October 30, 2000
Globalstar Posts Surprisingly Big Loss
Amid Disappointing Subscriber Growth
A WSJ.COM News Roundup
SAN JOSE, Calif. -- Globalstar Telecommunications LP reported a bigger-than-expected loss for the third quarter amid "unacceptably slow" subscriber growth and said it would cut prices and expand coverage to lure new satellite-phone users.In afternoon trading Monday, already battered shares of Globalstar tumbled $3.44, or 57%, to $2.56 on the Nasdaq Stock Market. The stock slid past its previous 52-week low of $5.50, set Oct. 17.
The struggling satellite-phone concern reported a net loss of $211.2 million, or $1 a diluted share, compared with $41 million, or 20 cents a share, a year earlier. Analysts had expected a loss of 90 cents a share, according to First Call/Thomson Financial.
Revenue came to $1.2 million in the third quarter. Globalstar, which launched services last fall, didn't report any revenue for the year-earlier period. It posted revenue of $708,000 for the second quarter.
Globalstar said the rate of subscriber and usage growth at the company is steady, but "unacceptably slow."
To try to lure subscribers, the company said it is expanding coverage and introducing new price offers, among other marketing initiatives. The company said earlier efforts were aimed at signing up consumers, but it now will focus on winning big industrial and government accounts.
During the third quarter, the company said it recorded 2.3 million minutes of mobile and fixed billable service, double its second-quarter usage. Globalstar said the estimated number of mobile subscribers was 21,300, nearly double the subscriber count at the end of the second quarter.
Meanwhile, Globalstar said it is in the process of raising additional funds through a $105 million share-repurchase agreement with Bear Stearns Cos. Globalstar said it had $286 million in cash as of Sept. 30, which is sufficient to fund the company through May 2001.
But Loral Space & Communications Ltd., which owns 40% of Globalstar, plans to cut off additional funding for the satellite-telephone project.
Loral's move to publicly distance itself from Globalstar and curtail its support sounds another death knell for low-orbit satellite phone projects, a segment in which two other prominent ventures already have collapsed.
Loral, New York, already has invested more than $1 billion in the $4.3 billion Globalstar venture, and before the end of the year plans to assume $500 million in Globalstar debt.
Weakened by losses from the Globalstar venture, Loral is mulling the possibility of a combination with another company, the sale of a major equity stake or other alliance to raise its sagging share price.
Globalstar's other partners include telecommunications service providers and equipment manufacturers such as Qualcomm Inc. and Vodafone Group PLC. |
