Globalstar Reports Results for Second Quarter of 2001; Subscriptions and Minutes of Use Continue to Rise; Restructuring Proposals Under Review.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 13, 2001

Globalstar (NASDAQ:GSTRF), the global mobile satellite telephone service, today announced its results for the quarter ended June 30, 2001, which showed steady increases in both voice and data traffic, with a broadening base of new customers among key industry targets.

Efforts to restructure the company's finances are continuing with the assistance of outside advisors. In the meantime, the company's marketing and sales efforts are showing growing acceptance of the service across industries and government organizations around the world. As a result, the company's business measurements, both in minutes of use (MOUs) and subscriber numbers, rose substantially over the previous quarter.

Globalstar recorded a total of 5.4 million minutes of use (MOUs), including both mobile and fixed service, in the second quarter, representing a 33% increase in traffic over the previous quarter. The estimated number of mobile and fixed subscribers at the end of June was 51,600, an increase of 27% from the previous quarter. As of the end of July, there were approximately 55,000 subscribers registered on the Globalstar system.

Most major Globalstar markets continued to record strong increases in MOUs over the previous quarter, including Russia (up 95%), the U.S. (up 43%) and Brazil (up 95%). In Venezuela, MOU's rose over 300% with the installation of dozens of fixed phone units in remote communities, with each phone generating exceptionally high usage.

"Globalstar still has much work still to do in order to make this business a success, said Olof Lundberg, chairman of Globalstar, "but it is very encouraging to see that, even in this difficult environment, our customer base and minutes of use continue to grow. Our sales and marketing efforts are continuing, and we expect to ramp up these efforts considerably once our restructuring work is completed."

"We would expect a restructured Globalstar to have a lower operating cost base, a shorter route to our customers with non-exclusive distribution, and the gateway network integrated into this single organization. We are looking toward having new pricing packages and over time also new products tailored to market segments we have not reached well so far. Our new 2 GHz license and the recently-initiated new FCC rulemaking process promises more flexibility in the provision of MSS services which opens up exciting avenues for us for the future. Our ability to aggressively execute a new plan for Globalstar depends, however, on our success in finding new strategic investors."

Financial Results

A full discussion of Globalstar's financial performance for the second quarter can be found in the company's Report on Form 10-Q, to be filed later today with the U.S. Securities and Exchange Commission. Highlights are as follows:

Gross service revenue for the second quarter was $2.3 million, up 13% over the previous quarter. Net revenue, including royalty income from phone sales and less discounts and promotions, was $1.8 million, an increase of 21% over the first quarter.

Globalstar, L.P. reported a net loss applicable to ordinary partnership interests for the quarter of $145 million, roughly the same as the previous quarter. The current quarter's loss is equivalent to $2.22 per partnership interest, which converts to a loss of $0.40 per share of Globalstar Telecommunications Ltd.

As of June 30, 2001, Globalstar had approximately $98 million in cash and cash equivalents, including restricted cash. For the first half of the year, cash flow was at a rate generally in line with earlier projections, and the company continues to expect that it will have sufficient cash to continue operations through the end of 2001.

As announced in January, in order to have sufficient funds available to pursue continued progress in its marketing and service activities, Globalstar has suspended indefinitely principal and interest payments on all of its funded debt, including its credit facility, vendor financing agreements and Senior Notes, as well as dividend payments on its preferred stock. Suspension of these payments remains in effect, and as a result of these actions, defaults have now occurred with respect to some of Globalstar's debt.

As a further step to ensure the availability of funding through the remainder of the year, the company expects to reduce its staffing later in the third quarter to 175 full-time employees, the minimum number essential to sustain current operations.

Sales and Marketing Operations

During the quarter, Globalstar continued to build its customer base across all target industries in markets around the world. Last month, the company announced several new customer contracts, including volume orders for phones from government agencies in the U.S., Brazil and Canada; construction companies and utilities in Russia; remote communities in Venezuela; and a major order from ENEL, Italy's main electric power provider. Other customers who were also signed up during this period include:

Maritime vessel operators: Two North American cruise ship lines began to install Globalstar phones on selected passenger vessels, initially for use by crew members for emergency communications, with certain boats also making phones available for passenger use. After the close of the quarter, Alaska Tankers, a cargo line, agreed to install and use Globalstar phones for use on vessels at sea between Alaska and the U.S. west coast.

Private boat owners are also turning to Globalstar. The three-man crew of the yacht North Star recently sailed across the Atlantic from the east coast of the U.S. to the Azore Islands, regularly sending e-mails all along the way, including digital photos, through their Globalstar phone. According to Mike Geissinger, one of the crew members, "We also had e-mail communications through two single-side band radios, but we found that the Globalstar phone was much better for communicating for voice and for e-mail. Data speeds were faster, and the clarity of the voice signal was amazing."

Government agencies: The U.S. Federal Protective Service, part of the General Services Administration, used Globalstar phones to support their security work during the Summit of the Americas held in April. Phones were used to enable agents to stay connected from remote locations along the U.S./Canada border.

Broadcasting production companies: The Golf Guys radio program, which is syndicated to some 550 radio stations across the U.S. and around the world, filed reports from several recent golf tournaments using a Globalstar phone. The show's host Dan Moschetti said, "During my live updates from the U.S. and British Opens, I used the Globalstar phone exclusively. It was awesome knowing that no matter if you were on the course at Southern Hills in Tulsa or Royal Lytham & St. Annes in England, you were going to connect with a clean line 100% of the time. Affiliates continually remarked on the broadcast quality of the signal." Globalstar phones are also currently being used from remote locations around the world by the cast and crew of Lost, an NBC-TV program to be aired in September.

System Update

The Globalstar system continues to operate well, with impressively high rates of call retention and call completion. Earlier this year, we detected anomalous behavior in three Globalstar satellites and removed them from service. After several months of analysis and testing, the company was successful in restoring service to one of the satellites, which is now processing calls as usual. It has also been determined that the remaining two satellites have failed, and two on-orbit spare satellites are now being maneuvered into position to replace them, one in September and one in November.

The cause of the satellite failures has not been determined with certainty, but it appears likely that they were caused by a temporarily severe space environment. These environmental conditions have now passed and are not expected to return for 10 or more years. We have seen no indication suggesting that the failures were due to a design defect or to a production error. Additionally, we have seen no further anomalies in any of our satellites since these events occurred. Therefore, we have no reason to believe that other Globalstar satellites will experience additional such failures in the future.

Globalstar is a partnership of the world's leading telecommunications service providers and equipment manufacturers, including co-founders Loral Space & Communications and Qualcomm Incorporated; Alenia; China Telecom (HK); DACOM; DaimlerChrysler Aerospace; Elsacom (a Finmeccanica Company); Hyundai; TE.SA.M (a France Telecom/Alcatel company); Space Systems/Loral; and Vodafone Group Plc. For more information, visit Globalstar's web site at www.globalstar.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements provide our expectations or forecasts of future events. Actual results could differ materially as a result of known or unknown risks and uncertainties and other factors, including our ability to secure sufficient funding with acceptable terms under credit facilities or from other sources, the ability to attract new investors to fund continued operations, the ability to restructure our debt, the risk of acceleration of existing debt facilities and the exercise of remedies with respect thereto, and other risks, uncertainties and factors disclosed in the most recent report on Form 10-K and reports on Form 10-Q and Forms 8-K of Globalstar Telecommunications Ltd. and Globalstar, L.P. filed with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statement.