Globalstar Inc (GSAT) 2013 Q1 法說會逐字稿

Welcome to the Q1 2013 Globalstar Incorporated earnings conference call. My name is Adrian and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note, this conference is being recorded. I'll now turn the call over to Caroline Capaccio. Caroline Capaccio of LHA, you may begin.

Thank you, operator. Good afternoon, everyone. Thank you for joining us for today's conference call to discuss Globalstar's exchange agreement and multi-part financing as well as its three months' results for the period ended March 31, 2013. 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 recent press releases and in Globalstar's SEC filings, including the annual report on Form 10-K for the period ended December 31, 2012.

The press releases, this conference call and the associated slide presentation, which is available on the Investor Relations page of Globalstar's website, include discussions of certain non-GAAP financial measures as defined under SEC rules. The press release provides a reconciliation of those non-GAAP measures to the most comparable GAAP measure. Please note that the information in this call is accurate only as of today, Tuesday, May 21, 2013. The first quarter 2013 press release that was issued on May 9, 2013, which contains certain financial information is available on the Company's website at www.globalstar.com. Later today, an audio recording of this conference call will be available via telephone dial-in and a webcast recording, along with a copy of the slide presentation, which also will be made available on the Company's website.

Today's call is being presented by Mr. Jay Monroe, Chairman and CEO, and Rebecca Clary, Chief Accounting Officer and Corporate Controller. Joining Jay and Rebecca for the question-and-answer session will be Tony Navarra, President of Global Operations, and Tim Taylor, Senior Director of Finance. Now it is my pleasure to turn the call over to Jay Monroe. Jay?

Good afternoon, everyone. This quarter, we elected to defer our call with you until after we completed the refinancing of our 5.75% notes, which took place yesterday and was the subject of last night's 8-K and press release. As a component of this refinancing, we have agreed to the principal terms with COFACE and our French bank group for alterations to our existing loan with them. While the timing for this call departs from our usual practice, I felt the delay was necessary so we could discuss today all of the positive implications to our business from having put these financing issues behind us, as well as a review of our first-quarter results and operational highlights. While this business always involves risk, our major financial uncertainties have been removed at Globalstar today.

Let's move to slide 2 to discuss the refinancing. Yesterday, we completed the exchange of 5.75% notes and this resolved the April 2013 put and reduces our near-term financial obligation. We want to thank all of the bondholders who worked so closely with us to finalize the agreement and for the help of our bank group and COFACE who have been integral to achieving this successful outcome. There are three important economic features of this refinancing that I want to focus on. First, the April 2013 put has been resolved. Second, approximately $20 million of the $71.8 million outstanding principal amount of the 5.75% was paid yesterday and we issued new 8% notes in exchange for more than 90% of the old 5.75%s. Up to 30% of the new notes can be paid down in cash or stock over the next 10 months so the remaining indebtedness would be reduced to approximately $38 million within a year. This will meaningfully enhance our balance sheet by cutting our debt nearly in half on this instrument and curing the defaults under the old 5.75%s. Third, the new 8% notes have an initial conversion price of $0.80 a share, subject to customary anti-dilution and other protections. We view this as a strong endorsement of the Company's upside potential. Taken together, these three features of the refinancing of the 5.75%s are immensely helpful to Globalstar.

Let's move to slide 3, which explains the agreed COFACE loan modifications, the terms of a substantial new equity commitment from Thermo and their combined importance. As part of our overall refinancing, we reached an agreement with our bank group and COFACE to amend our existing loan facility. While not final until everything is signed, the principal terms of the amendment are now done and have already received bank credit committee approvals and the approval of COFACE. We expect these to be fully effective by the end of June and the three most important economic terms, which the parties have agreed to are, first, to defer and alter the principal repayments under the loan by a cumulative $235 million over the next six years. We will not have any principal payments due until December, 2014, and no payment greater than $5 million until June of 2016. Through mid-2016, this represents an approximately 80% reduction in principal payment obligations. This structure allows us to aggressively invest in growing the business now that the Constellation has been launched.

Second, this agreement will materially reset our financial covenants based upon actual final launch schedule for the new Constellation which occurred this February. And third, this agreement also provides for $85 million of new financing from Thermo in the form of equity, subordinated debt, or equity-linked securities. The combination of our $30 million Terrapin Equity line, expected cash flow from operations, and the $85 million incremental financing from Thermo, we believe provides a fully funded business plan.

$25 million of Thermo's $85 million was funded to Globalstar to close the 5.75% refinancing and $5 million more was provided for general corporate purposes. As I've told you many times before, Thermo is fully committed to Globalstar's success. This latest financial commitment represents my personal conviction to realize the significant opportunities available to Globalstar. These transactions give the Company the necessary financial runway to execute its business plans and free the management team to focus fully on doing just that.

Let's move to slide 4. On the regulatory front, I know many of you are anxious to hear how our petition for terrestrial authority is progressing at the FCC. Let me assure you that we continue to work aggressively towards the release of a formal Notice of Proposed Rulemaking in the very near future. Our requests and discussions have reached the highest levels at the FCC and we look forward to taking them to favorable action soon. Our focus on helping to solve what the Commission itself refers to as the Wi-Fi traffic jam is well known. Our proposed system will operate within the technical parameters specified in the 802.11 standard so as not to cause any harmful interference to any other Wi-Fi channels or any current or future unregulated products or services in Wi-Fi. Given the sensitivity surrounding the current status of these regulatory requests, I can't provide you with much further detail at this time.

But, before I turn the call over to Rebecca, I want to reemphasize the importance of the events that have taken place this week. With the completion of the 5.75% exchange, and the fundamental agreement regarding the principal terms of our COFACE amendment, we will have the financial flexibility to focus all of our energies and resources on growing our business and winning in the marketplace. The financial pressure is now off and the way forward is clear.

I'll now turn the call over to Rebecca Clary, our Chief Accounting Officer, who will review the first-quarter numbers. Rebecca?

Thank you, Jay and good afternoon everyone. Given that the timing of this call is later than our typically scheduled investor calls, today I will not recite all of the numbers that were included in the press release issued several days ago. But instead, I will provide some higher-level commentary on the primary factors driving our first-quarter financial performance.

As shown on slide 5, Globalstar reported an 80% improvement in adjusted EBITDA from the first quarter of 2012. This improvement resulted from an increase in revenue, offset partially by an increase in operating expenses. The increase in revenue of 16% was attributable primarily to growth in service revenue associated with the expansion of our total subscriber base, and a significant improvement in ARPU from our Duplex subscribers. Service revenues from all of our core lines of business improved from 2012. The increases in SPOT and Simplex service revenue were primarily driven by growth in our subscriber base due to the volume of equipment sales during the previous 12 months. The increase in Duplex service revenue was due primarily to an improvement in ARPU. Driving this 25% improvement in ARPU were the conversions of nearly 19,000 loyal subscribers to higher rate plans, the addition of approximately 9,000 new subscribers at rate plans higher than our current ARPU levels as well as churn of low revenue generating subscribers.

To illustrate how our Duplex subscriber base is evolving, we look at the percentage of subscribers on rate plans above $35 per month. As of March 31, 2013, an additional 20% of our subscribers were on these higher rate plans as compared to March 31, 2012. Revenue from subscriber equipment sales was down slightly, driven by the selling price and mix of SPOT and Simplex equipment as we sold more higher-priced products during the first quarter of 2012 as compared to 2013 and more lower-priced products during the first quarter of 2013 than 2012. From a Duplex standpoint, the number of phones sold during the first quarter of 2013 was over 1,000 in excess of those sold during the first quarter of 2012. These phone sales were due to increased customer demand, driven by significantly improved service levels from our Constellation. The increase in operating expenses for the quarter was due primarily to expenditures to support our enhanced sales and marketing efforts. Growth in the department as well as commissions paid for subscriber activations and conversions had increased our expenses. However, we view these costs as investments in the Company's growth. Looking forward, the trends we are seeing in increasing Duplex ARPU, improving phone sales, and rising minutes of use, are strong indicators of future revenue growth from our Duplex business. As discussed with you in March, we are still on track to have a strong year as we leverage our restored Duplex service as well as our launch of new products through enhanced and innovative sales and marketing initiatives.

And now a few remarks on the Company's current liquidity position as well as the sources and uses of cash for the closing of the 5.75% notes exchange. As of March 31, 2013, the Company's unrestricted cash balance was $1.3 million. We also had $30 million available under the Terrapin Equity line, which we expect to begin to draw upon once the registration of the shares to be issued under this agreement is made effective. With respect to the 5.75% notes exchange, Thermo invested an initial $25 million of equity which was primarily used to make principal reduction in interest payments at close. Thermo has also provided a financial backstop equal to $60 million through the end of 2014. $5 million of the $60 million has been funded for general corporate purposes to meet the minimum liquidity requirements specified in the agreement with our bank group.

The funding schedule of the remaining $60 million requires that $20 million fund prior to the effective date of the new facility amendment, $20 million by December 2013, and the final $20 million by December 2014. The Company intends to raise third-party capital, which would reduce Thermo's commitment on a dollar for dollar basis. With the material improvements to our debt repayment obligations, we believe that our current sources of liquidity, as just outlined, position the Company to have a fully funded business plan. With our liquidity issues being addressed, we look forward to being able to focus on our core business operations. I will now turn the call back over to Jay.

Thanks, Rebecca. Let's turn to slide 7. As we discussed on our last call, we completed the second generation Constellation with a flawless fourth launch on February 6. Satellite testing has been completed successfully and all satellites have processed calls. We remain on track to move the remaining satellites into their final orbital positions over the next few weeks; one is entering service tonight, one goes into service tomorrow evening and the final two enter service this summer. All of our Duplex services, which carry higher profitability, are being fully restored; this is an exciting moment for the Company. Anticipating this, customers returned in increasing numbers the first quarter. Further, our success is beginning to convert existing customers to higher rate plans as we restore coverage and that has also been successful. Remember, because of our low-cost network, our new rate plans are priced significantly lower than our competitors, by virtue both of our Double the Minutes promotion, as well as substantially lower cash costs per month to our users. This positions us for greater customer stickiness and better returns for shareholders.

Let's move to slide 8 to discuss new products. With Duplex restored, Globalstar's product offering is impressive and showcases our passion for continuous innovation as we evolve our consumer and enterprise lines. Earlier in May, we launched the SPOT Global Phone, a portable, easy-to-use, data-enabled satellite phone. We are taking advantage of our successful SPOT franchise and the large distribution network it uses so that ordinary consumers can easily afford to purchase a satellite phone from their favorite retailer, bring it home and provision services online as you would with any of our SPOT products.

Following on the heels of the availability of the SPOT Global Phone, we anticipate a June launch of the new SPOT Gen3 personal tracking and emergency beacon device for the outdoor retail market. This product is also well-suited for non-outdoorsmen looking for additional security in an insecure world. It is smaller, more user-friendly, has more features, including extreme tracking that transmit a user's location every 2.5 minutes, and can be line-powered to bypass the need for battery replacement. And SPOT Gen3 has double the battery life of our existing SPOT device for those who choose to use it that way.

In June, we'll also release the STX3, an enabling module for commercial Simplex and M2M markets. This is the latest update to our core STX family of M2M solutions which addresses this fast-growing segment of the MSS market. It is smaller, lighter, less expensive, and much more power efficient than our own STX2 or any other company's satellite modem. It is much easier for our network of VARs and VAMs to integrate into their final products. Given its size, weight, and cost, it is also easily integrated into hybrid cellular satellite products for a wide range of commercial and consumer tracking applications. STX3 represents a large growth opportunity for Globalstar. As you'll also see on slide 8, we have additional new products in the pipeline for release this year. We will give you more information about the new consumer tracking products and the Maritime phone as they approach market launch. Clearly, our decision to acquire Axonn a few years ago, which has allowed us to internally develop and build our own products at competitive prices is paying off for us.

Let me wrap up the prepared remarks with the following summary on slide 9. Our near-term financial position has been materially improved and our financial uncertainties all but eliminated. Our final satellites are being placed into commercial service, restoring Duplex opportunities which are being increasingly sought after by our customers. Our service quality has returned and is being noticed by customers and throughout the satellite industry. Our landline quality voice service and industry-leading handset data speeds, all delivered over Globalstar's unique architecture, are driving many additional opportunities to work in association with a host of new VARs and other companies that themselves are acknowledged leaders in their specific markets, opportunities that Globalstar has not enjoyed for the last few years. We continue to aggressively press our FCC request and hope for good news there soon.

Globalstar is clearly back. We plan to spend the rest of 2013 making sure that everyone who touches the satellite industry -- investors, analysts, employees, distributors, and most importantly, our former, current and potential customers, hear it. We expect this to drive accelerating revenue and adjusted EBITDA growth in the second half of this year and into 2014. This concludes the prepared remarks. Operator, would you please give the instructions for Q&A?

Thank you. We'll now begin the question-and-answer session.

(Operator Instructions)

Jim McIlree, Dominick & Dominick.

Congratulations on the exchange. It's probably a big relief. Can you talk a little bit about the conversion option, the new 8% holders have in this year and next year for up to 15%? Is that an $0.80 strike price and it's at their option that they can convert?

That's correct. So, within about 30 days post-close, the -- it's actually by mid-July, the holders of about $54 million of principal have the option to convert the initial 15%. That will take the form as either an equitization where they receive common shares at the lower of the lap or $0.50. They have the same option in the early 2014 and again, they will either receive cash or shares. The election of whether it's going to be cash or shares is determined solely at the Company's option. In terms of the total impact from that, the total equitization shares could be an incremental $19 million for the equitization one and about $16.4 million for the equitization two. But of course, that's dependent on the Company's stock price, both 2 months and 10 months out from now.

Right. Okay. Great, and then CapEx for the rest of this year is going to be mostly associated with the ground station upgrades. Is there any more second gen constellation CapEx to occur this year?

In terms of this year, there's an incremental $10 million that occurs before the end of the year, but CapEx associated with the ground infrastructure upgrades totals about $40 million before the end of the year. However, of course, as we've talked about every quarter, we've been continually working with our ground vendors to amend and extend the payment milestone schedules so it's consistent with the work that's being performed and fully executed. So, it's $40 million before the end of the year. It's an incremental $28 million before the end of 2014 and then the final piece of the ground upgrades is $12 million by the end of 2015.

Okay, is $10 million a good number for sustained or just maintenance CapEx?

So, the $10 million is actually associated with the capitalized labor. So that's labor that's internal. That is exclusive of adjusted EBITDA. So, it's a real cash cost for the business. So in terms of your modeling, you should be modeling adjusted EBITDA and then factoring in the capitalized labor portion, having a further reduction associated with that capitalized labor which will be consistent over the next two years.

Okay, but what about a maintenance CapEx going forward since the constellation is done?

Maintenance CapEx going forward -- historically, it was a little bit above $2 million. It was between $2 million and $2.5 million and that's a reasonable number to use annually until the constellation is restored in 15 years.

Okay, great. And the last one, the Q mentioned that the cost of services were up quarter to quarter because of an increase in R&D for the new products in 2013. Is that level of R&D a permanent new level or is there just -- is there a higher amount in this quarter and next and then it drops back down at some point?

Of course, as we've talked about, there's been the development of five new products which come out this year. As it relates to the development, the -- in its long-term performance, I don't anticipate that R&D is going to be at the sustained high level that we've seen recently. That should drop off as the new products are put into the market. Of course, we're going to continually roll out new products over time, but I don't think that they're going to be sustained at the high level that we experienced this quarter.

(Operator Instructions)

Marco Rodriguez, Stonegate Securities.

I have a couple of quick questions you have referenced to the financing and the cash that's being raised here. Just a little bit unclear on the first tranche of $20 million. I guess that's in addition to the first $25 million that was raised via Thermo. When exactly is that needed to be raised?

Marco, let me break that down for you. So, the Thermo commitment in total is $85 million and let's talk about exactly how that gets funded and when. So concurrent with close, there was a total of $30 million that has already been funded. About $25 million of that $30 million is essentially out the door associated with the cash uses for the effectiveness of the exchange. Then going forward, there's an incremental $15 that is due at the effectiveness of the COFACE amendment, which we expect to occur by the end of June. The remaining $40 million comes in two tranches, $20 million before the end of this year and then an incremental $20 million before the end of 2014.

Got it, and you can -- Thermo doesn't necessarily have to raise that capital themselves, it could come from another source. Is that correct?

That's correct; so we can tap outside of third-party capital and to the extent that anything flows in from those transactions, the Thermo backstop will be reduced on a dollar for dollar basis.

Got it, okay, and then in terms of those capital raises there, that are lined out, how do those affect -- because I'm assuming that they're financing and Ericsson and Hughes as well as, if I'm not mistaken, the Arianespace agreement for additional satellites all had financing triggers, if you will. How does the cash raised in those events affect those -- this obligations there?

We can see that the requirements to fund that capital, together with the operating cash flow that the Company is already experiencing today, we are really funding the capital prior to the need of that capital. So, we're going to have excess cash cushion over the next 18 months that will more than meet the capital obligations. So, it comes in a little bit premature but we want to make sure that we have enough cash on the balance sheet to hopefully meet the obligations over time.

So I'm not sure I'm following, but are you saying that within the CapEx obligations, for example, to Ericsson and Hughes will be paid on schedule because of these capital raises?

That is correct. In terms of how Hughes and Ericsson have worked with the Company over the last couple of quarters, they have shown flexibility. The -- if you look at the 10-Q you can see what the contractual obligations are. Of course, over the last couple of years, the contractual obligations have not met the actual cash paid. In terms of how it's affected going forward, I think we still will have some flexibility. The milestones that are structured today can be structured, can be restructured and to the extent that they are, any restructuring can reduce the CapEx that's due both in 2013 and 2014. However, now that the capital is in place, we intend to fully reengage with Hughes and Ericsson and complete the ground infrastructure as soon as possible.

Got it, understood. And then could you perhaps give us a little bit of sense as far as where your cash level is at the anticipated close of everything here?

Sure, sure. So let's just exclude for now these sources and uses of cash at the effectiveness of the exchange. So, at the end of the quarter, we had $1.3 million of cash and we did not use anything off the Company's balance sheet to effect the exchange. The debt service reserve account in total was about $38 million and again, as we've talked about in the past, that's fully restricted to pay principal and interest. The total amount available from the Terrapin financing was $30 million.

We had a little bit less than $1 million remaining in the COFACE Facility on top of the $55 million backstop that comes in over the next 18 months from Thermo. And we had about $1 million remaining in the contingent equity account. So, in total that's $126 million of total liquidity, but $38 million is restricted and of course, the $55 million funds over the next 18 months or so, on top of the $30 million from Terrapin that funds over 24-month period after the effectiveness of the registration of those securities.

Got it. Thank you. And then last question, the announcement here on the new SPOT Phone. How are you guys thinking about any possible cannibalization of whether SPOT products or even from your more traditional satellite users?

Marco, this is Jay. The way that you should think about that from a retailer's perspective is that the SPOT Phone represents another SKU in the shelf for them. So what they like to have, of course, is good, better, best. And over time, we expect to give them another product that's not yet shown or announced, so that they have the ability to display the phone as their, so called, best. SPOT3 as better, and so forth. So the idea is to fill their shelf. So we hope that we're expanding the market and we don't see a ton of cannibalization at that level.

The other chains where we sell equipment, of course, are the traditional vertical market, dealers, agents and resellers and they have different arrangements with us. They get paid in a different fashion. And we have been very careful to not interrupt that with anything that we're doing in the retail marketplace. We continue to add people to that distribution chain. At this point, we're adding about one a day into the vertical market distribution. And we expect that to continue for some time. So we're very, very careful to manage the potential for channel conflict.

Jason Bernstein, Odeon Capital.

Congrats on the exchange. Two questions. One, can you give us an idea, assuming you're on the same timeline as the Dish DBSD approval, can you give us an idea of what some of those prospective deals for potential [length in that] spectrum would be structured like and how soon you'll be having those discussions? And the second question is for all the equity raises, what a share count looks like at the end of the day?

Okay, first on the spectrum discussions, as you might imagine, we're having discussions with everybody. People recognize what opportunity for Channel 14 and TLPS means and so they are having conversations with us about how to develop business plans around that opportunity. As you're probably aware, it looks on the surface to be a 33% increase in all Wi-Fi capacity, but because of the nature of the system, it's actually a controlled channel and therefore, much greater than the apparent 33%. So that's gotten the excitement of a number of companies, whether they are carriers, tech companies, or other.

At this point, people are testing the equipment, testing the service, and those are being done under FCC granted experimental licenses and one of the largest manufacturers of Wi-Fi equipment has built specific equipment for us to operate on Channel 14 and it's working perfectly. So we are testing it on the East Coast. We are testing it on the West Coast, and are optimistic that as soon as the FCC put out the Notice of Proposed Rulemaking that we will have an opportunity to mature up those conversations. In terms of the equity count, Tim?

Yes, sure. So, Jason, in terms of what the pro forma share count looks like for the exchange, there is total basic shares now of 492 million, plus when you factor in the Treasury method shares from the share -- from the warrants and options, plus the shares that were issued in connection with the exchange, the total fully diluted share count as of today is just about 675 million.

Okay, and that doesn't include the Thermo $55 million left on the Thermo backstop?

That is correct; so that's only inclusive of the $30 million that has been funded today. And in terms of what the fully diluted share count would be for those future raises, it's, of course, variable. And it depends on the price over time and that funds over the next 18 months. So it's a pretty wide range.

Okay. Last -- just to go back to what a prospective deal would look like on the spectrum side, is there anything you can point to in the last few years where you had someone leasing out that spectrum? We know that LightSquared had been talking to Sprint before everything occurred there, is there any metrics or numbers you can point to? Would it be someone taking spectrum to cover the whole United States? Is it regional, anything that -- any guidance you can help with there?

Spectrum leasing is actually very common. If you look inside the spectrum position of Clearwire, for instance, you'll find that the lion's share of that spectrum is actually leased spectrum. The FCC rules provide for several different paths for leasing. So that part is pretty straightforward. The -- I think one of the critical aspects of Globalstar's spectrum is that it is a single national footprint. In fact, in our case, it's a worldwide footprint, which offers us a series of attributes, particularly in terms of the Terrestrial Low Power Service that are unique, I think. So I can't give you another price comp at this point, except to say that spectrum leasing conversations are part of the conversations that we're having with people.

And I think what people find most interesting about the whole TLPS thing is that it leverages off of an existing one billion unit ecosystem, which can be immediately converted to service over that spectrum. So, unlike a normal LTE or other implementation where you have to build towers, you have to wait for devices to be built (technical difficulty) spectrum. In fact, every Wi-Fi device out there has the ability to see this spectrum as long as it's enabled to do so through a software or firmware push. So the whole ecosystem is there. It can take off immediately and I think that's why people are having conversations with us even in advance of having the NPRM out but I do think they heat up after the NPRM is formalized.

Vikas Tandon, Bastogne Capital.

Congrats guys on the exchange. Just wanted to talk about how you think about the value of your spectrum. Obviously, spectrum is heated up with whether it was Ergen buying the TerreStar and ICO stuff, now the bids for LightSquared and Clearwire; is it right to think about it on a per megahertz POP basis? Is it right to look at those as the comps? I mean, obviously at those levels, the value of your spectrum is far beyond the market value for where you're trading right now. So that had me thinking and wondering how do you guys look at your spectrum value? How do you think about it? And obviously as you're developing your business plans for the Wi-Fi going forward, obviously someone could approach you to buy this spectrum as well. I'm just wondering, how do you think about that? Have you thought about that eventuality? And how would you value your spectrum?

Well, I can't guess on exactly what other people will value the spectrum, like for a different applications and some of that depends upon what comes out of the FCC NPRM. But, certainly there is a premium on spectrum right now. The ability to control spectrum is critical to all of the carriers and a lot of alternative users. There are a number of things going on in the Wi-Fi sphere right now, which contribute to the congestion of Wi-Fi. And as a result, I think the TLPS opportunity is something that people are pretty interested in, but time will tell what the real value of the spectrum is.

There are multiple business models that we have looked at that have -- that don't value the spectrum per se; they value the business, sometimes at substantial premiums to what the spectrum might be worth. On the other hand, it remains to be seen what is put out by the FCC. As soon as that comes out, I think it will make our life a bit easier, but clearly, the value of spectrum is going up.

Look at just the value inside DISH of the spectrum that they acquired from TerreStar and look at the value that they were apparently willing to bid in the recent past for spectrum which is pretty challenging over at LightSquared. And it seems to be a multiple of what they paid for the prior two. Inside DISH, the speculation ranges from $0.50 to $0.80 per megahertz POP as value inside DISH for the spectrum that they acquired from TerreStar and ICO. So there are a lot of moving pieces, recent transactions, implied values well above $0.50. So we're watching that market very, very carefully, of course.

Yes, understood and I guess just a quick follow-up again, I think while a lot of guys look at you guys, they look at those ICO and TerreStar transactions, the bid for LightSquared, is your feeling that a positive development from the FCC is like an instant multiplier on the spectrum value and that's how you're thinking about it?

Well, certainly lifting regulatory ambiguity is helpful. But we are in the satellite business for the long term and so we can afford to be patient and operate a good satellite business. We have certainly invested a lot in it over the last five years in order to grow that business. So I think we can be both patient and at the same time, we can be fleet. And given the fact that Thermo controls roughly 70% or 80% of Globalstar, we can make prudent decisions quickly with the help of our Board. And, as a result, I'm very, very optimistic that we'll be able to do something meaningful and extremely intelligent with this spectrum.

Perfect. Well, thanks very much for the answers and congrats again on a great deal. Hopefully, the market will start waking up to the value in the Company.

We sure hope so.

Alex McWilliams, RWP.

Great job on a good -- on the restructuring. Most of my answers to my questions have already been given. My question regarding the TLPS on the Wi-Fi component had to do with the timeline and the hurdles for you guys to actually ink a deal on that. Could you talk a little bit about the NPRM approval and then what comes after that?

When the -- let's break it into two pieces. First, just getting the NPRM from the FCC. We know that inside the FCC, people are favorable towards what we're trying to accomplish. It clearly is in the wheelhouse of the FCC to help solve the Wi-Fi traffic jam. So there we're on all squares with the FCC. (multiple speakers)

The last guidance you had given for that was, I think, was second quarter; is that still intact, do you think or --?

We certainly hope so. The challenge that we've got there, of course, is that there is a new Interim Chair and they are telling us that they are going to continue aggressively pursuing the items on the previous chairman's list and that there would be solid continuity. So, we're hopeful that it will come out soon. If it does come out in the next month or so, then it would take, without a doubt, the balance of the year in order to get through a regular NPRM process with ordinary briefing periods and then post briefing periods for the Commission to write its decision. We're still targeting the end of the year and we hope that we're right.

Once it comes out, an NPRM is really a statement of the Commission's position and it will be very clear to parties that we're having conversations with what the FCC intends to do. And, they will refine that from NPRM to final order, but while they're doing it, we will definitely carry on conversations like the ones that we're having already. They will just be a lot more solid. And I cannot begin to anticipate when someone would want to strike a deal with us or do a business plan with us or lease spectrum from us or whatever one of the outcomes could be. I just really don't know.

Okay, but the hurdles would be the NPRM and the completion of that process, which you think will take you certainly into the fourth quarter?

That is correct. That's how we look at it.

And then the potential market size or number of customers that you could satisfy with the TLPS and the Wi-Fi service?

Well, the nature of a service like that is it is driven by close in access points that you have almost unlimited spectrum reuse. We would do it in a controlled fashion, so unlike traditional Wi-Fi, where every Wi-Fi user is interfering with every other Wi-Fi user, which gives you the phenomena of seeing four bars at a Starbucks, but then an inability to get any real speed through it. That's because the noise floor has been raised under the spectrum and within it. And so when you think about a controlled piece of spectrum like we have where instead of allowing people to operate in an uncontrolled manner, they operate more or less like you would operate controlled off of a cell system, just in that spectrum, you can move an enormous, enormous amount of capacity.

So though it appears to be a one-third increase in the total amount of spectrum, and therefore, one would intuit a one-third additional capacity; it's actually a multiple of that. So, how many users does that imply? I'm not sure I can answer that question. I can say that right now people say that 80% of the mobile-originated data traffic is actually going over Wi-Fi. And we're all on multiple devices that go over Wi-Fi and we are all using it and that is in a total of three 22-megahertz channels and we would have one 22-megahertz channel for this service. So it's a lot of people.

No, that is great. Again, congratulations. Good job.

Mark Kaufman of Little Oak Asset Management.

Thank you. My question has been answered already.

Okay. Jim McIlree, Dominick & Dominick.

There were some deactivations this quarter for the SPOT customers; what was that all about?

Hi Jim, so, in the first quarter we started deactivation project where we were just isolating the suspended customers which comprised almost 20% of that base, as we have disclosed in the past. It's just trying to clean up our book of business and that's what it was. So that's why you are seeing an increase in ARPU during the quarter.

So it's really just re-baselining that business? Is that correct? It would be reasonable to think that, that business grows in subscribers going forward and depending on the packages, the ARPU is going to do what it does, but we are really just re-baselining; is that correct?

Correct. Okay, fantastic.

Perez [Heinrik], Private Investor.

Practically all of my questions have been answered. I just have one question on the equity count going forward. This $55 million that is committed from Thermo, that -- all of that comes in at $0.32 a share?

No, in terms of exactly how that gets structured, the pricing will be solidified over time with the $15 million that's due in a month, the $20 million that's due at the end of the year and the final $20 million that's due towards the end of 2014. So, the exact economics associated with those raises have not been established yet.

I was looking at the 8-K, and looking at the stock purchase agreement, it looked to me as though it was $0.32 per share set price. Is that incorrect?

That was only for the initial $30 million that has been funded so far.

And we have no questions at this time. I will now turn the call back over to Mr. Monroe for final -- closing remarks.

Thank you, everybody, for joining the call today. We look forward to giving you some additional information on the second quarter conference call. Thanks for joining. Bye bye.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating, you may now disconnect.