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Good news kills Globalstar deal

An FCC ruling is both good and bad for the bankrupt satellite phone company. It forces cellular carriers to open networks to satellite firms but leads to a scrapped funding deal.

A federal ruling to give satellite phone customers room on cell phone networks has forced bankrupt satellite phone provider Globalstar Telecommunications to nix a deal for $55 million in new funding.

Globalstar representative Mac Jeffery said Monday that the recent Federal Communications Commission decision was a classic case of good news and bad news all in one package. Globalstar was the lead proponent of forcing cellular carriers to open up their networks to satellite phone providers, one way to help satellite companies better cover areas such as a city's glass and steel canyons, where satellite phone signals get lost.

But the ruling also raises the potential value of the company beyond what's represented by a recent $55 million funding offer from New Valley, real estate financier Bennett LeBow's venture capital firm, according to Jeffery. As a result, the creditors committee overseeing Globalstar financial dealings since the company filed for bankruptcy did not approve the New Valley funding, Jeffery said.

"The creditors committee believed they could get a better deal," Jeffery said, adding that Globalstar investors are ready to pump in another $12 million in funding to help the company operate while it seeks a larger investment.

A representative for New Valley could not be reached for comment Monday.

Last week, the FCC issued its long-awaited decision that opens up cell phone networks to satellite phone calls.

Jeffery said Globalstar is now exploring its next steps: either to build its own cellular phone network in areas where its coverage is lacking or to partner with existing a cell phone service provider. He said the company has yet to decide which route to take.

Satellite phone companies were launched with a lot of fanfare in the 1990s, but have since become symbols of billion-dollar investments gone bad. Though satellite phones rarely experience the dropped calls or lost e-mail that cell phone users complain about, the comparatively bulky handsets and expensive calls--about $6 a minute at the time--kept many people from choosing satellite service. Globalstar and other satellite phone companies have recently dropped the cost of phone calls to less than $1 a minute.

Globalstar rival Iridium filed for bankruptcy in 1999. Iridium eventually restructured and relaunched its service.