The mobile satellite industry is now under extreme pressure to justify itself. With Iridium’s and ICO’s bankruptcy filings last month, Globalstar is suddenly on the hot seat as industry defender-whether it wants to be or not.
Will Globalstar launch initial service on schedule in September or October, or will it delay its launch to make sure everything is “perfect?” As the only one of the Big Three global voice-based GMPCS companies still financially viable, its decision will have a major impact on how the overall industry is viewed.
In a way, I feel sorry for Globalstar because it has been thrust into this position. The company is wedged firmly between a rock and a hard place. The financial community, which now has very cold feet when it comes to the mobile satellite industry, will have quick reflexes in pulling back promised financing if it smells anything fishy. Already, at Global Wireless press time-a few days after ICO filed bankruptcy-Globalstar’s share price had dropped 10 percent.
The quandary is this:
If Globalstar backs away from its schedule, it risks losing the future financing it needs to launch operations.
If Globalstar pushes ahead with its schedule and isn’t completely ready, it risks mimicking Iridium’s mistakes and losing investor and user confidence later on.
It’s important for Globalstar to stick with its business plan so it can start bringing in revenue to meet investor expectations. At the same time, it shouldn’t launch if it’s not ready.
And right now, “ready” doesn’t even so much mean its technology must be perfect at launch.
To be qualified as ready, under the watchful eyes of capital investors, Globalstar must make sure it has a solid target customer base and reasonable pricing plans.
As Iridium found out, the tremendous expansion of cellular coverage means business users are not a primary target right now for GMPCS service. Added to that, its service was priced too high.
Globalstar says its strategy is different. Its target market is people in small and rural markets where existing cellular service isn’t available. Thus, it doesn’t plan to compete with existing cellular operators. However, at US$1,000 or so per handset and US$1 or more a minute for airtime, will people in those areas really be able to afford it? I can readily see a community-phone model working, but relying on handheld sales to these markets …? I still question it.
Just as important is handset availability, another area where Iridium ran into trouble. If there aren’t enough handsets, how can you sell the service? I imagine Globalstar is camped on the steps of Ericsson, Qualcomm and Telital.
I don’t envy Globalstar Chairman Bernard Schwartz right now.
There are positive angles to all of this, of course.
First, the problems in the mobile satellite industry point once again to the tremendous success of cellular and PCS services worldwide. If there were large problems in existing service offerings, users would be clamoring for a mobile satellite phone. And given the general success of wireless, I think GMPCS does have an important future if companies can locate the right market and strategy.
Second, if Globalstar plays its cards right, it has the opportunity to not only take the industry lead, but to define the industry.
Good luck!
