GlobalStar: Satellite Problems Could Cause Service Shutdown

One thing you really want to have as a satellite communications company is a nice collection of well-functioning satellites. Without them, to state the incredibly obvious, you own a nice collection of space junk.

And that is the problem that now faces GlobalStar (GSAT), the satellite communications provider.

Monday night, the company filed an incredible 8-K document with the SEC. In a section labeled “Satellite Constellation Operations,” the company made some disturbing disclosures. Globalstar has previously said that a number of its satellites have suffered from degradation of performance of power amplifiers to the S-band antenna which provides the downlink to subscriber phones or data terminals.

The result can be reduced quality and call duration. If the S-band antenna stops working, then you can’t have a two-way conversation using the specific satellite. GlobalStar conjectures that the amplifier problem might relate to irradiation in orbit, but it isn’t entirely sure.

The company says it has managed the issue in various ways, including placing spare satellites already in orbit into service and moving its satellites to different orbits. Previously, the company has said that with the addition of eight spare satellites planned for launch in 2007, two-say service would be viable until a set of next-generation satellites were placed into service in 2009.

And now, the punch line:

Based on data recently collected from satellite operations, the Company has concluded that the degradation of the amplifiers is now occurring at a rate that is faster than previously experienced and faster than the Company had previously anticipated. In response, the Company, in consultation with outside experts, has implemented innovative methods, and plans to continue to implement additional corrective measures, to attempt to ameliorate this problem, including modifying the configuration of its constellation as described above, and thereby extend the life of the two-way communication capacity of the constellation. Nonetheless, to date the Company has been unable to correct the amplifier problem and may be unable to do so. (emphasis added.)

So you can see where this is going, right?

Based on its most recent analysis, the Company now believes that, if the degradation of the S-band antenna amplifiers continues at the current rate or further accelerates, and if the Company is unsuccessful in developing additional technical solutions, the quality of two-way communications services will decline, and by some time in 2008 substantially all of the Company’s currently in-orbit satellites will cease to be able to support two-way communications services. (emphasis added.) As the number of in-orbit satellites with properly functioning S-band antenna decreases, despite a successful launch and optimized placement in orbit of the eight spare satellites in mid-2007, increasingly larger coverage gaps will recur over areas in which the Company currently provides two-way communication services. Subscriber service will continue to be available, but at certain times in any given location it will take substantially longer to establish calls and the average duration of calls may be impacted adversely.

GlobalStar says it is “exploring the feasibility of accelerating procurement and launch of its second-generation satellite constellation, to attempt to reduce the effects of this problem upon its customers and operations.” It says the company “will be able to forecast the duration of service coverage at any particular location in its service area and intends to make this information available without charge to its service providers, including its wholly owned operating subsidiaries, so that they may work with their subscribers to reduce the impact of the degradation in service quality in their respective service areas.”

GlobalStar says it is “also reviewing its business plan in light of these developments.”

But the bottom line is this: GlobalStar customers who use them for two-way communications better start looking for alternatives.

Yesterday morning, GlobalStar investors were looking for alternatives: the company’s shares tumbled $4, or 28%, to $10.48.

GSAT 3-mo chart

Comments

[afm528:]

Globalstar, and it's reseller, GMPCS, are the biggest joke of a company I have ever had the misfortune of being forced to deal with. Since I purchased the phone in 2004, I have rarely, if ever, been able to complete a phone call. The real point of the phone was to have an emergency back-country backup phone. What a farce! The last time I tried to use the phone, I was stranded in the middle of a lake with a dead engine. No luck with the phone, had to paddle my 20' boat back to shore for three hours.

But that's not the best part. The best part is, every time I called GMPCS to complain, I got a different story. Sometimes my account had been suspended for inactivity. DUH! Other times my account was active, but the service was "on hold". Other times they told me everything was fine, I would try to make a call and not get through, and they'd tell me it was satellite issues. I repeatedly asked them to cancel my service, but they insisted I send something in writing. Many different times, for the months when I was not able to make calls, and they could not tell me why, they still insisted on billing me. In many months when they told me my service was suspended for non-payment, they still billed me! Has anyone ever heard of a supplier who suspends service for non-payment, yet continues to bill for the suspended service?

And the kicker, in my last call, was the rep who told me that Globalstar simply doesn't work! She told me if I wanted satellite phone service, I needed to purchase an Iridium phone. But not to worry, GMPCS would give me a $400 credit against the $1200 cost of a new Iridium phone!! I hate GMPCS!

Mar 23 03:03 AM

[Joe Bee:]

I live in MALTA (Europe). I have a Globalstar Trimode 1600 with a European Number. The handset continues showing the sign "Looking for Service", when I try to make a call. Even on the open seas, the same signal occurs. I hardly succeed in making a call. Is THIS problem to continue ? Please advise. jb.

Jul 26 01:05 PM

[Joe Bee:]

Problems using the Globalstar Trimode 1600 from MALTA (Europe).

Jul 26 01:10 PM

[Mad Hedge F...:]

ery In an amazing comeback from the grave, satellite phone maker Iridium (IRDM) announced a reverse merger with GHL Acquisitions, giving it the capital it needs to launch a new generation of satellites. When the company filed for bankruptcy ten years ago we all had visions of their 66 satellites in low earth orbit crashing to the ground in flames. Most of them are in fact still up there, but have only five years of life remaining, and the technology has moved on. You may recall the original Iridium phones, which were heavy and sported three foot antennas, and gave you unlimited telephone access from the 92% of the world not covered by cell phone transmitters. It was the cell phone of choice with assorted spooks, foreign correspondents, and third world tyrants, and was the only phone you could use to call in an air strike in Afghanistan. I guess AT&T’s and Sprint’s “covert agent” plans never got off the ground. It was also popular with terrorists, until they learned the hard way that the National Security Agency was taping their every word. And at an initial cost of $3,000 a month and $7 a minute, it didn’t exactly encourage those long meaningful chats with your new girlfriend. They didn’t even offer rollover minutes. Their new 9555 model is the same size as any other cell, (better for undercover work), much cheaper, and is aimed at first responders and remote workers, like on offshore oil platforms and emerging market gold mines. Economies of scale are certain to lower prices further. Watch this space.

Sep 26 10:59 PM

[Joe Bee:]

COULD SOMEBODY AT GLOBALSTAR ESPECIALLY, SAY WHEN THE SATELLITE PHONE SERVICE WILL BE COMING TO NORMAL? IN OTHER WORDS, WHEN ARE WE GOING TO MAKE A SIMPLE SATELLITE PHONE CALL ? jay bee (MALTA - Europe).

Oct 16 03:14 AM