Globalstar Inc (GSAT) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen come and welcome to the second-quarter 2011 Globalstar, Incorporated, earnings conference call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. Dean Hirasawa, Director of Public and Investor Relations. Please proceed.

Good afternoon, everyone. Thank you for joining us for today's conference call to discuss the results for Globalstar, Inc., for the three-month period ended June 30, 2011.

Before we begin please note the following. This call may contain forward-looking statements within the meaning of federal securities law. Factors that could cause results to differ materially are described in the Safe Harbor section of today's press release and in Globalstar's SEC filings, including the quarterly report on Form 10-Q for the three months ended June 30, 2011, which will be filed shortly.

The press release, this conference call, and the associated slide presentation, which is available on the investor relations page of our Company website, include discussions of certain non-GAAP financial measures as defined under SEC rules. We have provided a reconciliation of each of those non-GAAP measures to the most comparable GAAP measure in the press release.

Please note that the information in this call is accurate only as of today, Thursday, August 4, 2011. Today's press release containing certain financial information is available on the Company website at www.Globalstar.com. Later today, an audio recording of the conference call will be available via telephone dial-in 10; and a webcast recording along with a copy of the slide presentation will also be made available on our Company website.

Today's call is being hosted by Mr. Jay Monroe, Chairman and CEO of Globalstar, Inc. Joining Mr. Monroe are Mr. Dirk Wild, Senior Vice President and CFO; and Mr. Tony Navarra, President of Global Operations. Each are in different Globalstar locations and will be available following their prepared remarks to take your questions.

At this time I would like to turn the call over to Mr. Monroe.

Thanks, Dean. Before we begin the conversation today about Globalstar's results, I would like to say a few words about our former CEO, Peter Dalton, who announced his retirement just a few days ago. Peter has been a very important part of Globalstar since joining the Board in 2004, and we wish him the very best in his retirement.

He took the role of CEO in 2009 at a difficult time and helped immeasurably over the last couple of years. He moved the Company from California, and hired an excellent staff in Covington. We will remain forever grateful. Thank you, Peter, for everything you have done for the Company over the last seven years.

Now on to the business. This past quarter we have record activations of our core family of SPOT consumer products. We also had significant activations of our Simplex M2M commercial products, so this has been a good quarter for the Company.

We had total revenue for this three-month period that was greater than it has been for the same quarter during the prior two years. Total revenue was $19 million compared with $17.6 million for the same period last year. So we are pleased with those results as we begin to grow our way out of the last few challenging years.

We raised $38 million during the quarter, $20 million of which was provided by Thermo in its continuing support of the Company. This financing also includes an option of up to $12 million more that can be subscribed to by the same investors that invested the initial $38 million tranche. Thermo expects to exercise its rights during September.

There have also been a series of important post calendar quarter-end highlights as well. Globalstar successfully launched six additional satellites from the Baikonur Cosmodrome in Kazakhstan. This was a beautiful sight for all of us in the Company. Tony will provide further details shortly.

As we look forward, one of our resellers is working on an initiative designed to benefit lone worker programs utilizing SPOT Intrinsically Safe, or SPOT IS, technology. We expect the device to be rolled out to some of the largest oil and gas and other natural resources companies in North America. We also see wider applications for this product plus our other Simplex product in the growing M2M space.

Globalstar has also signed initial agreements with ADS-B Technologies, which is working with us on the development of a worldwide leading-edge solution for over-the-horizon air-traffic control management using Globalstar's second-generation satellite network. ADS-B is a leader in this area and holds several patents regarding the technology.

They recently confirmed that Globalstar's network is the only practical platform that can provide an over-the-horizon real-time air traffic control system using a certified air-traffic protocol like ADS-B. This represents a long-term opportunity for Globalstar to participate in revamping the worldwide air-traffic control network, increasing the safety for all of us who travel by air.

I would like to pass the call over to Tony for the latest update regarding space operations.

Thank you, Jay, and good afternoon, everyone. Over the next few minutes, I will provide some you with our quarterly space segment update.

We have been very busy for the past several months. We launched six new satellites. We have readied six more satellites for our upcoming third launch.

We worked with Thales Alenia Space on both our current and future satellite production, and continue to make progress with CNES, the French space agency, to complete our French registration so that we can operate our second-generation constellation throughout our global coverage area.

Our biggest operations highlight took place post-quarter. As many of you know, on Tuesday, July 12 at 10.27 p.m. Eastern Daylight Time, Arianespace launched six new Globalstar satellites from the Baikonur Cosmodrome. This was the 1,774th successful launch of the Soyuz family of reliable human-rated rockets. We are now half way through the launching of our first 24 second-generation satellites.

At this time all six satellites are operating normally, and no anomalies have been observed. The orbit-raising process has proceeded very smoothly, with all six satellites reaching their nominal mode for orbit raising in less than eight hours. Additionally, we are pleased to announce that we have placed the first satellite from the July 12 launch into service yesterday at 5 p.m. Pacific Daylight Time.

Now let me provide a further update on the establishment of our second-generation satellite constellation and future launch plans. As we have previously reported, one of the second-generation satellites launched in October 2010 experienced an in-orbit anomaly associated with one of its momentum wheels. This wheel was taken out of service, and the spare momentum wheel was energized, and service was quickly returned to normal.

Unfortunately, during the latter half of July, the spare wheel began to show indications of a possible problem. So we decided it was best to place that satellite into a safe-hold mode on July 20.

We will be working with Thales over the next several months to seek a solution. And afterwards, if feasible, the design and development phase will begin.

Satellite operators occasionally are faced with similar requirements to create a new software solution for their spacecraft, and we are optimistic that we can find and complete a long-term solution. A solution, however, may not be found or may result in a reduced expected life of the satellite.

Also, a second satellite launched in October 2010 has experienced a similar momentum wheel anomaly. We took this wheel out of service and turned on the spare momentum wheel as envisioned in the satellite design, and this satellite is now operating nominally, providing communication services.

We continue to monitor this satellite's performance. Although we have engaged the spare wheel operation as designed, to allow the satellite to continue providing communication services, in the event of another wheel failure we will place the satellite in a safe-hold mode and attempt to apply the possible software solution described earlier.

The remaining four satellites launched in October continue to operate nominally.

The Goodrich Aerospace manufacturing records indicate that certain wheels used in the remaining four satellites launched last year did undergo some, but not all, manufacturing and testing procedures that were common to the wheels that have experienced in-orbit issues. Therefore, we are closely monitoring the momentum wheels in the first batch of satellites to ensure that they continue to operate nominally. At this time, these satellites have not shown any indication of the on-orbit wheel anomalies.

It is important to note that the root cause of the momentum wheel degradation has been identified by Thales Alenia Space and their contractor, Goodrich Aerospace, and a solution was implemented for all satellites launched on July 12, 2011. Therefore, we do not expect this issue to impact any of these satellites that were launched in July. And as we noted earlier, all six of the new satellites are operating nominally.

The solution, including replacement of wheels, has also been implemented for all satellites to be launched in the remaining two launches in 2011.

Globalstar and Thales Alenia Space have initiated negotiations to order up to 24 additional new satellites for delivery beginning as early as 2013. Due to a disagreement regarding the terms under which Globalstar may order additional spacecraft, Globalstar commenced an arbitration proceeding as permitted under the contract to resolve our differences.

Although this process is expected to last for several months, it does not impact the manufacturing and delivery of the remaining first 24 satellites that are currently being launched. The hearing and the arbitration has been scheduled for January 2012, so we expect resolution of this matter in early 2012.

Globalstar has been working closely with CNES, the French space agency which is responsible for reviewing the technical performance and operations of the Globalstar second-generation satellite constellation, to assure the French space ministry that Globalstar meets the requirements of a French licensed operator under French law. We have provided satellite specifications, radiofrequency power and bandwidth characteristics, operating procedures, and quality assurance policies for the control, maintenance, and operations of the Globalstar space and ground network operations.

We are very pleased to report that CNES has provided a positive recommendation to the ministry, stating that Globalstar has complied with the technical requirements. We are now waiting for the ministry's approval and registration of our constellation with the United Nations. Although we continue to pursue a final determination by the end of August, we now expect this process to be completed no later than the end of the third quarter of this year.

As a reminder, the Federal Communications Commission issued on March 18, 2011, a ruling stating that Globalstar will have the authority to operate its second-generation satellites over the United States and provide communication services once Globalstar completes French registration of its new satellites. Once this is achieved, Globalstar plans to begin offering Duplex voice and data as well as Simplex and SPOT services throughout North America.

Thales Alenia Space has completed final assembly, integration and test for the satellites for our upcoming third launch. All six satellites for the third launch are in their shipping containers in Rome, prepared for shipment in mid-August to Baikonur.

We have been notified by Arianespace that they and their Roscosmos team are prepared to launch our third batch of second-generation satellites. Our plan as of today is to launch the third batch of satellites in early October from the Baikonur Cosmodrome. Barring any unforeseen circumstances, this will allow us to complete the fourth launch of six satellites before the end of 2011.

In summary, we intend to complete the launch of the new 24 satellites by the end of 2011 and integrate them with the satellites that were launched in 2007 to establish a Globalstar constellation that is expected to provide industry-leading Duplex voice and mobile handset data services, machine-to-machine messaging, and SPOT services worldwide.

I will now pass the call over to Dirk Wild, who will discuss the financial performance and operating highlights for the second quarter of 2011.

Thanks, Tony. The Company reported total quarterly revenue of $19 million during the second quarter of 2011 compared with $17.6 million for Q2 2010, representing an increase of 7.8%. Year-over-year service revenue grew from $12.9 million to $13.4 million, while equipment sales revenue grew from $4.7 million to $5.6 million. The Company's adjusted EBITDA for the quarter was a negative $1.2 million versus a negative $0.3 million for the year-ago period of.

The revenue milestone achieved marks the highest quarterly performance for Globalstar since the third quarter of 2008. Our focus on our SPOT and Simplex lines of business has driven revenue growth as we prepare for quality Duplex service with the completion of the launches of our second-generation constellation.

Although we certainly expect continued growth from our consumer SPOT and commercial Simplex business, driven by the extension of satellite capabilities into both consumer applications and the commercial M2M markets, we believe that the primary source of future revenue and cash flow growth will be Duplex, through increases in both ARPU and new subscriber adoption. The Company has demonstrated an ability to develop innovative products and services, and we expect that we will be able to penetrate our markets further through internal innovation and collaborations with our service and equipment partners.

In June, the Company successfully raised gross proceeds of $38 million from select institutional investors including Thermo Funding, structured as a 5% convertible senior unsecured notes. The notes are convertible into shares of common stock at an initial conversion price of $1.25 per share and include warrants to purchase 15.2 million shares at a strike price of $1.25.

The investors have the right to purchase up to $12 million of additional notes by September 15 of this year on the same principal terms. The notes are senior, unsecured, and ranked pari-passu with the prior tranches of the Company's existing convertible notes, and are guaranteed by certain of our domestic subsidiaries.

We believe that this financing, fully funded by existing debt and equity investors, is indicative of the support from the investors closest to the Company. And we are pleased that these investors continue to demonstrate their collective commitment to Globalstar.

Globalstar ended the quarter with $94 million of liquidity including cash, additional availability under our COFACE senior debt facility and our $60 million contingent equity account. Looking forward for the remainder of 2011, we have approximately $88 million of significant cash obligations associated with the procurement and launch of the first 24 second-generation satellites, ground expenditures, and cash interest.

We note that we continue working with our ground suppliers to arrange deferral of certain payment terms. The Company also continues to work towards a long-term facility to fund future capital expenditures, including the remaining portion of our second-generation ground infrastructure and the construction and launch of additional second-generation satellites beyond the first 24.

Now let me pass the call back to Jay for some closing remarks.

Okay. Thanks, Dirk. To conclude, let's talk about the key value drivers, which have remained largely unchanged over the past few years and upon which we will execute with our new constellation. First, as Dirk said, we want to return to our core MSS voice and data products. We are the highest quality, lowest latency, and lowest cost provider of these services in the MSS industry. Historically, the most significant driver of our cash flow has been high-ARPU customers who utilize voice and data services.

Secondly, we have a tremendous family of SPOT retail consumer products and services. To date we have taken orders to ship more than 300,000 of these. We have also developed over 10,000 points of retail distribution, primarily in North America.

We are the MSN industry's only consumer-focused satellite tracking and life-saving products company. And we have a continued development plan to deploy and innovate further consumer products, as we have done in the recent past with SPOT Connect, our texting device, SPOT HUG, and so forth.

Thirdly, we have a range of commercial Simplex and reliable machine-to-machine asset-tracking products that are designed to address a market need for small, cost-effective solutions to send data such as location data from assets in remote locations and assets on the move. These are some of the most innovative and cost-effective asset-tracking, data-monitoring, and mobile security devices available in the marketplace today.

Lastly, but not unimportantly, Globalstar has a global asset of approximately 25 megahertz of worldwide spectrum. Roughly 20 megahertz of that is conditionally approved for terrestrial applications in the United States. And given recent FCC developments and the much recognized consumption of spectrum in the US due to the heavy use of very high-bandwidth devices like smartphones, tablets, data cards, and so forth, Globalstar is positioned to realize the untapped value of its significant spectrum asset.

Before I finish, it is important to mention the following. Thermo has continued to invest in Globalstar through thick and thin, to date to the tune of more than $0.5 billion. This is an investment that reflects our belief in the significant unrealized value of Globalstar; and we will continue to do what we need to in order to see the Company's success going forward.

I thank you all for your time today and we are now available to answer your questions.

Thank you, Jay. That concludes the prepared portion of the presentation. So we will now move to questions and answers. Also Jay, Tony, and Dirk are in different Globalstar offices; please direct those questions by name to the person you would like to answer.

Operator, can you please proceed with the first question?

(Operator Instructions) Marco Rodriguez, Stonegate Securities.

Good afternoon. Thank you for taking my questions. I was wondering, Tony, if you could talk a little bit more in regard to the second batch of satellites. I guess two of the satellites you mentioned are experiencing problems with the wheels.

Can you characterize, assuming that the remaining four suffer the same issue, how would that affect the overall Duplex or voice quality after the last two launches?

Well, Marco, thank you for the question. First of all, we have no indication of any further issues or degradation on the remaining four satellites. In fact, the solution that we put in place is reworking certain of the wheels by retesting them at temperature and vacuum, making certain that they were flightworthy for the 15 years going forward. These tests and the certification process was completed on all of the second-batch satellites, as well as all the satellites for the upcoming third and fourth launches.

Okay, so you are saying that the other four that didn't have the fix that are already up in space, obviously, if they were to fail, there shouldn't be a problem?

If we were to have a failure in the remaining four satellites we would fully expect to implement a solution -- a software-driven solution for those satellites, as we are planning to do with the one satellite that we presently have in the safe-hold mode condition.

And that software solution is what you applied to the just-launched satellites?

The ones that were launched in October that had the current momentum wheel degradation? That is correct.

Marco, let me say that much like Harris had difficulties with TerreStar, the TerreStar LightSquared satellite, where they were unable to unfold the L-band antenna, there were a number of mechanical and software-driven solutions to allow that satellite to come into service. Much like the Telesat satellite where the solar array that Loral had designed for that satellite in May of this year did not fully deploy.

We fully expect to put a software solution in place for these satellites, as it is not uncommon for the industry to have some problems of this sort and find solutions that we can upload into putting new software into the deployed satellite.

Okay. Fair enough. Then I guess, Jay, you might be able to answer this question. You guys had a pretty strong quarter for your SPOT services. Can you discuss a little bit what drove the results in the quarter? Were there any special promotion or marketing initiatives?

Marco, I can. We had a very strong quarter for activations across the entire SPOT family. That includes SPOT 2, the Connect, HUG, and on balance they sold very well.

There are a number of programs that are ongoing on the sales side for these products. It's oftentimes retailer-dependent, so we will continue to do that.

We also were quite successful in this quarter in the commercial Simplex market. We sold a lot of product that is used primarily for trailer tracking and remote-asset tracking. That was very strong as well.

I think what is happening in the marketplace is those products are more well understood. Therefore when people have an understanding of them, when they arrive in a retail outlet, it is not as much of an education process. So we hope to see that trend continue.

Speaking of the commercial Simplex market there, you had a nice quarter there on the hardware side. Was there anything special going on that drove that?

Our sales guys. They did a great job.

That's a product that often takes a little while for the pipeline to fill. And we just did a terrific job in this quarter with a bunch of our long-standing customers in order to sell more and activate more.

It's just a good quarter for us. We hope it will continue, Marco.

Okay. Then, Jay, I was wondering if you could also then discuss a little bit in regard to your expectations. Once all the satellites are launched, when do you think you will start marketing your Duplex services? Then also how are you thinking about any competitor reaction to that?

Well, in terms of marketing we are already seeing an uptick in Duplex sales. It is not as evident in the United States, because we haven't turned on the ground infrastructure here to see the new satellites. But in other parts of the world they are benefiting already from increases in coverage, and so it is starting to percolate through the marketplace. We will offer interesting opportunities for customers to join us, even as we are repopulating the consolation and all of those programs are not out and in the marketplace yet.

Now, from a reaction perspective, if you look at the field, you say if it is deep ocean that is going to be Inmarsat slugging it out with Iridium. When it is land mobile, I think we take a good portion of that marketplace again, just like we did in the period of time before we had constellation health issues.

We do it because the combination of our price, the equipment, the voice quality, and the cost of service is a very compelling buy for people that want satellite service. If you have the choice of buying something for $500 or for buying it for $1,500 and ending up with crystal-clear voice quality versus something that is less so, the purchase decision is pretty straightforward.

Now, will other people change their pricing in the land mobile business? Remains to be seen, Marco. Remains to be seen.

Okay, great. Then, Dirk, I was wondering if you could update us here a little bit more with regard to the funding status. Appreciate the numbers that you gave out there. Is the focus still to not tap the $60 million equity? Contingent equity account.

Yes, sure, Marco. This is not -- this is similar to what we talked about last quarter in that we are still looking for a long-term financing solution. We are actively working on that. We believe that there are a number of options available that we can proceed with.

We raised capital this quarter to move us along the path. And we have the contingent equity available if we need it. I think our preference would be to leave it there as a backstop, but it is available if we decide to use it.

Okay. Great. Thank you, guys.

Ryan Esposto, Sterne, Agee.

Hi, good afternoon. Dirk, I just -- good job on getting the adjusted EBITDA up from negative $2.5 million in last quarter to $1.194 million. I am still looking at the $2.5 million adjusted EBITDA covenant in the COFACE facility for 2011.

Can you provide where you see the adjusted EBITDA going over the next quarter or so and how we get to that $2.5 million? Or does -- would you then have to go back to the COFACE group and maybe look at having that covenant adjusted?

Yes, sure. Let me give you a couple of different options. Well, first of all, we don't provide any specific guidance looking forward. You have seen that we have been able to make improvements in operations and drive revenue increases, which is really driving the improvement in the adjusted EBITDA.

We have continued to keep our costs under control. So we are optimistic that those trends will continue.

As far as the COFACE covenant for December 31 that you are referring to, another option that we have is we have the ability to obviously go back to COFACE and ask for some relief there if we don't make it -- and I am not saying we won't. But we have that as an option.

And the other option is built into the agreement is an ability to cure that adjusted EBITDA provision by equity raises or equity-linked raises. The $38 million that we just raised, we could use that to cure any shortfall. So we don't have any concerns about using any one of those options to get there.

Thank you for making that clear. On the $12 million that is open on the $38 million, what was the idea behind that? Why didn't you guys just do the $50 million altogether there?

Can you tell me what that does for you in terms of your future CapEx to get to the 24 satellites up and the end of your launches? What that does for you in terms of making the -- bridging that gap?

Then also lastly, since we are on the topic of this, what types of ideas do you have in terms of long-term financing solutions? Is it like a COFACE facility-like program or that type of thing?

Yes, so let's talk about if we get the $12 million let's -- you know, we have got the cash right now of $24 million; we have $10 million under our facility remaining. And when you look at the first three items listed on the slide that I have, which is the 24, the remaining cost for the 24, that is about $45 million.

So if we get that $12 million we will be able to fully fund that without dipping into the contingent equity or doing anything else, assuming we can continue to work with Hughes and defer that payment or other options available. So, that was one of the questions.

As far as looking into a long-term solution, again we are working through a number of options. But we do think that looking at a facility similar to a COFACE facility would be an attractive option for us. So that is -- something like that would be something that we would be looking at.

We obviously aren't prepared to discuss anything specific, but we have a number of options that we are working on, on that front.

Got it. Okay. On the two satellites that are -- well, one is working with a backup motion wheel, the other one -- does that preclude you guys at all from meeting certain FCC gating requirements as it relates to the threshold use of your spectrum in the US?

Or -- do you need all 24 satellites up there? Or it can you get away with having something less than that?

Well, Ryan, as long as we have the satellites as we anticipate, that is the 32-satellite Walker configuration, and we get these two satellites -- and remember it is only one satellite today back into service -- we will meet their requirements for the ATC opportunity.

Okay, great. Perfect. Then my last question just has to do with the spectrum. I am sorry, I don't know which person to address this with.

But LightSquared has been getting some flak on their lower band spectrum as it relates to the GPS parties that be. How do you guys see that? Does that at all impact your spectrum?

How is yours different? Is there some impact from what the GPS guys are barking about as it relates to LightSquared's spectrum?

I think I can answer that for you, Ryan. A couple of things.

First of all, the way we use the spectrum, which is somewhat near to the GPS band, is entirely different than the way LightSquared intended to use it. So an ATC rollout for us would not cause the same issues at all.

We are also farther away from the GPS band than the upper portion of the LightSquared band was. So we don't see that as an issue for us at any point.

Okay, great. Well, that's it. Thank you very much, guys.

Alex Sammarco, Stark Investments.

Hi, thanks for the update. It sounds like you had pretty good progress on the SPOT front. Had a couple of quick questions and the prior analyst here answered a lot of my -- or, asked a lot of my questions.

But can you maybe go a little deeper into what is going on with the UN registration? I think at the shareholders meeting we were guided to this being a July event, or having a lot of buffer or cushion to the COFACE covenant. Can you just maybe go into a little more detail on how active the dialogue is, how involved Globalstar is in the dialogue, and whether this is going to be an issue under the COFACE facility?

Then on a related note, is this an issue for the July launch as well as the upcoming successive, hopefully October and December launches?

Well, Alex, this is Tony. Let me jump in first and say that we have a very active dialogue ongoing today with CNES, the French space agency, which in the month of July did provide a positive recommendation to the French ministry responsible for registering our satellites with the United Nations. We were very pleased over the work that has been ongoing for the last 60 days to make sure they fully understood how we operate our satellites, how they perform in global operations.

The fact that we are now in a process where we need the continuing ministry review -- which, frankly, they have told us could take us as much as three, up to four months to complete approval -- would take us just at the date or just past the date that we would like to have the license registration with and for COFACE.

Now the Company has a couple opportunities. One of them is just to go forward with COFACE and ask for a very, very small or short extension. We may or may not choose to do that because, as you asked in the first part of your question, we are working very closely with the ministry itself and with CNES to obtain the approval as soon as possible.

With regards to your second question about the future launches, we are actually in great shape. Because Arianespace and their partner Starsem -- and Starsem is a wholly-owned subsidiary of Arianespace and the Russian entity called Roscosmos. Those two organizations have full approval to launch all four of our launches from the French government. So that authority is already in place to launch the remaining two launches that we hope to get off before the end of the year.

Okay, that's very helpful. So the delay, it does apply to the July launch, but it won't apply to the next two. Is that right?

Well, I am not sure what you mean by the delay.

Sorry, the -- we are waiting for a final registration. Even though there is a positive recommendation, we're waiting for it to make it through the registration process. And that applies to the October launch and the July launch, but (multiple speakers) apply to the September and December -- I'm sorry, October and December launches.

Yes, Alex, let me confirm that the registration process is very important to us and, obviously, ultimately it impacts our beginning of service in North America. But again, to be very clear, we are permitted to launch the third and fourth launches in an already-approved license that Arianespace has. And having this registration is not needed to get those last two launches off.

Great. I appreciate the update. A couple of related questions. How soon -- is it immediate after obtaining the registration that you can turn on the ground stations in the US as pertains to the new satellites?

Well, you know, Alex, to give you a good feel on how closely we are working with several of the executives in Paris, we have asked that same question. And the answer was a very vociferous -- days. In other words, as soon as we get that approval with the ministry they will go forward and file with the United Nations the constellation and the number of satellites.

Then we are then hoping within days, under the order that was put in place in March with the FCC, that we can proceed to provide a North American service.

Thanks, that's very helpful. Then finally, on prior calls and prior updates you have talked about the magnitude of coverage improvements as the new satellites come online. Could you just remind us on a percentage of coverage, in terms of percentage improvements in coverage as the new satellites come online successively?

Well, I don't actually have the numbers in front of me. But it is a mathematical calculation that as each of the satellites come onboard over the full need of 32 satellites for global coverage, you get that much percentage improvement upon each of the satellites entering their service.

In round numbers, that is in the 3% to 4% range improvement each time a satellite is placed into service, which as I mentioned earlier was -- the latest one was yesterday at 5 o'clock California Time.

Great. Thank you very much for the update.

Operator, I think we have got time for one more question, so please proceed.

Joel Miller, Merrion.

Good afternoon, guys. I am really looking forward to getting the North American process going. My question really has to do with the ATC portion.

I am curious as to whether you are going to have a SPOT Connect Duplex product that can connect to a cell phone. And also the ability to use that cell phone on ATC I think would be a really interesting product to a lot of people. So curious as to whether that is either in development, or whether you have it ready to introduce?

Hey, Joel, it's Jay. How are you? The short answer to that is it depends on who your partner is.

If the partner on ATC is someone who wants the product just as you described it, we would certainly do everything we could to support the development of that. If they wanted something different -- and there are people that we talk to that are solely data-driven, for instance, and they are looking only for data products -- then in that situation you would build something different.

So at this moment, we do not have the product exactly as you described it in development.

Okay. Then I see like a lot of machine-to-machine capabilities that people are going to be looking for, especially in the utility area. I know that at one point the FCC was trying to allow one of your competitors to use ATC without a connection to the satellites.

Is it possible that people are going to be -- that Globalstar might get an ATC capability from the FCC without going through the satellite in some short-run period?

I wouldn't be surprised. The FCC made that decision in the LightSquared situation and they did allow LightSquared do not build a device which was a full satellite and terrestrial device. They had to offer it, but they didn't have to build it into every single product.

The FCC made that decision, and of course they knew that they were setting a precedent for the other ATC participants. Specifically, TerreStar and DDSV and Globalstar. So they have communicated those facts to us; however, we have not gone in to seek a similar waiver yet.

Yes, okay, okay. That's encouraging, because there is a lot of potential for that space. I am looking forward to having some discussions about it, so thanks a lot.

Ladies and gentlemen, that concludes our question-and-answer portion. I would now like to turn the call back over to Mr. Dean Hirasawa for closing remarks.

Thank you, operator. With that, we will bring the conference call to an end. Thank you again for joining us. And please be reminded that later this afternoon an audio recording of the conference call will become available via telephone dial-in; and a webcast recording and a copy of the presentation will also be available on the Globalstar website. Thank you and good afternoon.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.