Rignet To Buy Global Xpress Capacity Under Partnership Pact with Inmarsat

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PARIS — The competitive playing field for delivering broadband access to the global energy sector become clearer on Aug. 2 with the announcement that London-based mobile satellite services provider Inmarsat had struck a strategic partnership agreement with Rignet Inc. of Houston that includes a Rignet commitment to purchase capacity aboard Inmarsat’s Ka-band Global Xpress satellite system.

Rignet is second to Harris CapRock Communications of Fairfax, Va., in delivering bandwidth to the energy sector. Harris CapRock is leveraging Luxembourg- and Washington-based Intelsat’s Epic C- and Ku-band high-throughput offer, which will include satellites scheduled for launch starting in 2015.

Intelsat said Aug. 1 that Harris CapRock has secured more than 600 megahertz of capacity on up to five Epic satellites, making it one of three anchor customers for the Epic project.

Rignet appears to have entered a similar, if smaller, take-or-pay arrangement with Inmarsat as part of an agreement that coincides with Rignet’s purchase of Inmarsat’s energy broadband business.

The business includes an equity stake in a Russian VSAT, or very small aperture terminal, network operator and both WiMax and microwave communications businesses in the Gulf of Mexico.

In an Aug. 2 conference call with investors, Rignet officials said the collection of Inmarsat assets they are buying reported $81 million in revenue in 2012. Rignet is paying $25 million in cash for those assets.

The remarkable 0.31-times-sales transaction ratio is partly explained by the fact that the Inmarsat assets have very low profit margins and require regular capital spending to maintain.

Inmarsat Chief Financial Officer Rick Medlock said during an Inmarsat conference call Aug. 2 that the business being sold had a gross profit margin of around 5 percent.

“The price we received is a recognition of that,” Medlock said.

Rignet Chief Executive Mark Slaughter said he is counting on Rignet to move the margins of the Inmarsat business to 8-10 percent within a year of the purchase, which is expected to close by early 2014 if not before.

Slaughter said Rignet’s agreement to purchase Inmarsat Global Xpress Ka-band capacity for four years, starting as early as 2015, followed a long evaluation process during which Rignet reviewed all the high-throughput-satellite alternatives coming onto the market.

The decision to go with Inmarsat, he said, was based on the fact that Global Xpress, which as currently planned is a three-satellite fleet covering the globe except for the polar regions, offers global reach to the nomadic energy industry.

“We’re not buying beams in a region,” Slaughter said. “Our customers are often in multiple nations.”

As was the case with Boeing Space and Intelligence Systems of El Segundo, Calif., which is building the three Global Xpress satellites and agreed to sell capacity on the system to U.S. government customers in a take-or-pay arrangement, and also agreed to become a distributor of Inmarsat’s L-band service, Rignet too will become a Ka- and L-band distributor for Inmarsat.

Rignet Chief Financial Officer Marty Jimmerson said Rignet has not signed any exclusivity agreements with Inmarsat and could end up purchasing high-throughput satellite capacity elsewhere in addition to its four-year Global Xpress commitment.

Rignet did not specify its minimum purchase obligations under the Global Xpress agreement, but Jimmerson said one-third of the commitment would be used to serve the business Rignet has just purchased from Inmarsat.