Iridium CEO Matt Desch and Inmarsat CEO Andy Sukawaty joined forces in their criticism of Globalstar CEO Jay Monroe and his company’s $574 million financing award from France’s export credit agency, Coface, on the MSUA-6 opening session panel of mobile satellite sector (MSS) CEOs.
    “Congratulations to Jay. He’s a bit cheerier now than he was when we were here last year, but this financing is unusual. … It’s a bailout,” said Desch.
    From the very beginning of the “What’s Next for the Mobile Satellite Industry?” panel, Monroe repeatedly defended his company’s move. “This is not a government subsidy in any way. This is a senior credit facility that has to be repaid with interest equivalent to the funding that Sirius XM received from Liberty Media. This is a natural move for us and strategic for the French government,” said Monroe.
    Commenting on criticism over how the deal may put U.S. manufacturers at a disadvantage since the funding supports French manufacturer Thales Alenia Space, which has contracts with the U.S.-based Globalstar, Monroe said that he, like his colleagues, is a “commercial animal” and will look for the best deal regardless. “The outcome of this financing is seminal for our industry, and is not exclusive for us,” Monroe said.
    While other CEOs on the panel admitted that they would accept such a deal if they were offered it and depending on if they needed the cash, Sukawaty raised suspicions over the terms of the financing. “While, in a sense, it’s a good deal for Globalstar, I don’t understand how or why they received this funding. Globalstar isn’t the type of business with revenues that merit a senior credit loan like this. To not call this a government subsidy — as they say in the United Kingdom — is a bit cheeky,” he said.
    Michael Corkery, acting CEO of ICO, said that while his company was not looking for financing, he is ready to meet with any potential investor. “If I could get credit like what Globalstar got, I would take it,” he said.
    Desch took a shot at Corkery’s response. “Well, Mike, you have a much more immediate need for credit. I will have to say that capital at these interest rates is not only good for Globalstar but good for the whole MSS industry. It opens up the possibility of future funding opportunities if we need it.”
    Orbcomm CEO Marc Eisenberg brought up U.S. manufacturers in his criticism of the deal. “We chose a U.S. manufacturer for our satellites and received $20 million in credit. Our satellites are also smaller and more efficient, but power to Jay and his company for his deal,” said Eisenberg.
    Criticism was not only heard from Globalstar’s competitors but from other sectors as well. Shortly after the funding was announced, Intelsat CEO Dave McGlade told the audience at the SATELLITE 2009 opening panel of fixed satellite services (FSS) CEOs, that government interference of commercial markets would distort competition, especially in Europe. “It’s bad for competition and is unfair to the companies that receive no funding,” said McGlade.
    Tensions were high on the MSS panel, and there was plenty of veiled criticism of business models. Some analysts and executives had projected that Globalstar was on the verge of folding. Iridium has launched vast campaigns to entice Globalstar customers to switch to its service by providing price incentives.
    Sven Rohte, CCO of Thuraya, defended Globalstar and said it would be unhealthy for the industry if Globalstar stayed afloat with sinking assets. “We welcome the news. You can argue that it’s bad for the industry, but it is strategic in some ways.”
     Monroe spoke about what he viewed as developments in the MSS consumer product market, specifically Globalstar’s Spot Messenger product, which uses the GPS network to determine a customer’s location and the Spot network to transmit information. “There’s a lot of money being made off the planet and geo-location services and products. We see it as a definite growth opportunity,” he said.
    Sukawaty praised Globalstar’s move with the Spot product. “What Jay has done with Spot is great. Terrestrial products are growing the pie for our sector, which is relatively dwarfed by FSS. These are the steps that will one day, hopefully, transform us into major telecoms,” said Sukawaty.
    Desch, however, was not as complimentary. “Spot is a great product, but it is just not profitable. I think there is a better way to tackle the consumer market, which, to begin with, is dangerous territory for us to enter,” he said.
    Monroe fired back at Desch. “Clearly, Matt doesn’t understand the economics of the products. We are very confident in its profitability.”
    Rohte agreed with Desch and emphasized the need to focus on vertical markets. “We also need to create new markets to expand our presence. Focusing on consumer products, in my opinion, is dangerous,” Rohte said.
     The argument over vertical and consumer markets led to the debate over viewing hybrid satellite-terrestrial networks as an opportunity or peril for the MSS sector.
    Corkery said the opportunities outweigh the expenses. “The growth areas are not just in consumer markets but in government and first responders as well,” he said as he pulled a handset unit from his front pocket. “This isn’t my BlackBerry; this is my hybrid dual handset. It’s all about delivering a compact-sized and reliable device.”    Monroe talked about Globalstar’s deal with Open Range to provide broadband wireless Internet and voice access to unserved and underserved U.S. rural communities. Open Range aims to eventually deliver voice and data services on a mobile basis and to customers within its WiMax footprint in the future. “I share the belief that hybrid is the future,” said Monroe.
    Sukawaty and Desch, once again, teamed up to battle the hybrid enthusiasm of their competitors. “When and where are people going to fund the terrestrial elements to these systems, which make satellites look cheap?” said Sukawaty, who himself has partnered with SkyTerra to develop hybrid broadband infrastructure.
    “I keep agreeing with Andy, which is scary,” said Desch. “Last time I checked, we were in a serious economic crisis. In order to even get funding, you have to prove that you can drive revenues quickly and the roaming revenues which these systems generate are such a small portion of the population.”
    But the two MSS rivals certainly kept up the hostile and competitive stance, battling each other over issues, such as the definition of global coverage. “Iridium keeps advertising polar coverage. If their key area of coverage is the poles, then it’s a problem. Penguins and polar bears are nothing to talk about,” said Sukawaty.
    “Do not dismiss polar coverage,” said Desch. “One minute of polar coverage drives two or three minutes of use somewhere else. Global coverage may not include inside buildings, but it may cover Andy’s ‘expensive’ hybrid networks.”