GSAT’s Spectrum is Worthless

Not the Same as Cellular Spectrum:

The FCC has ignored Globalstar’s request to make its spectrum available for cellular use, entertaining only its Wi-Fi proposal, which means users will be restricted to transmitting signals that are 10x lower than typical cellular signals.

Frequency Matters:

Spectrum value as a function of frequency

Low-frequency spectrum is exponentially more valuable than high-frequency spectrum like GSAT’s, rendering most comp analyses far too optimistic. Clearwire’s spectrum, right next door to GSAT’s in frequency terms, sold in July 2013 for $0.30 per MHz-pop – implying 85% downside for GSAT.

GSAT’s Wi-Fi Proposal Will Never Be Commercially Viable

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Bulls dream big about GSAT’s proposed Wi-Fi-like service, TLPS. But TLPS will be, in Cisco’s words, “nothing more than a paid Wi-Fi offering.” Yet GSAT’s market value exceeds that of the largest paid-Wi-Fi firm, Boingo (WIFI), by 28x.

Wi-Fi “Congestion” is Massively Overstated

There is already plenty of Wi-Fi spectrum to go around, and more is on the way.

GSAT spectrum vs unlicensed wi-fi spectrum

Average Wi-Fi speeds already exceed most requirements. How much speed do you need

Academic researchers agree:

Successful Large-Scale Wi-Fi Deployments Abound

With engineering best practices and up-to-date technology, Wi-Fi performs great on current unlicensed spectrum, even in highly dense, bandwidth-hungry environments.

Super Bowl XLVIII

Free Wi-Fi for 82,529 fans
3.2 terabytes of traffic

Sochi 2014 Winter Olympics

2,500 Wi-Fi access points supporting 120,000 simultaneous mobile devices

Mobile World Congress 2014 (Barcelona)

Free Wi-Fi for >80,000 attendees
19.1 terabytes of traffic

Stanford University Computer Science Department Building

2,700 unique clients per month
1.32 terabytes of monthly traffic

Apple Worldwide Developers Conference 2014

1,000 Apple engineers and 5,000 third-party developers

When bad Wi-Fi can already be fixed using today’s best practices on public bands, who will have any interest in one licensed, private Wi-Fi channel? And the technology for high-density Wi-Fi environments is only getting better every day.

Just Ask Yourself

In a world where:

Unlicensed Wi-Fi, when available, is already superior to cellular service
Free Wi-Fi is offered by more and more businesses and venues
5GHz Wi-Fi is supported by all new devices and will enable far faster peak speeds than 2.4GHz
<0.1% of the US population has demonstrated any willingness to pay a dime for Wi-Fi access, let alone faster Wi-Fi access
The notion of unmanageable spectrum congestion is belied by the widespread success of Wi-Fi deployments in stadiums, universities, businesses, etc.

Does TLPS have any remotely viable future? Or is TLPS merely Globalstar management’s latest scheme to “totally not go bankrupt this time”:

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Prepare for Dilution

GSAT minimum EBITDA covenants

GSAT has almost $600 million in net debt but hasn’t been profitable in years. It’s unlikely to be able to meet its financial covenants in the coming years.

A dilutive capital raise is a real possibility. Recently, Iridium, a major player in GSAT’s industry with a very similar debt facility, was also on track to violate its covenants. In May, its creditors forced it to raise over $200 million in new equity.