Asking Price Remains Obstacle to Thuraya Sale
WASHINGTON — Mobile satellite services operator Thuraya is looking to sell itself to rival Inmarsat in a transaction that has long been expected but has been stalled by the two sides’ inability to agree on a price, industry officials said.
Whether this time will be any different is unclear. From earlier self-valuations of around $600 million, Thuraya Telecommunications Co. of the United Arab Emirates has recently come down in price to about $300 million, which may still be too high in the judgment of London-based Inmarsat.
The correlation of forces between the two companies remains what it has been since Thuraya first explored a transaction in 2012: Thuraya needs a deal more than Inmarsat.
But since hiring Samer Halawi, a former Inmarsat executive, in 2011 — Thuraya’s nadir in terms of financial performance — the company has boasted consecutive years of growth. Halawi said March 18 here during the Satellite 2015 conference that the company’s 2014 revenue was $140 million, up 14 percent over 2013 on strong sales of its Satphone handset. The company had 220,000 subscribers as of Dec. 31, he said, up from around 210,000 in 2013.
Halawi said Dubai-based Thuraya’s equipment revenue has grown by 72 percent per year, on average, since 2011, with the Satphone continuing to outsell the SatSleeve product that allows subscribers to use their smartphones as satellite phones by fitting them into a small Thuraya-connected case when they are outside cellular coverage.
Formed in 1997 with about $500 million raised from investors led by the Emirates Telecommunications Co., Etisalat, Thuraya has launched three large Boeing-built L-band mobile communications satellites. The first, launched in 2000, has been retired.
Thuraya 2, launched in 2003, operates at 44 degrees east over the company’s core Middle Eastern, European and African markets. Thuraya 3 launched in 2008, operates from 98.5 degrees east and expanded the company’s reach into Asia and Australia.
Thuraya has not ordered a new satellite, and Thuraya 2 is only a few years away from retirement. If no transaction occurs, the company may be forced to move Thuraya 3 from the Asia-Pacific region to its primary slot over the Middle East, sacrificing at least a portion of its gains in Asia over the last six years.
Inmarsat is already flush with cash and its Global Xpress program — three Boeing-built Ka-band satellites for commercial and military communications — will enter full global service late this year assuming a successful launch this spring of the third Global Xpress satellite on a Russian Proton rocket.
Inmarsat has said it intends to continue providing L-band services, its core business, indefinitely and will be ordering an Inmarsat-6 L-band satellite system in a few years.
Thuraya also operates in L-band. But beyond its current business, a Thuraya purchase could give Inmarsat smoother regulatory approval in the Middle East for its Global Xpress service given Thuraya’s connections in the region.
In addition to Etisalat, Thuraya’s current investors include satellite fleet operator Arabsat of Riyadh, Saudi Arabia; Dubai Investments; Invest AD; Gulf Investment Corp.; Jeffries; Perry Capital; and Boeing, which took a small equity stake in return for the Thuraya satellite contract.
Two industry officials said the sale of Thuraya to a company outside the United Arab Emirates faces regulatory obstacles that would need to be overcome to give Inmarsat a clear controlling stake. What is more, one industry official said, some Thuraya investors have resisted a sale in the past if the transaction does not result in their being paid 100 cents on the dollar of their initial investments.
Officials said that outside of Inmarsat, it was difficult to see any prospective buyer of Thuraya. Competitors Iridium Communications and Globalstar of the United States, which operate satellite constellations in low Earth orbit for mobile services, are not viewed as being in a position to make a bid.
“Inmarsat is faced with letting Thuraya slowly decline on its own, or salvaging it in a deal that could put Thuraya’s regional strength to service for Inmarsat,” one industry official said.
El Segundo, California-based Boeing Space and Intelligence Systems is a thread running through most of the geostationary L-band mobile satellite systems.
Boeing is building two large L-band satellites for the Mexican government, is prime contractor for Thuraya’s satellites and also built two satellites for LightSquared of the United States, which has been in prolonged Chapter 11 bankruptcy proceedings but has continued to pay Inmarsat an annual fee for future use of Inmarsat’s spectrum in the United States.
Halawi declined to comment on any possible strategic transaction. Inmarsat spokesman Christopher McLaughlin said the company would decline comment beyond saying Inmarsat is not in negotiations with Thuraya.