Amazon Acquires Globalstar for $11.57 Billion
Amazon revealed on Tuesday that it plans to purchase Globalstar in a deal worth $11.57 billion. This move aims to enhance its growing satellite business and better compete with Elon Musk’s Starlink.
Tech companies are directing substantial investments towards the lucrative field of satellite connectivity. However, rival companies are finding it challenging to match Starlink’s expansive network of around 10,000 satellites.
As a part of this acquisition, Amazon will incorporate 20 Globalstar satellites into its existing fleet of over 200.
With its ambitions, Amazon aims to deploy approximately 3,200 satellites into low Earth orbit by 2029, with an urgent need to launch about half of them by a regulatory deadline in July.
The company is also gearing up to introduce satellite internet services by the end of this year.
Globalstar’s satellite network facilitates direct-to-device (D2D) connectivity, providing reliable, low-data links for mobile devices. This technology is crucial for emergency services and offers connectivity in regions with sparse cell phone coverage.
The partnership purportedly positions Amazon to start offering D2D services by 2028.
Meanwhile, Starlink, a division of SpaceX, already boasts over 9 million users globally. They are also forging partnerships, for instance, with T-Mobile, to expand their direct-to-consumer offerings.
According to Armand Musey, president of Summit Ridge Group, “Amazon lags behind Starlink in satellite broadband. Acquiring Globalstar could help us catch up in direct-to-consumer services.”
Following news reports about the potential agreement, shares of Globalstar, based in Louisiana, jumped by over 9% in early trading, which followed a previous increase of more than 6% in the two weeks leading up to the announcement.
Amazon’s shares also rose by 2.5%.
Challenges Ahead for Amazon
This acquisition comes at a time when SpaceX is making strides toward a potential stock market listing. Starlink contributes roughly between 50% and 80% of SpaceX’s revenue, and they are rapidly launching Starlink satellites to build the largest constellation in existence.
“Given SpaceX’s scale and its nearly limitless launch capacity, further consolidation in this industry will likely occur to compete in the communications market,” suggested Austin Moller from Canaccord Genuity.
Under the terms of the agreement, Globalstar shareholders can opt for either $90 in cash or 0.3210 shares of Amazon stock for each share they hold. This offer represents a premium exceeding 31% compared to Globalstar’s stock price prior to deal discussions.
The acquisition is anticipated to finalize next year, pending regulatory approvals and the fulfillment of specific milestones by Globalstar.
The deal will also require clearance from the Federal Communications Commission, according to the agency’s Chairman Brendan Carr, who expressed optimism about the Amazon-Globalstar agreement.
Last year, Globalstar shared plans to grow its network, developed with backing from Apple, from approximately 20 to 54 satellites in low Earth orbit, including a few backups.
Additionally, Amazon has partnered with Apple, which invested around $1.5 billion in Globalstar, to enhance satellite-based features, like Emergency SOS and Find My for users of iPhones and Apple Watches.
