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How Globalstar, Inc. Stock Fell 15.1% in September

By Anders Bylund – Oct 10, 2017 at 5:07PM

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When the satellite-communications specialist filed a regulatory response document, investors were reminded that the company is facing some potential service-quality issues.

What happened

Shares of Globalstar (GSAT 0.53%) fell 15.1% in September 2017, according to data from S&P Global Market Intelligence. The price drop started when the provider of satellite-based voice and data communications services filed a response to the WiMAX Forum's petition for approval of a new wireless network for air-traffic-control systems.

So what

The so-called AeroMACS system is meant to standardize the way traffic controllers communicate with aircraft and other important connection points, adding broadband data capacity and better error correction to the process. But the wireless spectrum bands allocated to this system, which has not yet been approved by the Federal Communications Commission, sit close to Globalstar's licensed spectrum bands and in some cases overlap with them.

A satellite orbiting the Earth

Image source: Getty Images.

Now what

The company's response highlighted the many ways an active AeroMACS implementation might hurt Globalstar's operations, and investors took it as a new risk that could reduce Globalstar's future cash flows.

These days, it's almost impossible to predict which new technologies will make it through the hyperpartisan FCC approval process. For what it's worth, the American Association of Airport Executives broadly supports the AeroMACS initiative, but with the caveat that it may cause interference with other services. So, no clear guidance from the industry's sidelines there.

Globalstar shares are trading at nosebleed valuations today, making the stock more vulnerable to knee-jerk reactions. The AeroMACS system has been in the works since 2011, and the final stamp of approval may still be years away -- assuming that the FCC will accept the new standard at all.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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