Globalstar rises out of bankruptcy

A former heavyweight in the satellite communications space is out of bankruptcy and setting it sights on the Canadian market once again.

After a raucous couple of years that saw the company launch satellites, roll out service and eventually file for bankruptcy, Globalstar L.P. says it’s back and ready to ramp up the customer acquisition engine.

Globalstar’s past is anything but boring. By November 1999 it had a 48-satellite fleet, and it started Canadian operations in February 2000. But by that June it was admitting that service rollout was slower than expected.

In January 2001 Globalstar deferred interest and dividend payments, an indication that perhaps the company was not as healthy as it could be. Come February 2002 Globalstar filed Chapter 11 and started looking for investors.

Now Thermo Capital Partners LLC has emerged as a financial saviour. The New Orleans-based investment firm helped guide the satellite operator through the Chapter 11 process.

According to Jim Lynch, Thermo’s managing director, Globalstar will look to its Canadian subsidiary as a template for the rest of the company, relying on the same low-overhead, high-revenue model employed by Mississauga, Ont.-based Globalstar Canada to some success.

“We know this company will be poised for tremendous growth,” Lynch said.

Thermo is not concerned that filing for bankruptcy has tarnished Globalstar’s reputation with current and potential customers, Lynch said.

Roger Entner, director of the wireless and mobile service practice at The Yankee Group in Boston, said Globalstar’s reputation is no worse for wear after bankruptcy.

“I don’t think their reputation has been hurt because every satellite company has gone into bankruptcy,” he said.

One of the biggest problems satellite communications companies face is the massive investment needed to put “the birds in the sky,” Entner said. It’s difficult to recoup the massive capital outlay required to launch the network infrastructure.

“Putting the satellite up is millions and millions of dollars,” he said. However, “if the debt has been forgiven then the operating costs are relatively small.”

One Globalstar customer said the company kept clients informed through the restructuring process, which mitigated concerns that the satellite operator wouldn’t survive.

“We were getting a lot of information from them as to what was happening that wasn’t really public [knowledge],” said Rory Hale, the IT manager at Pure Energy Services Ltd., a provider of production testing, performing and data logging services in the oil and gas industry throughout Alberta and Northern B.C. Pure Energy has been a Globalstar customer for more than two years.

Up until Globalstar transferred its assets to Thermo last year, the company’s Canadian division existed under ownership separate from the U.S. arm, so it was virtually unaffected by the firm’s financial problems, which became public when Globalstar filed for bankruptcy protection in 2002.

Two of the technology companies that owned Globalstar Canada, Vodafone Group and Loral Space and Communications, have since put their assets into the new operating Globalstar company, so there would be one united entity coming out of bankruptcy, explained Steven Bell, general manager of Globalstar Canada.

Because Canada is Globalstar’s shining star of a business model, not much will change in the operations north of the border, but one of the benefits of the restructuring, Bell explained, will be the creation of new jobs for Canadians.

Globalstar should be able to carve out a niche for itself focusing on individuals that really need mobile communications including spots in Northern Canada, Entner added.

Although Globalstar Canada was doing well on its own, Bell said he isn’t apprehensive about joining the rest of the company, which he said would make the combined organization a more “lean and focused” group.

Bell said he anticipates big growth in the company’s customer base.

“[Our financial situation since restructuring] has been nothing but positive, so I think that change alone will help fuel some growth for us,” he said.

Currently, Globalstar in Canada focuses on resource-based organizations including oil and gas companies, the maritime industry and the forestry industry.



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