Satellite Phone Company Struggles for Life

S A N   F R A N C I S C O, Nov. 6 -- The stars never seemed to align right for Globalstar Telecommunications Ltd., a mobile satellite phone company in a financial freefall likely to end with a thud if management doesn’t come up with money by next summer.

Globalstar’s plan to sell phones that provide great reception inremote areas by tapping into a constellation of 48 satellitessounded good to many investors, but the business hasn’t panned outfor a variety of reasons, analysts say.

Part of the problem has been poor execution by Globalstar’smanagement, but the San Jose-based company also has been hurt byseveral factors beyond its control.

Previous Burnouts

The extenuating circumstances include the failure of two rivalsatellite phone companies, Iridium LLC and ICO GlobalCommunications, which spooked consumers about the stability of aservice that requires an upfront investment of several hundreddollars.

The increased range and declining costs of cellular phones alsohave made satellite phones tougher to sell.

“Unless you are stuck on an oil rig somewhere, you really don’tneed a Globalstar phone,” said Manuel Marquez, a San Franciscowireless dealer who said he hasn’t been able to persuade anyone tobuy one of the company’s phones.

Add it all up, and Globalstar has only a fraction of thesubscribers it needs to stay alive. In a statement released withits third-quarter results earlier this week, the company said ithad $286 million in cash — enough to stay in business through May2001. The company lost $652 million on revenues of $2.5 millionthrough the first nine months of the year.

The trouble has ravaged Globalstar’s stock, which was tradingThursday at $2.94 — 95 percent off its 52-week high.

All this has left stakeholders wary about Globalstar’sprospects.

Financing on Hold

Loral Space & Communications, which has parceled more than $1billion on its 38 percent stake in Globalstar, won’t invest anymore money unless the company’s fortunes improve, according toGlobalstar chief executive Bernard Schwartz.