Annual Report 2009
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Annual Report 2009 Dear Fellow Stockholders, Once again it is time to extend a sincere welcome to all of our stockholders and thank you for your continued faith and confidence in and support of Globalstar. During 2009 we successfully met our financing challenges in a way other satellite companies are striving to replicate. 2009 was a difficult time for the Company but thanks to the perseverance and level of commitment from all of our investors and employees we have more than met these challenges. With only about 8 weeks to go before the expected delivery of the initial second-generation satellites I am pleased to provide you with a summary of our progress during 2009. MEETING THE RETAIL CONSUMER MARKET CHALLENGE One of the traditional barriers faced by the mobile satellite services industry has been the lack of mainstream retail consumer market acceptance. Globalstar is the first, and to this day the only, MSS provider to have successfully broken through this market barrier via the introduction of our revolutionary SPOT Satellite GPS Messenger™ product. Our challenge in 2009 was to continue to capitalize on, and further expand, this consumer success both domestically and around the world. We successfully met this challenge and grew our consumer market presence by expanding the mix of SPOT Satellite GPS Messenger retail products and services as well as the global distribution for our unique satellite messaging and tracking products. We introduced a new enhanced version of SPOT that is both easier to use and about 30 percent smaller and lighter than the original product. We also announced a suite of new SPOT value-added services such as our SPOT Assist Roadside and Maritime packages. And thanks to our sales and marketing initiatives since launching SPOT, as of the end of 2009 we had received orders to ship more than 190,000 SPOT units to more than 10,000 retail points of global distribution. The success of SPOT and the reliability of our simplex data services resulted in subscriber growth of more than 46,000 in 2009. Thus, once again we ended the year as the mobile satellite services provider with the world’s largest base of voice and data subscribers. Our consumer products growth however was not limited to SPOT. Last year we unveiled our HUG product at the Fort Lauderdale International Boat Show. HUG is an easy-to- install satellite-based asset monitoring and messaging system for the recreational maritime industry. While the HUG is designed to monitor a marine vessel’s location, it could be used to monitor the location of any mobile asset such as a motorcycle or snowmobile, and to send an “unauthorized movement” alert to an Asset Monitoring Center and the owner, providing them with a real-time satellite-based theft protection system. It can also be used to monitor operational information such as bilge water levels and unauthorized equipment removal. During 2009 we also continued work with manufacturers of consumer retail products. Earlier this year at the Consumer Electronics Show in Las Vegas, Globalstar along with GPS manufacturer DeLorme jointly introduced the world’s first handheld GPS and Satellite Communicator. The revolutionary satellite communicator, designed exclusively for the new DeLorme PN-60w, merges SPOT functionality and DeLorme state-of-the-art GPS mapping capability. Users can send customized text messages using the PN-60w’s keyboard to select individuals or groups from virtually anywhere even when they are far beyond the range of traditional wireless or cellular coverage. We believe this will be just the first of a series of Globalstar Mobile Access Point products designed to provide owners of standardized consumer handsets and devices with access to the Globalstar satellite network. In December 2009 we further solidified our long-term consumer products supply chain and intellectual property (IP) rights by acquiring substantially all of the assets of Axonn LLC. Axonn is a leading developer and manufacturer of GPS asset-tracking and messaging products including our SPOT Satellite GPS Messenger. This acquisition also secures the associated IP rights for other Simplex data enterprise M2M asset-tracking solutions and provides Globalstar with a world-class product design capability that can rapidly assist us in driving the maximum usage of our satellite network. By applying the IP expertise developed by Axonn to our satellite network, we can offer wireless application developers the open-source technology standard needed to integrate our proven messaging and global tracking capabilities into their M2M and asset tracking solutions. FINANCING AND NEW SATELLITES In addition to our consumer market success, on July 1, 2009, we announced the completion of a financing of approximately $738 million. We required this funding to procure and launch our second-generation satellites and continue development of our next-generation ground segment. The fact that it was completed during what many describe as the worst state of the global capital markets in the last 75 years underlines the enormous effort of all those who helped make it possible. This financing provides us with the resources needed to launch our new satellite constellation designed to last beyond 2025 and to continue developing the supporting ground infrastructure needed to position us to market a host of advanced IP-based mobile satellite services. In the future we expect to initiate services such as push-to-talk, multicasting, advanced messaging capabilities such as multimedia messaging, mobile video applications, geo-location services, and provide multiband and multimode handsets, as well as field data devices with GPS integration and cellular network compatibility. We expect to take delivery of our first six satellites in late June with launch expected in late summer. Once our new satellites are in operational orbit, the most immediate impact will be on those customers who use our satellite voice and duplex data services. With each of the first four launches, these customers can expect a progressive return to the high reliability and service quality they enjoyed before we began to experience satellite degradation in 2007. Of course, our SPOT Satellite GPS Messenger™ and Simplex data asset-tracking customers, who have never been affected by this degradation, will continue to receive the high quality service they have always enjoyed. SATELLITE SPECTRUM AND NATIONAL BROADBAND STRATEGY As many of you are aware, Globalstar has followed a diligent wireless spectrum strategy, and we are licensed for more than 25 MHz of L and S-band spectrum both here in the United States and around the world. We have U.S. Federal Communications Commission (FCC) authority to offer complimentary terrestrial wireless or Ancillary Terrestrial Component (ATC) services in the United States in conjunction with our mobile satellite services using up to 19.275 MHz of this spectrum. In 2009 we became the very first MSS provider to utilize our ATC authority when our partner, Open Range Communications, Inc. deployed a WiMAX rural broadband service using this spectrum. With the introduction of such services as well as new wireless products being launched on a regular basis, it is clear that there is an increased demand for wireless broadband. Consequently we are seeing a heightened awareness of the current shortage of domestic wireless spectrum. The FCC recently announced ambitious plans to expand broadband availability when it released, “Connecting America: The National Broadband Plan.” One important element of that plan is to examine whether and how mobile satellite spectrum, such as Globalstar’s, could be used more widely and efficiently for terrestrial wireless services. In order to help ensure that there is sufficient, flexible wireless spectrum that accommodates growing demand and evolving technologies, the plan stated the FCC should accelerate terrestrial deployment using mobile satellite spectrum. The Plan also recommended the FCC should grant licensees flexibility under the ATC regime in the “2.4 GHz Big LEO band, already being used for terrestrial broadband deployments, to make this spectrum permanently suitable for terrestrial broadband service, subject to appropriate safeguards to promote the public interest.” This is potentially important for Globalstar as we are the only ATC authorized participant in the Big LEO band. The proposed changes may provide us with the ability to utilize increased ATC authority without the current gating requirements or restrictions. If the FCC allows Globalstar greater flexibility in the use of its spectrum, we intend to exploit such flexibility not only in the U.S. but also abroad as FCC policies often provide a template for similar regulatory policies in international markets. Finally, we feel the plan validates our current ATC business model under which we are already receiving revenue for leasing our satellite spectrum to Open Range. The full extent of the plan’s potential impact on Globalstar will be better known in the upcoming months as the FCC intends to initiate a rulemaking proceeding addressing these issues in mid-Summer and Globalstar will be an active participant. LOOKING AHEAD With less than eight weeks to go before we take delivery of our first second-generation satellites, this year’s success will ultimately be measured by our ability to meet major but achievable operational milestones. These milestones are primarily associated with the launch of our second-generation satellites, our continued domestic and international consumer retail product initiatives, and reinvigorating our two-way voice and duplex data sales and marketing initiatives. As we approach our satellite delivery date, we will provide you with further detailed information regarding the first scheduled launch. In summary, 2009 can be described as a watershed year in the history of Globalstar. It has been challenging to say the least, but despite the state of the economy we successfully emerged with our much needed financing and a continued consumer product focus that we intend to expand as we approach the launch of our new satellites.