Inmarsat Expects Only Brief Delay in First Global Xpress Launch on Proton

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PARIS — Mobile satellite services operator Inmarsat on Aug. 2 said it still expects to launch the first of three Ka-band Global Xpress mobile-broadband satellites this year aboard a Russian Proton rocket despite the rocket’s grounding following a July 2 failure.

In a conference call with investors, Inmarsat Chief Executive Rupert Pearce said Proton’s historic ability to return to flight quickly after failures likely will be demonstrated again following the most recent failure. 

Given that the three Global Xpress launches are spaced out between 2013 and 2014, he said, it is likely that the global commercial availability date of the service will remain late 2014 or early 2015 and will not be delayed.

“We expect a short delay of maybe a couple of months” to the first launch, which had been scheduled for this autumn, Pearce said. “We remain confident that our launch strategy remains appropriate.”

Pearce nonetheless confirmed that Inmarsat is reviewing its options for a fourth Global Xpress satellite that could be launched within 30 months of a contract award. London-based Inmarsat has been asking multiple satellite manufacturers to indicate how quickly they could build such a satellite. 

Inmarsat also has options with Boeing Space and Intelligence Systems of El Segundo, Calif., for two more Global Xpress spacecraft in addition to the three Boeing is now building. 

Inmarsat’s investor call came 24 hours after the earnings release by competitor Iridium Communications of McLean, Va., during which Iridium said it would miss its revenue and profit targets and would seek to renegotiate loan covenants of its principal credit facility.

Inmarsat has had some of the same difficulties as Iridium with the decline in U.S. government purchases of commercial satellite capacity. But in other respects Pearce sought to portray Inmarsat as doing well in precisely those areas where Iridium is facing near-term challenges.

Where Iridium reported reduced sales of its satellite handsets, Inmarsat reported a nearly 73 percent increase in its land-mobile services revenue for the six months ending June 30 compared with the same period last year.

Average monthly revenue for Inmarsat’s IsatPhone Pro handset is increasing as Iridium’s revenue is decreasing, Pearce said.

Iridium’s maritime product, OpenPort, has suffered a component glitch that has caused the service to fail and resulted in customer defections even as Inmarsat’s maritime business, especially for data links, is reporting a 7 percent revenue increase for the first half of 2013.

In the kind of schadenfreude that is not unusual among mobile satellite operators, Pearce said: “It’s obviously with deep regret that we learned of Iridium’s problems in maritime. There had been rumors for a long time.”

“We’re leaving Iridium in the dust,” Pearce said. “We’re displacing them as the leader in the hand-held market.” Iridium has maintained that it continues to generate more revenue from hand-held satellite phones than anyone else, and that this metric is more important than the number of handsets sold in a given period.

Inmarsat Chief Financial Officer Rick Medlock said the U.S. troop withdrawal from Afghanistan, which has been eroding Inmarsat’s land-mobile revenue for some time, looks ready to stabilize, with Afghanistan-generated sales likely to level off at about $10 million per year.

For the first six months of 2013, Afghanistan-based revenue declined by $3.7 million compared with the previous year, Inmarsat said.

Pearce said the U.S. government presents an opportunity for Inmarsat to make inroads in Iridium’s business. He said the reduced revenue owing to the U.S. budget impasse and its across-the-board spending cuts should not obscure the fact that, over time, the U.S. government “is a real growth opportunity still.”

Pearce, like other commercial satellite fleet operators, is counting on U.S. government budget pressures ultimately to nudge U.S. military commanders in the direction of buying more commercial satellite capacity, not less.