Ericsson files second complaint against Globalstar

July 12, 2001

Troubled mobile satellite telephone company Globalstar Friday said wireless telephone maker Ericsson had filed a second complaint against it for failing to buy enough phones as required under a contract.

Globalstar disclosed in May that the Swedish company was accusing it of failing to meet minimum purchasing requirements for phones under two contracts, one for the purchase of non-portable "fixed" phones and the other for the purchase of mobile phones.

Ericsson had filed a demand for arbitration regarding the contract for the non-portable satellite phones on May 4 but had not taken any formal action regarding the mobile phones until now.

According to an industry source close to the matter, Ericsson filed a demand for arbitration regarding the mobile phone contract on June 12 and is seeking $36 million in damages.

The two complaints together seek about $67 million in damages. "We understand that Ericsson has now referred this matter to the American Arbitration Association," said Mac Jeffery, a spokesman with New York-based Globalstar.

"This complaint is something we had acknowledged in our earlier federal filing. We will work with the arbitrators toward a reasonable conclusion," he said.

Globalstar is a partnership formed in 1994 by satellite firm Loral Space & Communications and Qualcomm. Loral owns about 38 percent of Globalstar.

Globalstar Telecommunications, the public Globalstar entity, owns more than 40 percent of the business. Qualcomm and several other companies own the remainder.

Globalstar, whose stock was recently moved to the Nasdaq SmallCap Market list after nearly being de-listed, previously warned that it may seek bankruptcy protection if it cannot restructure.

In May, Globalstar reported a first-quarter net loss applicable to ordinary partnership interests of $145 million, compared with a loss of $216 million a year ago.

Shares of Globalstar Telecommunications closed flat at 33 cents and American Depository Receipts of Ericsson closed up 2 cents to $5.40 on Nasdaq. Globalstar has underperformed the Nasdaq telecommunications index by more than 88 percent over the past year.

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