LONDON — Mobile satellite services provider Inmarsat on Nov. 7 said it is seeing continued weakness in its U.S. government business but that for now the effect is limited and that its core business continues to grow.
In a conference call with investors, London-based Inmarsat nonetheless warned that what it had hoped was a short-term dip in U.S. government business following the U.S. budget crisis and the troop-pullout from Afghanistan may drag on longer than expected.
The U.S. government decline was the main reason — a drop in Russian revenue was another — that Inmarsat reported a 5.8 percent decline in total revenue, to $306.9 million, for the three months ending Sept. 30 compared with the same period a year ago.
Much of the revenue decline was from services Inmarsat supplies to the U.S. government from third-party satellite sources at relatively low profit margins. As a result, Inmarsat said its earnings before interest, taxes, depreciation and amortization, or EBITDA, was up 3.6 percent, to $168.7 million, despite the dip in revenue.
Inmarsat Chief Executive Rupert Pearce said the company’s core maritime data business and its land-mobile satellite telephone division both reported increased revenue and subscribers. Inmarsat also reported an accelerated growth of its XpressLink service, which offers maritime customers a Ku-band link using third-party satellite capacity combined with Inmarsat’s L-band product. XpressLink customers commit to transitioning to Inmarsat’s Global Xpress Ka-band when that is available in late 2014.
Pearce said Inmarsat added 138 ships to the XpressLink customer base in the three months ending Sept. 30, bringing the total to 1,386. This compares with 107 new ships in the previous quarter, and 85 ships in the first three months of 2013.
The backlog of ships that had signed on to XpressLink but were waiting to be fitted with the gear stood at 300 as of Sept. 30. In October, Inmarsat signed on with a maritime fleet with more than 140 ships.
Inmarsat’s IsatPhone Pro satellite telephone grew its subscriber base to 92,000 as of Sept. 30, suggesting that growth was continuing but had slowed in recent months. Pearce said gross adds totaled 7,000 but that Inmarsat removed 5,000 subscribers from its reporting because they had not used their phones.
Inmarsat’s Global Xpress, a three-satellite constellation of Ka-band satellites in geostationary orbit, will begin launching by mid-December, a date that had been in question following the July failure of the Russian Proton rocket that Inmarsat is using to launch all three Global Xpress spacecraft.
A mid-December launch is scheduled to be followed by the launch of the two others in 2014, with global service available by the end of 2014 and full commercial service starting early in 2015.
Inmarsat recently ordered a fourth Global Xpress satellite from Boeing Space and Intelligence Systems of El Segundo, Calif., exercising an option in the original three-satellite contract. The fourth spacecraft will remain on the ground unless needed following a launch failure of one of the first three, and likely will be launched to augment Global Xpress service.
Global Xpress has two payloads, one using commercial Ka-band frequencies and the other using military Ka-band frequencies. The military Ka-band will be used as an overlay on the U.S. Defense Department’s Wideband Global Satcom (WGS) constellation of Ka-band satellites, in regions or periods when, in a given region, WGS capacity is insufficient to meet military demand.
Global Xpress’ military payload is available to all 28 NATO alliance members, plus Australia and New Zealand, and access to it may be extended to other nations as well.
Pearce said Inmarsat has no reason to believe that the U.S. government budget crisis will have a material effect on Global Xpress. As a condition of its satellite manufacturing contract, Boeing has a take-or-pay commitment to Global Xpress capacity. Boeing has established a services division to sell the capacity to the U.S. government.
Pearce said the Boeing commitment under the contract will not move as a function of the U.S. budget turmoil. He said there is a global shortage of military Ka-band given the demand on the horizon from mobile platforms.
He said Inmarsat still has between 20 percent and 30 percent of its forecasted Global Xpress business for the first five years in backlog, including the Boeing commitment.
Inmarsat continues to negotiate with Astrium Services, which sells X-band satellite capacity to allied governments, on an Astrium bulk purchase of Global Xpress military Ka-band. Astrium officials have said they are hesitating before committing because the company’s anchor military customer, the British Ministry of Defence, as yet has no requirement for Ka-band. Inmarsat has opened negotiations with several governments on purchases of Global Xpress capacity.