So now Trump has won the White House, the opportunity for Globalstar to secure approval for its Terrestrial Low Power Service (TLPS) that was first proposed four years ago has finally disappeared. Instead of a 22MHz WiFi Channel 14, that was supposed to have access to a “massive and immediate ecosystem” (an assertion that was challenged by opponents), Globalstar is now asking for a low power terrestrial authorization in only its 11.5MHz of licensed spectrum.
That takes us back essentially to the compromise that Jay Monroe rejected in summer 2015, apparently because he didn’t believe that it would be possible to monetize the spectrum for low power LTE. However, with the FCC still keen to allow Iridium to share more of the L-band MSS spectrum for NEXT, and even Google supporting the concept of Globalstar using only its licensed spectrum for terrestrial operations, an approval seems very plausible in the near term, albeit with a further comment period required on the proposed license modification, as Globalstar acknowledges in its ex parte letter.
UPDATE (11/11): This email, produced earlier in the year by the FCC in response to a FOIA request, gives some further insight into the key June 2015 meeting with Globalstar that I referred to in my post. With its reference to “the conditions for operation in Channels 12 and 13″ and changes to “out-of-band emission levels in the MSS licensed spectrum” it seems clear that FCC staff were contemplating operation by unlicensed users right up to the 2483.5MHz boundary at least, presumably in conjunction with some reciprocity for Globalstar to operate below 2483.5MHz. Thus the deal proposed by FCC staff (although not necessarily validated with Commissioners’ offices) and rejected by Globalstar appears to have been somewhat different to this latest proposal from Globalstar (and perhaps more similar to the Public Knowledge proposals of shared use that came to the fore later in 2015). However, it seems hard to argue that the deal on the table in summer 2015 wouldn’t have been more favorable to Globalstar (due to the ability to actually offer a full 22MHz TLPS WiFi channel), if approved by Commissioners, than Globalstar’s latest proposal.
So the question now becomes, is there value in a non-standard 10MHz TDLTE channel, which is restricted to operate only at low power? Back in June 2015, I noted that there clearly would be some value for standard high power operation, but the question is a very different one for a low power license. After all, even Jay didn’t believe this type of authorization would have meaningful value last year.
Of course, its only to be expected that lazy analysts will cite the Sprint leaseback deal, which supposedly represented a huge increase in the value of 2.5GHz spectrum (though in practice this deal included cherry picked licenses for owned spectrum in top markets, and the increase in value was actually quite modest). And they will also presumably overlook the impact of the power restrictions and lack of ecosystem.
What is really critical is whether Globalstar could use such an approval to raise further funds before it runs out of money next year. Globalstar’s most recent Q3 10-Q admitted that “we will draw all or substantially all of the remaining amounts available under the August 2015 Terrapin Agreement to achieve compliance with certain financial covenants in our Facility Agreement for the measurement period ending December 31, 2016 and to pay our debt service obligations.”
In other words, Globalstar does not have the money to pay its interest and debt payments in June 2017. And with an imminent Terrapin drawdown of over $30M in December, Globalstar really needs an immediate approval to get its share price up to a level where Terrapin won’t be swamping the market with share sales next month. So how will the market react to the prospects of a limited authorization, and will investors be willing to put up $100M+ just to meet Globalstar’s obligations under the COFACE agreement in 2017?
Its important to note that the biannual debt repayments jump further in December 2017 and Globalstar will not be able to extend the period in which it makes cure payments beyond December 2017 unless “the 8% New Notes have been irrevocably redeemed in full (and no obligations or amounts are outstanding in connection therewith) on or prior to 30 June 2017″. Thus its critical that the financing situation is resolved through a major cash injection in the first half of 2017. As a result, it looks like we should find out pretty soon whether this compromise is sufficient for Thermo (or more likely others) to continue funding Globalstar.