Analyzing Globalstar’s Go-Forward Strategy: Differentiation, Defense & DTD
Globalstar on Dec. 12 held its first investor day in years, bringing analysts and shareholders together to outline business priorities. Quilty Space attended the event, and walked away with the conclusion that, as far as GSAT’s space business is concerned, the company is embarking on a three-pronged expansion strategy aimed at righting several wrongs from years past. The pillars of that strategy are:
1) Differentiated IoT products and services with the goal of building a protective moat against cannibalization by cellular options or emerging threats like Starlink;
2) Expanding into defense and challenging Iridium’s dominance in military Internet of Things (IoT); and
3) Cautiously investing in Direct-to-Device (DTD) while letting Apple lead the way
After more than a decade of moving sideways, Globalstar is in the midst of a turnaround catalyzed by $1.7 billion in capital from Apple (who management affectionately refers to only as “the customer”) and an infusion of high-caliber engineering talent from Qualcomm (the former home of Globalstar CEO Paul Jacobs, CTO Matt Grob, and Chief Scientist Peter Black). The first of 17 next-gen satellites from MDA Space and Rocket Lab are progressing at pace towards launching 2025, and a larger, presumably more capable network is set to follow shortly after.
The raison d’etre for Globalstar’s new lease on life is unquestionably DTD, a service for which Apple has booked 85% of the satellite operator’s capacity. In spite of this, GSAT management remains extremely circumspect of end user willingness to pay for always-on connectivity. Both at the investor day and in subsequent press articles, CEO Jacobs made it clear GSAT is taking a cautious stance out of concern it could invest too heavily in a product without a market. GSAT’s current DTD services are limited to texting and emergency comms. Management indicated it does have DTD concepts for its 15% of capacity, but that most future DTD services and expansions will come from Apple.
On Defense, government customers represent just 1% of GSAT subscribers today. Compare that to Iridium, where government is 6% of total subs and backed by a lucrative seven-year, $738.5 million contract from the Defense Information Systems Agency. GSAT management indicated it would no longer willingly cede this market to Iridium, and that defense is now a priority market. The tip of the spear for GSAT’s defense strategy is an exclusive partnership with Parsons Corporation.
Mike Kushin, Parson’s president of defense and intelligence, praised Globalstar’s bent-pipe constellation architecture, which relies on simple satellites and upgradable ground stations. Parsons is integrating its software-defined radios into Globalstar’s network of 30 ground stations, and believes it can sell Globalstar satellite communications devices by the millions in 2025 and 2026. We view that projection as especially bullish, but agree with the sentiment that defense is a missed opportunity that Globalstar will benefit from pursuing.
On commercial IoT, GSAT is poised to return to offering a two-way service after a series of satellite amplifier failures hobbled its constellation 15 years ago. Engineers have found a workaround, and have beta tests planned for next year. Several GSAT customers at the investor day indicated high interest in a duplex service over Globalstar’s current simplex IoT service. Globalstar had 481,000 active IoT subscribers that generated a cumulative $23M in 2023, growing at a7% CAGR from 2020 to 2023. The company has found growth where low Total Cost of Ownership (TCO) and low Size, Weight and Power (SWAP) devices are paramount.
The elephant in the room (or perhaps the second elephant after DTD) is GSAT’s future constellation, the Extended MSS network. Management was notably tight-lipped about key architecture details such as the number of satellites it will have, what ITU filing it will use, or even when it will launch. Quilty Space continues to view the Extended MSS network as essential to offering compelling safety services for DTD, and for catalyzing long-term growth. The significance of the Extended MSS network has only grown since Globalstar said it is unlikely to execute its contract option for nine more satellites from Rocket Lab and MDA Space, but what exactly the network will look like remains a mystery.
SOURCE: https://investors.globalstar.com/news-releases/news-release-details/globalstar-outlines-growth-strategy-and-financial-outlook