Globalstar Reports Results for First Quarter of 2001
NEW YORK--May 15, 2001--Globalstar , the global mobile satellite telephone service, today announced its results for the quarter ended March 31, 2001, which showed growth in both voice and data traffic.
While the company is continuing to work on restructuring its debt, Globalstar's marketing efforts remain uninterrupted. As a result, the company's rate of growth, both in minutes of use (MOUs) and subscriber numbers, rose substantially over the previous quarter.
Globalstar recorded a total of 4 million minutes of use (MOUs), including both mobile and fixed service, in the first quarter, representing a 53% increase in traffic over the previous quarter. The estimated number of mobile and fixed subscribers at the end of March was 40,700, an increase of over 30% from the previous quarter. As of the end of April, there were approximately 44,000 subscribers registered on the Globalstar system.
Most key markets continued to show encouraging MOU growth over the previous quarter, including Russia (up 118%), Canada (up 78%), Saudi Arabia (up 179%) and Argentina (up 101%). In addition, MOUs in the Central American countries collectively were up 45%, driven in large part by strong fixed phone usage.
Data services, which were introduced in North America in late December, represented 4% of total billable minutes for the quarter. This is expected to rise substantially as data is introduced in other markets. In March, data represented nearly 8% of total traffic volume, driven by testing and demonstrations in Mediterranean markets.
"The introduction of data services has opened up a variety of new opportunities for Globalstar, not just for data-only customers but also for business and industry users who have an important requirement for both data and voice communications," said Tony Navarra, president of Globalstar. "The response from data users in North America has been very encouraging, and we are already at work implementing this feature in other gateways around the world."
In early May, the Globalstar partners, along with advisors from The Blackstone Group, reviewed several business proposals to continue and to strengthen Globalstar's business. Efforts to restructure the company's debt remain on track, and work on a final plan is expected to continue into the third quarter of this year.
Financial Results
A full discussion of Globalstar's financial performance for the first quarter can be found in the company's Report on Form 10-Q, filed today with the U.S. Securities and Exchange Commission. Highlights are as follows:
Gross service revenue for the first quarter was $1.9 million, up 66% over the previous quarter, and net revenue, including royalty income from phone sales and less discounts and promotions, was $1.5 million, an increase of 32% over the fourth quarter of 2000.
Globalstar, L.P. reported a net loss applicable to ordinary partnership interests for the quarter of $145 million or $2.25 per partnership interest that converts to a loss of $0.31 per share of Globalstar Telecommunications Ltd.
As of March 31, 2001, Globalstar had approximately $138 million in cash and cash equivalents, including restricted cash. As part of the company's work to conserve cash, Globalstar has instituted a number of cost saving measures across the company. According to the company's current operating plan, Globalstar has sufficient cash to continue operations through the end of 2001.
As announced in January, in order to have sufficient funds available to pursue continued progress in its marketing and service activities, Globalstar has suspended indefinitely principal and interest payments on all of its funded debt, including its credit facility, vendor financing agreements and Senior Notes, as well as dividend payments on its preferred stock. The suspension of these payments will reduce the company's expected cash outflow by approximately $400 million for the year 2001. As a result of these actions, however, defaults have now occurred with respect to some of Globalstar's debt.
Operating and Marketing Initiatives
Globalstar is taking several steps to broaden and strengthen its business and marketing operations, including:
Introduction and expansion of data applications: Globalstar is continuing its introduction of data services, which began in late 2000 in the U.S., Canada and the Caribbean where preliminary sales results have been encouraging. In late March, SCADA (Supervisory Control and Data Acquisition) data modem service was also introduced in North America, offering an attractive data transmission capability which can be used for monitoring the status of pipelines, transmission lines and other industrial operations in remote locations. Globalstar is working with outside companies to develop further specialized equipment for aviation, maritime, and other potential data markets.
Expansion of service in new country markets: During the quarter, two new gateways - in Ogulbey, Turkey, and Manaus, Brazil - initiated service, and the State Planning Commission in China gave its approval for a second and third gateway to be constructed in that country. Globalstar service coverage now reaches 109 countries or over 75% of the world's land areas.
Extension of coverage in maritime areas: Because the Globalstar gateways have performed even better than original design specifications predicted, the company has been able to extend the coverage of many gateways to bring service to new offshore and mid-ocean regions. In addition to the wide areas across the North Atlantic and northeast Pacific announced last year, new service areas have been opened up including the Caribbean; the Tasman Sea between Australia and New Zealand; and the Sea of Japan between Korea and Japan.
Fixed phone services: Installation of fixed phones grew, with phones installed on public intercity buses in Brazil, in remote communities across Central America and Morocco, and along highways in Argentina. At a single mining operation in Honduras, five fixed phones each are generating several thousand minutes of use per week.
In early 2001, Globalstar signed a memorandum of understanding with SeaTel, a major provider of maritime telecommunications equipment and services, under which SeaTel now markets a marine satellite telephone package for installation and use aboard ships. The package, which includes a Globalstar Qualcomm fixed access unit along with a weatherproof antenna housing and related equipment, is included in SeaTel's current catalog of products.
Globalstar service also continues to serve a critical role in rescue operations around the world. Use of Globalstar phones have been credited with saving lives in the wake of earthquakes earlier this year in El Salvador and in rescue work by the Royal Canadian Mounted Police.
System Update
The Globalstar system continues to operate well, with impressively high rates of call retention and call completion. In recent months, three satellites experienced operational anomalies and have been taken out of service pending further analysis and investigation. While work on restoring these satellites continues, on-orbit spare satellites are gradually being maneuvered toward the orbital slots of the affected satellites. If these satellites cannot be restored to full service in the coming months, the company will then have the option of replacing them with the on-orbit spares. In the meantime, this temporary situation has caused minimal impact to overall service, usually for a few minutes per day and generally only for users in equatorial or very Northern or Southern latitude regions.
Globalstar is a partnership of the world's leading telecommunications service providers and equipment manufacturers, including co-founders Loral Space & Communications and Qualcomm Incorporated; Alenia; China Telecom (HK); DACOM; DaimlerChrysler Aerospace; Elsacom (a Finmeccanica Company); Hyundai; TE.SA.M (a France Telecom/Alcatel company); Space Systems/Loral; and Vodafone Group Plc. For more information, visit Globalstar's web site at www.globalstar.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements provide our expectations or forecasts of future events. Actual results could differ materially as a result of known or unknown risks and uncertainties and other factors, including our ability to secure sufficient funding under credit facilities or from other sources, to restructure our debt, the acceleration of existing debt facilities and the exercise of remedies with respect thereto, and other risks, uncertainties and factors disclosed in the most recent report on Form 10-K and reports on Form 10-Q and Forms 8-K of Globalstar Telecommunications Ltd. and Globalstar, L.P. filed with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statement.