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Arbitration setback for Globalstar

Globalstar has suffered a major setback in its plans to launch its second generation satellite constellation, after commercial arbitration of a dispute with Thales Alenia Space France was decided in favour of the French satellite manufacturer.

The arbitrators in the dispute concerning Globalstar's 2009 satellite manufacturing contract with Thales ruled that Thales has no further obligation to manufacture or deliver satellites under Phase 3 of the contract.

Phase 3 provided for Globalstar's option to purchase up to 23 second-generation satellites in addition to the 25 satellites purchased in the first two phases under the contract.

Although Globalstar and Thales may agree to other terms, the arbitrator's ruling also requires Globalstar to pay Thales approximately EUR€53 million in termination charges by June 9, 2012.

Globalstar and Thales have already initiated post-ruling discussions to seek mutually agreeable solutions, without which Globalstar concedes that it is likely to suffer "materially negative consequences", with respect to its debt agreements, ongoing work with Thales and business operations.

"Although we had hoped for a different outcome, we have been in constant contact with Thales over the last several months as completion of Phase 2 satellites continues, and over the past days to negotiate acceptable terms for ordering additional satellites," said Jay Monroe, chairman and CEO of Globalstar.

"Having already paid over EUR€450 million to Thales and having experienced satellite delivery delays approaching two years, we remain hopeful that a mutually acceptable agreement can be reached."

"Globalstar has been operating under extremely challenging circumstances for the past few years as a result of delayed satellite deliveries and remains amenable to negotiating a positive resolution with Thales."

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