11.25.08

SPOT’s economic stimulus plan

Posted in Globalstar at 10:02 am by timfarrar

With Globalstar looking to raise additional funding to complete construction and launch of its second generation satellites, it is critical that it demonstrates good fourth quarter results, by selling as many SPOT units as possible. Indeed Globalstar’s most recent 10-Q indicates that it is targeting between 1M and 1.5M users in North America by the end of 2010, although at the end of the third quarter it only had around 50,000 SPOT subscribers. Unfortunately the SPOT unit is a highly discretionary purchase for most consumers, since it represents such a new type of service (think for example of how long it took for awareness of TiVo to grow), and with the downturn in consumer spending, it seems likely that sales of SPOT units have also been affected.
As a result, we’ve now seen SPOT offering a $50 rebate to new subscribers, and most recently an announcement (shown below) that existing subscribers are now able to get additional SPOT units for free if they sign up for the $150 service plan. With 100,000 units already shipped or ordered, hopefully these incentives will allow SPOT to show significant subscriber gains in the fourth quarter. However, as we’ve highlighted before, the cost of subscriber acquisition for SPOT is quite high and this rebate/free unit program will do nothing to reduce those costs. It therefore seems unlikely that SPOT will help to generate the cash needed to pay for the launch of Globalstar’s second generation satellites in the near term.
SPOT’s latest incentives

1 Comment »

  1. craigvanwagner said,

    November 28, 2008 at 5:41 am

    You have to give Globalstar some credit for getting this lowest of level satphone into the mass markets. Now distributed in such retailers as Cabellas, Outdoor World, REI and even Costco! The Globalstar team has faced an incredible barrage of setbacks over the course of their constellation and if you were a betting man you can’t count them out. It has to bring a smile to your face to see such a simple satellite communications device and application make it to the mass markets. Who could have imagined seeing this stuff in Costco? Bravo! Remember when Iridium was saying how mass market thier product would be in 1999? There is a price point for communications and value. Satellite phones have a distinct niche in the communications spectrum and SPOT is good at it’s price point. Two way voice satellite phones have to be below $500 retail to hit a major rise.

    However, I do agree with the economics of the situation. Weaker consumer spending, consumer confidence and the reduction in discretionary spending is the next immediate challenge. More to come on this story.

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