Better Buy: Iridium Communications vs. Globalstar
Iridium Communications (NASDAQ: IRDM) and Globalstar (NYSEMKT: GSAT) both operate telecommunications services powered by satellite. The companies compete for a similar clientele, servicing primarily government entities and corporations in need of service in hard-to-reach places. However, the two telecom providers are in two very different situations.
The leader in satellite communications
Iridium boasts of having the only network capable of reaching every corner of the planet. That coverage is pulled off through an array of 66 in-orbit satellites that can provide voice and data service to devices on land, sea, and air.
An upgrade to that constellation of satellites is underway. Dubbed NEXT, the new satellites are being deployed by SpaceX and will support Iridium's new CERTUS service, a mobile service that combines voice, data, and broadcast options into one package. Once complete, the satellites will provide speeds of up to 1.4 Mbps and will be able to support mission-critical communications and machine-to-machine connections. In other words, this is Iridium's solution to support Internet of Things connections.
Image source: Iridium Communications.
The NEXT satellite array is expected to fuel growth in the years to come. Deployment will be ongoing into 2018, and over that time, Iridium sees service revenues increasing 3% to 5%, up from last year's $335 million. By 2019, though, management sees that number ballooning to $440 million to $465 million, along with reductions in costs once the satellite array upgrades are complete.
An underdog making waves
Globalstar offers the same type of satellite-based network as Iridium, but it cannot boast the same extensive coverage. The company finished updating its current constellation of satellites back in 2013.
In an attempt to up its game, Globalstar recently announced it is working on a partnership with fellow satellite network provider Inmarsat. The yet-to-be-released agreement will allow the two companies to cross-sell services, increasing their respective service ranges and expanding on services offered.
Image source: Globalstar.
Globalstar also recently got approval from the Federal Communications Commission to use its satellites as a 4G LTE service in the U.S. Globalstar's plan was proposed to help ease Wi-Fi congestion, especially in dense urban areas, as LTE increasingly becomes the standard for voice and data communications.
The company is looking for a partner in the U.S. that is interested in the new LTE service. Globalstar is also going through a similar process in international markets, proposing its plan to regulators and then searching for network provider partners.
And the winner is...
Iridium Communications has a leading position in the satellite telecom industry as measured by coverage, and once its NEXT satellites are deployed, it will have a leading edge in network ability.
As a result, Iridium has been able to drive profitable growth, something its competitor has struggled with to date.
Data by YCharts.
Data by YCharts.
Globalstar has made headway in getting to profitability, but it sits in a precarious financial situation and is running out of time. The company has had to raise significant funding over the last few years, and as of last quarter, it had just over $10 million in cash to nearly $600 million in debt. Management said it is exploring additionalfunding options, which could end up being additional debt or issuing more shares, to keep the boat afloat.
By comparison, Iridium had over $400 million in cash to its $1.57 billion in debt and is running a profitable business.
With Globalstar's shares flirting with penny stock status, this might be just the stock for those with a particular penchant for risk-taking. For everyone else interested in the satellite-powered communications network industry, there is Iridium Communications.
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Nicholas Rossolillo owns shares of Iridium Communications. The Motley Fool recommends Iridium Communications. The Motley Fool has a disclosure policy.