Summary
Hughes continues to dominate MSS system development contracts. However, it is unclear how Globalstar will pay for this contract, given the lack of any vendor financing arrangements.
Analysis
Hughes has established itself as unquestionably the leading vendor for MSS system development projects, now working with MSV, ICO, TerreStar and Globalstar, as well as Thuraya. It is likely also well positioned for work with Iridium in the future.
Hughes is therefore a sensible choice for Globalstar, but the challenge will be how to pay for the work. Globalstar's recent convertible offering left it with a potential funding gap of ~$300M, before signing this contract. Globalstar is hoping that as much as $250M in cashflows will be generated from its existing business in the next few years to close its funding gap, although its (~$100M annual) revenues have been declining and it is close to (if not below) cashflow breakeven at present.
As a result, the lack of any vendor financing associated with this contract is a notable omission and will make Globalstar's fundraising requirements even greater. Globalstar is therefore likely to need to lean even more heavily on the continued support of its CEO, Jay Monroe, who has already invested $400M in the company.
