Now that the flap over Lockheed Martin’s acquisition of Loral’s defense electronics and system integration divisions earlier this month has died down, strategists at Loral Space & Communications-which owns a 31 percent stake in low-earth-orbit satellite licensee Globalstar L.P.-have had a chance to assess the implications of the merger.
“This transaction will enable the senior management at Loral Space to focus on the satellite and space business, which have excellent potential for growth,” said Bernard L. Schwartz, chairman and chief executive officer of Loral Corp., who also becomes chairman and CEO of Loral Space, Globalstar’s parent; and vice chairman of Lockheed Martin. The deal also includes all of Globalstar’s service-provider assets in Canada, Mexico and Brazil. All components of Loral Space-including Space Systems/Loral, and projected interests in such domestic and international satellite broadband data projects as Cyberstar-eventually will be rolled into one entity.
San Jose, Calif.-based Globalstar, which now is debt-free, gains more than $700 million in cash working capital, part of which could be used to fund the remaining $600 million of the satellite-phone venture. According to the company, this means that work on the $2 billion big LEO system will remain on schedule, and there could be other commercial ventures involving satellite and telecom technology as well. Shares of Globalstar, which have recorded a 52-week high of $47 and a low of $11, now are trading in the $37 to $38 range.
Due to a recently completed $250 million bank-financing transaction, no additional funding is needed to operate Globalstar until later this summer. According to company spokesman Tom Ross, Globalstar probably will not tap into its windfall to complete its financing, unless adverse market conditions dictate such a move.
“Bernard Schwartz has stated that it still is his intention to go into the debt market for additional financing,” Ross said. “We have time to work on it. With our cash and no debt, the company has considerable options in the market.”
So far, Globalstar has raised approximately $1.4 billion in capital, including $300 million from strategic investors,; $300 million in vendor financing; $350 million from prepaid franchise fees and other revenues; $200 million from an initial public offering; and $250 million from the bank facility. It could be the best-financed big LEO out of the three competing licensees.
Aside from the cash infusion, Globalstar should continue to meet its launch and service goals with the focused help and attention from new company head Schwartz, to whom Ross referred as a hands-on manager.
“If he is as successful with this new company as he was with Loral, Globalstar will be tremendously successful,” Ross said, adding that Loral became a $6 billion-plus concern under Schwartz’s watch. “We hope we can replicate that.”
When it is in full swing sometime in 1998, Globalstar will have the capability to serve some 10 million subscribers around the world.
For the most part, it will be business as usual for Globalstar as far as its buildout schedule for its first launch next year and its search for additional local providers are concerned. It also sees no change in its relationship with any strategic partners, including Qualcomm Inc.
“Qualcomm and Loral were the founding partners of Globalstar, and Code Division Multiple Access is the cornerstone of our system,” Ross said. “This relationship will continue.”
On the competitive side, Ross said the company has no problem with the fact that a division of Lockheed Martin is manufacturing rival Iridium’s satellites.
