Phoenix Rises In Satellite Communications

Signal, Apr 2004 by Lawlor, Maryann

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 Jose, 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 Global star 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.