Globalstar
Mobile Satellite Services Business
Globalstar, Inc. (GSAT) provides Mobile Satellite Services (“MSS”) including voice and data communications services globally via satellite. By providing wireless communications services in areas not served or underserved by terrestrial wireless and wireline networks and in circumstances where terrestrial networks are not operational due to natural or man-made disasters, the company seek to meet its customers' increasing desire for connectivity. The company offer voice and data communication services over its network of in-orbit satellites and its active ground stations (“gateways”), which the company refer to collectively as the Globalstar System.1
The company currently provide the following communications services via satellite. These services are available only with equipment designed to work on its network:
- two-way voice communication and data transmissions ("Duplex") using mobile or fixed devices; and
- one-way data transmissions ("Simplex") using a mobile or fixed device that transmits its location and other information to a central monitoring station, including certain SPOT and Simplex products.
The company's constellation of Low Earth Orbit ("LEO") satellites includes second-generation satellites, which were launched and placed into service during the years 2010 through 2013 after a $1.1 billion investment, and certain first-generation satellites. The company designed its second-generation satellites to last twice as long in space, have 40% greater capacity and be built at a significantly lower cost compared to its first-generation satellites. The company achieved this longer life by increasing the solar array and battery capacity, using a larger fuel tank, adding redundancy for key satellite equipment, and improving radiation specifications and additional lot level testing for all susceptible electronic components, in order to account for the accumulated dosage of radiation encountered during a 15-year mission at the operational altitude of the satellites. The second-generation satellites use passive S-band antennas on the body of the spacecraft providing additional shielding for the active amplifiers which are located inside the spacecraft, unlike the first-generation amplifiers that were located on the outside as part of the active antenna array. Each satellite has a high degree of on-board subsystem redundancy, an on-board fault detection system and isolation and recovery for safe and quick risk mitigation.
Due to the specific design of the Globalstar System (and based on customer input), the company believe that its voice quality is the best among its peer group. The company define a successful level of service for its customers by their ability to make uninterrupted calls of average duration for a system-wide average number of minutes per month. The company's goal is to provide service levels and call success rates equal to or better than its MSS competitors so its products and services are attractive to potential customers. The company define voice quality as the ability to easily hear, recognize and understand callers with imperceptible delay in the transmission. By this measure, the company believe that its system outperforms geostationary (“GEO”) satellites used by some of its competitors. Due to the difference in signal travel distance, GEO satellite signals must travel approximately 42,000 additional nautical miles, which introduces considerable delay and signal degradation to GEO calls. For its competitors using cross-linked satellite architectures, which require multiple inter-satellite connections to complete a call, signal degradation and delay can result in compromised call quality as compared to that experienced over the Globalstar System.
The company designed its second-generation ground network, when combined with its second-generation products, to provide its customers with enhanced future services featuring increased data speeds of up to 256 kbps, with initial services up to 72 kbps, as well as increased capacity. The second-generation ground network is an Internet protocol multimedia subsystem ("IMS") based solution providing such industry standard services as voice, Internet, email and short message services ("SMS").
The company compete aggressively on price. The company offer a range of price-competitive products to the industrial, governmental and consumer markets. The company expect to retain its position as a cost-effective, high quality leader in the MSS industry. The company's next-generation products under development include Duplex, SPOT and Simplex products, including:
•Sat-Fi Like the original Sat-Fi, the next-generation Sat-Fi will be designed to allow smartphones, laptops and tablets with Wi-Fi to connect to the Globalstar network for voice and data services outside terrestrial network coverage areas, and is expected to be the first product to operate using its second-generation ground infrastructure resulting in higher speeds, enhanced capacity and improved performance.
•Two-way SPOT Globalstar is designing the next SPOT device with a new keyboard functionality to allow subscribers to send and receive SMS messages along with the traditional tracking and SOS functions to continue to appeal to consumers.
•Simplex
Partnering with existing companies, Globalstar is developing IoT-focused Simplex products to connect into existing user bases and accelerate deployment of a Globalstar IoT product suite. The company expect the new solar-powered devices will be designed to support larger and more frequent data transmission capabilities to enable a longer field life than existing devices. The new solar-powered devices are also expected to take advantage of its network's ability to support over 10 billion transmissions daily assuming an average message size of 90 characters. Globalstar is also developing machine-to-machine ("M2M") products that support two-way communications allowing for both tracking and control of assets in its coverage footprint.
The company's satellite communications business, by providing critical mobile communications to its subscribers, serves principally the following markets: recreation and personal; government; public safety and disaster relief; oil and gas; maritime and fishing; natural resources, mining and forestry; construction; utilities; and transportation. Currently, the company believe there are billions of people who live, work or play in areas not connected by cellular service and over two-thirds of the world's landmass is without reliable connectivity.
The company's products and services are sold through a variety of independent agents, dealers and resellers, and IGOs. The company also have distribution relationships with a number of "Big Box" and online retailers and other similar distribution channels.
Licensed Spectrum Overview
Globalstar has access to a world-wide allocation of radio frequency spectrum through the international radio frequency tables administered by the International Telecommunications Union ("ITU"). In the United States, the Federal Communications Commission ("FCC") has authorized it to operate its first-generation satellites in 25.225 MHz of radio spectrum comprising two blocks of non-contiguous radio frequencies in the 1.6/2.4 GHz band commonly referred to as the "Big LEO" Spectrum Band. The company licensed and registered its second-generation satellites in France. In March 2011, the company obtained all authorizations necessary from the FCC to operate its domestic gateways with its second-generation satellites.
Terrestrial Authority for Globalstar's Licensed 2.4GHz Spectrum
In December 2016, the FCC unanimously adopted a Report and Order permitting it to provide terrestrial broadband services over 11.5 MHz of its licensed Mobile Satellite Services spectrum at 2483.5 to 2495 MHz, covering a population ("POPs") of approximately 320 million people, representing 3.7 billion MHz POPs. As provided in that Report & Order, the company filed applications to modify its existing MSS licenses in April 2017 in order to obtain the terrestrial authorization permitted in the Report & Order. The FCC placed its applications on public notice in May with a comment cycle that ended in July 2017. In August 2017, the FCC granted Globalstar's MSS license modification application and granted Globalstar authority to provide terrestrial broadband services over its satellite spectrum. The FCC modified Globalstar's space station authorization to include a terrestrial low-power network using authorized Big LEO mobile-satellite service spectrum. The company will need to comply with certain conditions in order to provide terrestrial broadband service under its MSS licenses, including obtaining FCC certifications for its equipment that will utilize this spectrum authority. The company believe its MSS spectrum position provides potential for harmonized terrestrial authority across many international regulatory domains. Globalstar is seeking similar approvals in various foreign jurisdictions and have applied for licenses in countries serving 375 million consumers, or approximately 6.2 billion MHz POPs. Additionally, Globalstar is working with regulators in countries representing an aggregate population of another approximately 425 million. The company expect this effort to continue for the foreseeable future.
The company expect its terrestrial authority will allow future partners to develop high-density dedicated, small cell deployments using the TD-LTE protocol that eliminates the need for paired spectrum. Conventional commercial spectrum allocations must meet minimum population coverage requirements, which effectively prohibits the exclusive use of most carrier spectrum for dedicated small cell. In addition, low frequency carrier spectrum is not physically well suited to high-density small cell topologies, while mmWave spectrum is sub-optimal given range and attenuation limitations. The company believe its license in the 2.4 GHz band, holds physical, regulatory, and ecosystem qualities that distinguish it from other current and anticipated allocations, and is well positioned to balance favorable range, capacity and attenuation characteristics.
Performance Indicators
The company's management reviews and analyzes several key performance indicators in order to manage its business and assess the quality and potential variability of its earnings and cash flows. These key performance indicators include:
- total revenue, which is an indicator of its overall business growth;
- subscriber growth and churn rate, which are both indicators of the satisfaction of its customers;
- average monthly revenue per user, or ARPU, which is an indicator of its pricing and ability to obtain effectively long-term, high-value customers. The company calculate ARPU separately for each type of its Duplex, Simplex, SPOT and IGO revenue;
- operating income and adjusted EBITDA, both of which are indicators of its financial performance; and
- capital expenditures, which are an indicator of future revenue growth potential and cash requirements.
