Globalstar Says ATC System, Financing Rely on Full Spectrum Use

Earlier this year, the Commission granted the company ATC authority, but only for 11 MHz of its spectrum, Globalstar said: “This is well short of the 20-28+ MHz of spectrum that each of Globalstar’s MSS competitors is permitted to use for ATC.” The FCC rationale for limiting Globalstar’s ATC no longer applies, Globalstar said, noting that the proceedings the Commission didn’t want to prejudice “have been decided.” Citing MSS use by pubic safety, plus hurdles to ATC financing and development, Globalstar urged the Commission to “eliminate the handicap” it placed on Globalstar’s growth.

The FCC granted Globalstar only partial ATC authority in light of a rulemaking related to an Iridium request to use some Globalstar spectrum and possible reallocation of 2483.5- 2500 MHz band spectrum, Globalstar said. Since the 2003 ATC order, the Commission authorized Iridium to share 3.1 MHz of Globalstar’s spectrum at 1618.25-1621.35 MHz and reworked fixed and mobile spectrum allocations at 2495-2500 MHz, they said.

“Now that these proceedings have been essentially completed, there is no further reason for continuing to place restrictions on Globalstar’s ability to use all of its spectrum for ATC services,” Globalstar said. The MSS operator can operate ATC in the 3.1 MHz of spectrum it shares with Iridium without interference, it said. And, to get ATC authority in the first place, Globalstar agreed to NTIA requests that, to protect GPS operations, it accept stricter limits than the FCC imposed for ATC in the L-band -- curbs Globalstar will continue to follow, it said.

Globalstar said it has “taken substantial steps toward developing and funding its MSS/ATC network” since Jan., when it won its ATC license, the 2nd the FCC has granted. Since then it has been doing engineering tests, surveying potential ATC customers and tweaking its next-generation satellites for ATC compatibility, it said. The company is negotiating with wireless, voice, broadband data and multimedia service providers on potential ATC plays, and Qualcomm is analyzing MSS/ATC phone designs, Globalstar said. ATC operations, which would let MSS firms roll out hybrid networks incorporating wireless service, are seen by many as crucial to the land-based MSS industry’s future.

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Globalstar competitor Iridium got a “B-” corporate credit rating with a negative outlook from Standard & Poor’s ratings service. The rating reflects “a vulnerable business risk profile from participation in a niche market with uncertain long-term customer demand, a small revenue base, substantial long-term satellite replacement capital expenditures, requirements to continue current operations beyond 2014, and competition from other MSS providers and terrestrial wireless carriers,” said S&P analyst Eric Geil.

To maintain today’s service level beyond 2014, Iridium must invest heavily in replacement satellites to compensate for its existing constellation’s degradation, Geil said. The costs “are likely to well exceed any reasonable estimate of the company’s operating cash flow potential,” he said. The firm is getting $235 million of aggregate senior secured credit facilities, from which it will receive $225 million to finance a $123 million distribution to investors, S&P said. The money will repay $78.1 million in bank debt, collateralize a $15.4 million letter of credit and pay fees and expenses, they said.

Iridium has seen solid revenue growth since a 2000 restructuring, however, and can price its service higher than Globalstar’s, Geil said. Near-term growth is likely from increased use by existing customers, bigger sales territories and low-priced asset tracking applications, he said. Iridium has around 154,500 users, S&P said. Globalstar said it has close to 227,000 subscribers.