Key Points:
- Amazon acquires Globalstar for $11.6 billion, intensifying satellite competition.
- Amazon will launch a direct-to-device service in 2028.
- The deal includes radio frequency licenses crucial for Amazon’s satellite plans.
- Amazon also announced Apple’s emergency messaging will transition to Amazon Leo.
Amazon.com Inc.’s $11.6 billion deal to buy Globalstar Inc. significantly increases its competition with Elon Musk’s Starlink in satellite communications. This market is expected to double, reaching $200 billion in the coming years.
On Tuesday, Amazon announced its plans to acquire the satellite operator for a combination of stock and up to $90 a share. The company also revealed that in 2028, it will launch a direct-to-device service, providing connectivity straight to people’s mobile devices as an alternative to traditional cell towers.
Through Globalstar, Amazon will gain crucial radio frequency licenses. These licenses are key for the company to advance its satellite-to-mobile services. The e-commerce giant has been trying for years to enter the satellite services market to find new growth beyond its massive retail and cloud-computing businesses. However, its efforts have faced setbacks due to delays from rocket builders and a slow start to its manufacturing operations.
Meanwhile, Musk’s Starlink, a division of SpaceX, has moved quickly ahead. It boasts a network of 10,000 satellites in orbit, serves 10 million people, and has built a reputation for reliable internet service in hard-to-reach areas.
Panos Panay, senior vice president of devices and services at Amazon, stated in the deal’s announcement, “customers can expect faster, more reliable service in more places — keeping them connected to the people and things that matter most.”
Amazon is offering Globalstar shareholders either $90 in cash per share or 0.32 shares of Amazon stock, with the stock value capped at $90 a share. This represents a nearly 117% premium over Globalstar’s price from late October, before Bloomberg reported that the company was looking into a potential sale.
Globalstar shareholders will have the option to choose whether they want to receive a mix of cash and Amazon stock. The cash amount will be adjusted based on how many shareholders choose that option, with the total cash capped at 40% of the shares. This acquisition, which is Amazon’s second largest after its Whole Foods takeover, is expected to be finalized in 2027.
Bloomberg News had previously reported that Amazon was in advanced talks to buy Globalstar. Following the news, Globalstar’s shares jumped 9.6% to close at $79.91 in New York. Amazon shares rose 3.8% to $249.02. AST SpaceMobile Inc., a major competitor in the direct-to-device segment, saw its shares fall almost 11% to $88.57.
Amazon also announced on Tuesday that Apple Inc.’s emergency messaging service will switch to Amazon Leo, the company’s newly renamed broadband satellite network. Adding Apple as a customer could be a significant win for Leo, which has lagged behind SpaceX’s Starlink in securing major partners like airlines.
