PARIS — Mobile satellite services operator Iridium Communications on Oct. 21 said the U.S. Defense Department has committed to purchasing $400 million in Iridium airtime for five years starting Oct. 22.
Iridium also announced that it was trimming the upper end of its service revenue, gross profit and subscriber growth for 2013. In August the company had told investors to expect 10-15 percent growth in billable subscribers; the new forecast is for a 10 percent increase.
Revenue growth, which had been forecast at 6-8 percent for 2013, is now seen as increasing by 6 percent. The company’s estimate of operational EBITDA, or earnings before interest, taxes, depreciation and amortization, was reduced to between $200 million and $205 million, against a previous estimate of $210 million.
The company said it is continuing to evaluate the impact of lower equipment sales and subscriber additions, as well as the Iridium Prime hosted payload initiative, and will issue further details of its longer-term outlook when it presents its financial results Oct. 31.
The U.S. Defense Department contract, which McLean, Va.-based Iridium had told investors to expect, will result in an increase in Defense Department revenue to Iridium over the five-year period.
The company said U.S. government revenue was $61.8 million in 2012. Under the new contract for Enhanced Mobile Satellite Services, U.S. defense revenue to Iridium will be $64 million in fiscal year 2014, $72 million the next year and $88 million per year in the three following years.
The U.S. government accounts for about 20 percent of Iridium’s annual revenue. Iridium said government subscribers started at 32,000 at the beginning of the previous five-year contract and now total 51,000.
Iridium is in the middle of a $3 billion capital investment to build its second-generation constellation of 66 operational satellites in low Earth orbit, called Iridium Next.
Lower-than-expected maritime revenue following a hardware glitch on Iridium shipboard gear is one reason for the lower-than-expected performance. Iridium said it has corrected the problem with replacement hardware.
The company said earlier this year that the maritime revenue shortfall could oblige the company to renegotiate its Iridium Next loan, organized through the French export-credit agency, Coface. Iridium Next satellite launches are scheduled to start in 2015.
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