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(Sharecast News) - Amazon said on Tuesday that it has agreed to buy satellite services operator Globalstar in an $11.5bn deal.
Under the terms of the acquisition, Amazon will pay $90.00 in cash per share, or 0.3210 shares of Amazon common stock with a value capped at $90 per share.
The deal will allow Amazon's Leo satelitte business to add direct-to-device (D2D) services to its low Earth orbit satellite network and extend cellular coverage to customers beyond the reach of terrestrial networks. In addition, Amazon and Apple announced an agreement for Amazon Leo to power satellite services for iPhone and Apple Watch, including Emergency SOS via satellite.
The new capabilities are part of Amazon's long-term vision for space-based connectivity, and Amazon said it plans to work with mobile network operators (MNOs) and additional partners to deliver on that vision "and extend reliable, high-speed connectivity to customers, no matter where they are in the world".
Panos Panay, senior vice president of Devices & Services at Amazon, said: "There are billions of customers out there living, traveling, and operating in places beyond the reach of existing networks, and we started Amazon Leo to help bridge that divide.
"By combining Globalstar's proven expertise and strong foundation with Amazon's customer-obsession and innovation, customers can expect faster, more reliable service in more places- keeping them connected to the people and things that matter most. We're excited to support Apple users through the Leo D2D system, and look forward to working with mobile network partners to help extend coverage to every corner of the planet."
At 1520 BST, Globalstar shares were up 9.7% at $79.96, while Amazon was 4% higher at $245.62.
Dan Coatsworth, head of markets at AJ Bell, said: "Amazon's acquisition of Globalstar means it is snapping even harder at SpaceX's heels. It elevates Amazon's position in the space economy and means Elon Musk now has a competitor with deep pockets. Globalstar lacks the scale of SpaceX but is now in a stronger position to play catch-up.
"Amazon is building a low earth orbit satellite network to provide fast internet access from space for more remote locations on earth - such as rural areas or on ships. This is precisely what SpaceX's Starlink service offers, making Amazon a direct rival.
"Buying Globalstar gives Amazon the capability to connect via space to smartphones without needing special hardware. For now, that means basic services like emergency messages or texts rather than full internet connectivity.
"What makes this deal more interesting is Apple's involvement both as a customer of Globalstar and a shareholder. Apple already uses Globalstar's services for emergency SOS on certain iPhones and Apple Watch models and has a 20% equity stake in the satellite services group.
"Apple will continue to use Globalstar's service under Amazon's ownership, creating a working relationship between the two tech giants.
"Amazon is offering a choice of either stock or cash to Globalstar investors, but the cash component is capped at 40% of total Globalstar stock. That implies Apple could be paid partially in Amazon shares, raising questions about where else the two companies might want to work together.
"What's certain is that the space race is heating up and big money is expected to be ploughed into this industry over the coming years. Amazon's involvement will only fuel more investor interest, and it could spur SpaceX into upping its game and making sure it maintains the massive lead it currently has over rivals."