switch network, which could fail. Globalstar is working with GlobalNet Corporation, a company that provides services from a fixed network into the United States, to address this issue.
The transformation of Globalstar is fundamentally changing the way the company operates. Primarily, it will now be in a position to control its own destiny and show true profits, Navarra says. The second substantial change will be that the firm will begin looking at other niche markets, which it could not do while in debt and dealing with bankruptcy. “There are major applications that the Globalstar mobile satellite service can provide to North America and the world now that it’s an ongoing company, now that it’s servicing its own operations. We hope to get to cash-flow break-even maybe this fall, and that will allow us to go look at other markets that we can enter with other companies,” Navarra says. Another objective is to expand its presence in the asset tracking and remote-control of assets arenas. Globalstar may be able to offer these services at a lower cost and with a larger coverage than capabilities offered by other firms or technologies, he notes.
In addition, Navarra says major opportunities are coming to light in terms of replacing current communications methods. For example, Globalstar equipment could be used to communicate and track taxicabs.
As a result of the reorganization and influx of cash, the company plans to expand not only technologically but also geographically. Navarra says all of the current services could be replicated in areas such as South America or other locations that do not currently have service. This work is already underway. In February, the company began engineering and development work aimed at providing enhanced service coverage and system capacity in the Caribbean and the southeastern regions of the United States. Improved service is expected to begin this month.
In conjunction with Thermo, Globalstar will make decisions about changing or expanding the company’s product line. For instance, the firm could develop a docking port so customers could use their mobile telephones as their vacation-home telephones. Navarra believes that data-sharing capabilities will be a big growth area as well. In addition to improving data transmitting speeds, the company is working with another firm to offer an integrated compression solution. Customers will have a choice between purchasing compression technologies or investing in equipment that offers faster speeds.
The company will continue to build new products, Navarra says. However, another priority will be to pursue niche markets and to look into new market segments such as recreation, oil and gas distribution, maritime and areas of the government that it is not currently serving.
Additional information on Globalstar is available on the World Wide Web at http://www.globalstar.com.