The bad news for Globalstar Telecommunications Ltd. continues to mount following the filing of a second complaint by Ericsson Inc. against the mobile satellite communications provider, claiming Globalstar failed to buy the number of phones from Ericsson agreed to under contract.
In May, Ericsson accused Globalstar of failing to meet the minimum purchasing requirements for phones under two contracts-one for fixed phones and the other for mobile phones. Together, the complaints seek approximately $67 million in damages.
Mac Jeffrey, senior director of communications for Globalstar L.P., said the complaints were referred to arbitration and do not, as of yet, involve the courts.
The courts are involved, however, in several lawsuits filed mostly by people who bought Globalstar securities. They assert that Globalstar, among other things, issued false and misleading statements concerning its prospects and financial status, as well as the sale of its satellite phones.
Globalstar has been teetering on the edge of bankruptcy for several months. It reported revenues for 2000 of $3.7 million, and a staggering net loss of $3.8 billion. The company lost $145 million in the first quarter of this year, having signed on approximately 44,000 customers since launching in February 2000.
But the company also has taken several dramatic steps to avoid bankruptcy court. Globalstar decided in January to suspend all payments on about $400 million of funded debt. Following in the footsteps of its competitor, Iridium Satellite L.L.C., Globalstar vowed to focus more on industrial customers in the transportation, maritime and natural resource exploration industries. It also added short message service and data access capabilities in hopes of making its phone and service more appealing.
Despite these efforts however, the future looks dim. A Reuters report said Qualcomm Inc. has withdrawn its offer to become a lead investor in a restructuring plan for Globalstar. Under a plan introduced in May, Qualcomm and several other investors were considering buying Globalstar’s assets if it agreed to file for Chapter 11 bankruptcy protection.
Jeffrey said this does not mean Qualcomm is leaving the restructuring efforts.
“They may choose to be a part of another restructuring plan. Qualcomm very much remains a partner in Globalstar, and remains a supplier of technology to Globalstar and a part of a group of partners that are continuing to work on the restructuring of the company,” said Jeffrey.
Jeffrey also denied claims in the report that said TE.SA.M, which provides 40 percent of Globalstar’s business, is trying to exit the business and has frozen all spending related to Globalstar except salaries and office rent. TE.SA.M is a partnership between France Telecom and Alcatel that provides mobile satellite services in Western Europe, North Africa and South America.
“To my knowledge, nothing has happened that has indicated that TE.SA.M has stopped its marketing efforts,” he said.
