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Thursday September 10 6:30 PM EDT
By Dan Burns
NEW YORK (Reuters) - Globalstar Telecommunications Ltd (GSTRF - news). said Thursday it lost 12 satellites worth $180 million when a rocket failed during launch, delaying completion of its $2.6 billion satellite-based global communications network.
The accident -- in which a converted former Soviet ballistic missile malfunctioned while carrying the satellites aloft -- was also a setback for the nascent commercial satellite communications industry, analysts said.
News of the loss, although covered by insurance, sent Globalstar's stock plunging $7, or 39 percent, to $10.875 in heavy trading on the Nasdaq market, where it was the second most active issue with 7.8 million shares changing hands.
Shares of Loral Space & Communications Ltd (LOR - news)., which owns 42 percent of the Globalstar consortium, fell by $5.06, or 28 percent, to $12.875 on the New York Stock Exchange, where they topped the most active list with 11.6 million shares traded.
A Globalstar spokeswoman said she could not provide any details regarding the financial impact of the accident on the company, which was still being assessed.
``It's a significant setback for the entire industry,'' Nationsbanc Montgomery Securities analyst Jim Linnehan said. ''Anytime a rocket explodes the entire industry takes a hit.''
``This basically is going to cast a shadow on the remainder of anybody's launch schedule,'' CIBC Oppenheimer analyst Marc Crossman said. ``It's a painful reminder of how difficult it is to launch satellites.''
Globalstar, which has several other international telecommunications corporate investors in addition to Loral, said it was reviewing its options regarding future launches for its system, which is designed to provide cell phone and other communication services around the world.
The company, which planned to have a 48-satellite network ringing the globe by the middle of next year, said it still hoped the system would be operational by the end of 1999, perhaps using just 32 satellites.
The setback came a day after one of Globalstar's main competitors -- Iridium LLC, a consortium led by Motorola Inc. (MOT - news) -- delayed the commercial start of its global satellite communications system by more than a month to complete testing and make refinements to the $5 billion venture.
The Globalstar loss also followed PanAmSat Corp.'s loss of a satellite during launch last month and the failure of another of its orbiting satellites that temporarily blacked out pager services for millions of people across the United States.
Globalstar's 12 satellites, which cost about $15 million apiece, were destroyed when a computer malfunction caused a Ukrainian-made rocket carrying them to crash shortly after launch from the Central Asian country of Kazakhstan.
NPO Yuzhnoye, the rocket's maker, said two computer faults appeared in quick succession in the two-stage Zenit-2 rocket's second stage just after it lifted off from the Baikonur Cosmodrome in Kazakhstan -- once the main space center of the former Soviet Union.
The accident was also a setback for Russia's and Ukraine's space industries, which have been struggling to make a living following the end of Soviet government subsidies by taking a major share of the fast-growing satellite launch market.
It was the first time that Globalstar had launched satellites using the Zenit rocket -- a converted Soviet ballistic missile. Two more launches had been planned.
Globalstar, which already has eight of its satellites in low earth orbit, said it may be able to resume its launch campaign using Soyuz rockets as early as November, although each Soyuz could carry only four satellites.
The company said it also may return to launching some satellites using Boeing Co. Delta II rockets that out its first eight satellites aloft.
Yuri Alekseyenko, spokesman for Yuzhnoye's rocket design bureau, put a brave face on the accident, saying the crash should not delay further planned launches.
``We already know the reason for this (crash), so there won't be a long investigation,'' Alekseyenko said. ``We think the next launches in October and December, if they are delayed, will not be delayed for long,'' he said.
Other investors in the Globalstar system include U.S. companies Qualcomm Inc. (QCOM - news), which holds a 6 percent stake, and AirTouch Communications Inc., which owns about 5 percent.
Other participants in the consortium, some of whom provide services but hold no equity position, include Alcatel of France, Alenia France Telecom of Italy, Hyundai of South Korea, Daimler Benz Aerospace of Germany and Vodafone Group Plc of Britain.
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