Apple Satellite Connectivity Provider Globalstar Stock Surges After Deal Extension

Globalstar GSAT stock surged Friday after it disclosed expanding its strategic partnership with Apple Inc AAPL in a newly updated $1.1 billion services agreement.

Under this extended deal, Globalstar will provide Apple with enhanced satellite services, covering the development, launch and operation of a new mobile satellite services (MSS) network. This agreement builds on the existing service terms.

Also Read: FuboTV Q3 Earnings: Subscribers Grow 9% To 1.61 Million, Narrows EPS Loss, Raises Annual Outlook

The revised agreements enable Globalstar to deliver these services through a new MSS network featuring a fresh satellite constellation, expanded ground facilities and broader MSS licensing worldwide. The new MSS network will be owned by a subsidiary known as Globalstar Licensee, which Globalstar will continue to manage and operate.

Apple will provide substantial prepayments, including up to $1.1 billion, to fund the Extended MSS Network's construction and operational phases. These funds will also cover related costs like infrastructure and debt repayment.

Additionally, Apple has agreed to acquire 400,000 Class B Units in Globalstar Licensee, giving it a 20% equity stake for $400 million.

In exchange for these expanded satellite services, Apple will pay Globalstar incremental service fees tied to the cost of the MSS network, additional services and associated expenses, including performance-based bonuses.

A portion of these payments will be contingent on achieving certain milestones, including service levels and regulatory approvals. Moreover, the deal specifies annual service fees of $30 million, which are set to accelerate under the new agreement terms.

Globalstar and Apple have agreed on a structure allowing for quarterly redemption of Apple's Class B Units, starting once Apple recovers the total amount of the prepayment. Globalstar retains the right to repurchase these units under certain conditions, while Apple can initiate redemption in case of specific contract breaches by Globalstar.

The parties also adjusted Globalstar's 2023 Funding Agreement by removing cash sweeps, relaxing certain covenant conditions, deferring repayment start dates to 2026, and strengthening Globalstar's obligations under the 2024 Prepay Agreement with additional lien security.

Globalstar reported fiscal second-quarter 2024 sales growth of 10% to $60.4 million, beating the consensus estimate of $57.2 million. Adjusted EBITDA was $32.6 million. Globalstar expects revenue of $235 million–$250 million versus the consensus of $237.5 million.

GSAT Price Action: Globalstar stock is up 32.90% at $1.39 at publication Friday.

Read Next:

• Charter Communications Beats Q3 Estimates On Strong Mobile Growth, Expanding Margins
  

This article was generated using artificial intelligence and was reviewed by Benzinga editors

Photo: Shutterstock