Globalstar’s second quarter results, issued last Thursday, were mixed. The company reported;

• $708,000 (E759,000) in total revenue, consisting of $390,000 in net service revenue ($483,000 in gross service revenue before backing out promotions and discounts) and $318,000 in royalty revenue from the sale of phones;
• 1,137,000 minutes of billable service;
• 35-40 average minutes of mobile usage per month per subscriber;
• 13,000 subscribers at the end of the quarter; and
• $97 million in operating cost and interest expense.

Globalstar ended the quarter with $463 million in cash and expects to end the year with a cash balance in excess of $100 million. With a projected expenditure of $125 million per quarter, that leaves $213 million ($463 million minus $250 million) at year end, not factoring in any revenues.

According to Globalstar, the additional funds ($213 million minus the projected $100 million) will be spent on “below the line,” or extraordinary, items such as completing eight ground spare satellites and financing gateways, which the company expects to receive back in 2001 and beyond.

On the one hand, Globalstar stressed improved results compared to the first quarter, pointing out, for example, that service revenue jumped 173 percent, compared to the first quarter’s $177,000. However, Globalstar’s first quarter results were anemic and based on only one full month of service.

Still, the company is showing steady improvement. For example, the weekly average of total mobile minutes of use (MOUs) went from 30,000 in April, 41,000 in May, 76,000 in June and 100,000 plus minutes of use during the first week of July.

On the other hand, the company still has a long way to go to convince investors and analysts that it has a bright future. Even if mobile service revenue improved a hypothetical 200 percent during the third quarter and 250 percent during the fourth quarter, the company would still end the year with only $3.3 million in mobile service revenue.

Granted, those are significant in-creases, but they are still very low absolute numbers for a $3.9 billion system.

Globalstar’s other revenue sources are royalties and fixed usage. The company expects revenues from phone sales and gateway royalties to peak during the third quarter, though it didn’t indicate to what amount. Globalstar management admitted that fixed usage is very volatile. Indeed, fixed usage is somewhat of a wild card, yet one with significant potential.