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Monday, July 24, 2006

Anyone Notice Globalstar Filed to Come Public Again?

Do you recall an old satellite phone company called Globalstar? It's Back. Actually it never went away as far as some of the satellites and infrastructure, but it blew some investor portfolios apart so bad they sure thought it went away. Globalstar is coming public AGAIN in an IPO under ticker "GLOB." The phone technology doesn't look like has changed either, although that may be arguable.

The company has filed to sell $100 Million in securities. In 2005 it earned $21.8 million on revenues of $81.47 million,and this last March 2006 quarter it earned $3.7 million on revenues of $20.7 million. Wachovia is listed as the lead underwriter with backers Qualcomm (QCOM) and Thermo Capital Partners. In a world in turmoil this company is actually profitable.

Globalstar intends to use the net proceeds of the offering, together with the proceeds under its credit facility, the issuance of its common stock under its irrevocable standby stock purchase agreement with its controlling stockholder and cash generated by its business, to fund the procurement and launch of its second-generation satellite constellation, upgrades to its gateways and other ground facilities, and the launch of eight spare satellites to augment its current constellation, as well as for general corporate purposes.

Here is the general pricing structure, but understand this changes depending on your needs:

Plan Name Access Fee Annual Pre-Pay $/Minute Voice Mail Email, Data, Web
Emergency Annual $450/yr $0 $1.39 to $4.99 $95.40 $119.40
Emergency Monthly $39.00/mo $0 $1.39 to $4.99 $95.40 $119.40
Traveler $0 $750 $0.99 to $1.99 Free Free

Globalstar used to be public, but in the 1990's it had a defunct business model under the old "GSTRF" stock ticker. We had no war. We had no need for every single person to be reachable by email. We weren't used to every single person having a cell phone, so when a hurricane knocked out the cell taowers we didn't topple local governments for not protecting against natural disasters (we had no Katrina). Even oil prices were low as could be, so oil workers weren't having to be shuffled around on a moments notice to all over the globe. We also didn't have small "private soldier contractors" deployed all over the world. Now we do, so as long as the world keeps acting like it wants to got to hell in a handbasket it looks like they are ins business.

The one major issue you can see if you start looking through the coverage areas is that Globalstar is not truly GLOBAL yet. They are close, but they are not there. The IPO will help close some of that gap, but this is pretty important for the business model. Maybe this is just some hot air and hype, but this is a real issue for a satellite cell phone company.

These Globalstar phones can be purchased new for $500 to $699 depending on where you purchase from, or you can even (you guessed it....eBay it!) buy used ones online for $200 to $450 depending on accessories and condition.

It competes against Iridium, now essentially a for-profit government agency that sells global coverage. Even their phones look alike. This Globalstar phone looks the same as it did in 1999. The Iridium service includes Dial-Up Data with a throughput rate of up to 2.4 Kbps (Yse that is "K") and Direct Internet Data with a throughput rate of up to 10 Kbps. Iridium Satellite LLC also plans to offer specialty equipment for aviation and maritime applications. Iridium Satellite has contracted with the Boeing Company to operate and maintain the satellite constellation, and Celestica has agreed to provide subscriber equipment. Only Iridium’s global service allows maritime users to send and receive voice, messaging and data regardless of location.

Globalstar also competes against Inmarsat and a couple of other niche players, which may even include Ford, BSky, the old Hughes under DirecTV, and others.

The pricing actually isn't all that bad if you are running a critical data environment, or if you are trying to get out of danger areas. The old fear was that if you ran an Iridium phone it was being eavesdropped by the government, and the perception was that this might not be. With all the media reports of wire taps, you probably just better presume that if you make a call there are probably 3 of you on the call.

Either way, these are great for mission critical businesses and international jet setters.....and the prices aren't so high that it breaks tha bank. The market is likely to take a "Show Me!" attitude since many will say "Been there, done that!" on the deal. We'll have to wait until next month or September to find out.

Jon C. Ogg
July 24, 2006

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