FINANCIALLY STRAPPED GLOBALSTAR REDUCES PRICES
Fighting to stay alive, Globalstar dramatically reduced prices for handsets and rates for calls to unprecedented level as it moved closer to leaving bankruptcy that started 6 months ago, spokesman said Wed. As expected (CD July 22 p4), Globalstar reduced cost for certain high-volume users packages to 17 cents per min. for high-usage calls in U.S. and Caribbean. Similar price plans are expected to be introduced in other global markets, spokesman said. Before cuts were announced, Globalstar prices ranged from 79 cents to $1.60 per min., virtually same as rival Iridium. Handsets also have been reduced 25% from $799 to $599.
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New price plans are expected to blunt impact of financial problems. Globalstar has been buying out former partners to regain control of ground stations and reduce costs by cutting out middleman in offering retail service and obtaining FCC and other regulatory approvals for restructured operations. Company filed for Chapter 11 protection in U.S. Bankruptcy Court, Wilmington, Del. in Feb. after listing $573.4 million in assets and $3.34 billion in debts. At time, it said it had invested $4 billion in project that had failed to attract substantial number of subscribers.
If “pieces fall into place” Globalstar expects to leave bankruptcy by end of year, spokesman said. Company said it had reduced overall cost structure by downsizing and eliminating “duplicating functions,” spokesman said, and final step was securing $50-$100 million from investor. “That will be sufficient to make us cash-flow positive.” Globalstar is working to consolidate sales and technical operations in N. America and Europe. On Tues. Globalstar announced it had completed acquisition of all its assets held by Vodaphone. Companies signed preliminary agreement in Dec., but FCC approval of deal still is pending.
It’s still unclear what impact reductions in price will have on satellite telephone market or how much more company must sell over current levels to become profitable. “We will see some reaction,” spokesman said: “Maybe they [competitors] will adjust their prices.” Spokesman said Globalstar wasn’t “trying to compete with cellular industry,” but said new pricing “does dramatically change the economics” of satellite telephone market.