PARIS — Mobile satellite services provider Inmarsat delivered March 7 what it said is proof that selective price hikes have not alienated customers and that its handheld telephone is outselling competitor Iridium’s higher priced handset.
London-based Inmarsat, whose all-Ka-band Global Xpress satellites are scheduled to begin launching late this year, said it is locking in future Global Xpress maritime customers by getting ship owners to sign up for a bundled L- and Ku-band service — with Inmarsat purchasing the Ku-band capacity from competing satellite operators. As Global Xpress becomes available, these customers will be moved from Ku-band to Inmarsat’s own Ka-band satellites.
Inmarsat Chief Executive Rupert Pearce, in a presentation to investors on Inmarsat’s 2012 financial results, said the company is confident that commercial launches of Russia’s Proton rocket will resume in the coming weeks, in time to keep to Inmarsat’s schedule of a Global Xpress satellite liftoff this year.
Russia’s Proton rocket has suffered three failures in less than two years, but Pearce said the vehicle has a demonstrated record of returning to flight quickly after launch anomalies, and that this should mean no delay for Global Xpress.
All three Global Xpress satellites, under construction by Boeing Space and Intelligence Systems of El Segundo, Calif., are scheduled for launch aboard Russian Proton rockets in 2013 and 2014.
Inmarsat’s core maritime satellite services business is under attack by operators of Ku-band satellite fleets that are extending their coverage to the oceans to capture demand for broadband access at sea. Several companies, including KVH Industries, have developed shipboard satellite terminals called VSATs (for very small aperture terminals) offering broadband access that is less expensive than traditional L-band connections offered by Inmarsat.
In April 2011 Inmarsat purchased ShipEquip, an established maritime VSAT provider, to take advantage of this trend. Inmarsat bundled its L-band service and ShipEquip’s VSAT offering into a subscription package, called XpressLink, that encourages subscribers to migrate to the Ka-band Global Xpress when that service becomes available worldwide in late 2014 or early 2015.
As of Dec. 31, ShipEquip had 1,186 ships under contract, of which 333 were XpressLink customers, versus 132 XpressLink subscribers as of March 31.
To stop subscribers from installing an Inmarsat L-band terminal as an emergency backup while using only a VSAT connection for their daily communications, Inmarsat began charging customers monthly fees even if there was no usage of the L-band service.
Inmarsat argues that on a per-megabyte basis the new subscription model means lower monthly charges for most Inmarsat customers — with the exception of what Inmarsat called “free riders” who installed the Inmarsat terminal but did not use it.
Pearce said the company’s results demonstrate the value of the selective price increases. In 2012, Inmarsat Global’s total maritime revenue grew by 14.6 percent, to $411.2 million. Maritime voice revenue dropped, as expected, by nearly 12 percent, to $79.7 million as customers moved away from voice links toward messaging.
Maritime data revenue more than made up for the decline in voice, rising by 23.4 percent in 2012, to $331.5 million.
Inmarsat’s highest-speed L-band maritime product, called Fleet Broadband, booked 7,900 new subscribers in 2012. Average monthly revenue per subscriber, after dropping in early 2012, climbed past where it was before the price increases and remained there through the end of the year. Pearce said Fleet Broadband subscriber revenue in the last three months of 2012 set a record.
New additions to Fleet Broadband, which had averaged 2,000 per quarter for the past year, dropped to 1,500 in the last three months of 2012. Pearce said this is likely temporary, and that the company already booked 1,300 new ships as customers in January and February of this year.
Inmarsat’s revenue from U.S. and allied military activities in Afghanistan has been decreasing as military forces leave the country. Land-mobile revenue in 2012 was down nearly 13 percent, to $132.4 million, because of the decline in Afghanistan and the absence of one-time events, such as the Arab Spring revolts and the Japanese tsunami that in 2011 combined with Afghanistan to provide some $30 million in revenue that did not recur in 2012.
The company still has $15 million to $20 million in annual Afghanistan-related revenue, however.
The growing popularity of Inmarsat’s ISatphone Pro hand-held device in 2012 helped reverse a long-term downward trend in the company’s land-mobile voice business. Revenue in 2012 was up 86 percent, to $14.3 million.
Inmarsat counted more than 84,000 active ISatphone Pro subscribers as of Dec. 31, up from 43,000 a year earlier, and said it has outsold competitor Iridium Communications, the leader in hand-held satellite telephones, in every quarter since late 2011.
Total Inmarsat plc revenue for 2012 was $1.34 billion, down 5 percent from 2011. The decline is because of a loss of payments from struggling U.S. broadband-wireless provider LightSquared, which up to now has paid Inmarsat nearly $550 million in return for Inmarsat’s cooperation in the use of Inmarsat-licensed L-band spectrum in the United States.
LightSquared is now in Chapter 11 bankruptcy reorganization after U.S. regulators suspended its license following concerns that LightSquared’s business would interfere with U.S. GPS positioning, navigation and timing signals.
Inmarsat has agreed to let LightSquared suspend payments for two years, to mid-2014, to give LightSquared time to recover.
Taking away the LightSquared effect, Inmarsat revenue in 2012, at $1.28 billion, was up 6 percent from 2011.
