Globalstar gets $55 million infusion

The satellite phone company reaches a deal to erase $2 billion in debt, a final step before it emerges from bankruptcy protection.

Globalstar Telecommunications has reached a deal to erase $2 billion in debt, a final step before the satellite phone company emerges from bankruptcy protection, a company representative said Wednesday.

Under terms of the deal, real estate financier Bennett LeBow's venture capital firm, New Valley, will become the majority owner of Globalstar. New Valley will invest $55 million in the company, money that will be used to reduce the debt that forced Globalstar to file for bankruptcy last year.

Globalstar founders Qualcomm and Loral Space & Communications will still own a portion of the company. Loral once owned 40 percent of Globalstar, but its share will drop to less than 20 percent if a bankruptcy court judge approves the deal. Qualcomm's ownership share will likely remain the same as before, about 6 percent, according to a Globalstar representative.

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--have kept many people from choosing satellite service.

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

Globalstar spokesman Mac Jeffery said Globalstar added subscribers while it was restructuring in bankruptcy court. The company also is being encouraged by New Valley executives to continue expanding the reach of its service, rather than retrench as often happens when company's seek financial protections, Jeffery said.

"We doubled subscribers while in restructuring, so imagine what we could do once out of restructuring," he said.

Jeffery said part of the growth in subscribers was due to draconian price cuts Globalstar initiated in the last few months. Calls now cost about 17 cents per minute; by comparison, Iridium charges about $1.50 a minute.