Apple’s satellite deal with Globalstar could be good news for that company

Apple’s partnership with satellite company Globalstar was one of several announcements at the tech giant’s much-anticipated iPhone 14 launch event this week.

Under the terms of the agreement, Globalstar Inc. GSAT,
+9.50%
will provide text-based emergency services for the tech giant. “Now your iPhone can connect you to the help you need when you’re off the grid,” said Ashley Williams, director of satellite modeling and simulation at Apple Inc. AAPL.
+1.21%,
during the event.

The news sent shares of Globalstar Inc. on a high, with the stock ending Thursday’s session down 18.9%.

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In a filing, Globalstar explained that it will dedicate 85% of its current and future network capacity to support Apple’s services.

But could the deal spell good news for other companies in the satellite space?

Iridium Communications Inc. IRDM,
+2.29%
is well positioned to benefit from the deal, according to BWS Financial. “Apple’s ( AAPL ) announcement that it’s incorporating satellite communications into its latest iPhone opens the door for Iridium Communications ( IRDM ) to benefit from rival device makers doing the same,” BWS financial analyst Hamed Khorsand wrote in a memo released Thursday. “AAPL’s news establishes a business plan where service providers won’t be threatened by phones that bypass their network.”

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Khorsand notes that Iridium already has an established low-Earth orbit satellite network that is deployed and commercially active. Shares of Iridium closed Thursday’s session up 0.6% and rose 4.3% before the market opened on Friday.

The analyst also pointed to Iridium’s recently disclosed smartphone deal with an unnamed partner. The development agreement will enable Iridium’s technology in smartphones, the satellite company said in a July filing. “The deal is contingent on the successful development of the technology, as well as the negotiation and execution of a service provider agreement, which the Company expects to finalize by the end of the year,” it said in the filing. “The development agreement also provides for development fees, royalties and network usage fees to be paid to Iridium.”

“IRDM has already been incorporated into personal communication devices that have been widely popular over the past two years,” Khorsand wrote. “The market is starting to experience such a shift,” he added.

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Iridium’s stock is up 6.83% this year, compared to the S&P 500 Index’s SPX,
+1.18%
down 16%. Globalstar stock posted a 44% gain over the same period.

B. Riley Securities analyst Mike Crawford praised Apple and Globalstar for being first to market and offering a low-cost satellite solution. “That alone in terms of market share growth is likely worth it for Apple, even if satellite broadband becomes ubiquitous in the coming years,” he wrote in a note released Thursday. “As far as GSAT is concerned, it appears to be taking very little market risk and we expect good news on the spectrum monetization front in the coming months.”

“GSAT is now moving out of an extended financial stress purgatory into a new era of increasing positive FCF generation,” Crawford wrote. “GSAT will refinance its existing debt of $257 million and secure constellation financing as expected in 4Q12.

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Apple has agreed to pay 95 percent of the approved capital expenditures Globalstar makes in connection with the new satellites, Globalstar disclosed in a filing this week. There will be at least 24 satellites in orbit that can be used for the service, according to the satellite company.

Last month T-Mobile US Inc. TMUS,
+0.19%
and SpaceX announced a partnership aimed at connecting the vast majority of smartphones already on T-Mobile’s network to SpaceX satellites. Despite the existence of strong LTE and 5G wireless networks, more than half a million square miles of the US and vast stretches of ocean are untouched by cell phone signals from any carrier, the companies said in a statement. To solve this problem, the companies will build a new network, which will be transmitted from Starlink satellites using T-Mobile’s mid-band spectrum nationwide.

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