Inmarsat Remains Confident Global Xpress Will Be a Hit with U.S. Military

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PARIS — Mobile satellite services operator Inmarsat on March 6 said deployed U.S. military forces will begin using the first Inmarsat Global Xpress Ka-band satellite this spring, before the satellite is declared operational, to debug the system and whet the military’s appetite in advance of commercial service starting in July.

The satellite, the first of three Ka-band spacecraft that will form Inmarsat’s Global Xpress mobile broadband network, is located at 62.7 degrees east, over the Indian Ocean. The other two satellites are scheduled for launch this year, with full global network operations to start in 2015.

In a conference call with investors, Inmarsat officials said they remain as confident as ever about Global Xpress’ future popularity with the U.S. Defense Department. The spacecraft, built by Boeing Space and Intelligence Systems of El Segundo, Calif., have military and civil Ka-band capacity and are designed to provide up to 50 megabits per second of throughput to mobile platforms using a 60-centimeter antenna.

Boeing has committed to purchasing a big chunk of the early Global Xpress capacity to sell to U.S. government users. Honeywell has made a similar commitment and will build the avionics package to adapt business jets to use Global Xpress. Europe’s Airbus Defence and Space, which is the biggest independent Inmarsat reseller, in December signed on for Global Xpress as well.

Inmarsat’s U.S. defense business has decreased in the past year with the U.S. budget tightening and the planned withdrawal of troops from Afghanistan. But while this decline is the main reason London-based Inmarsat reported a 2.2 percent drop in total revenue for 2013, to $1.25 billion, its effect has been concentrated in the company’s retail sales channels, which are less profitable than the wholesale business.

The consequences on Inmarsat profitability were relatively modest. Company EBITDA, or earnings before interest, taxes, depreciation and amortization, was flat for the year at $640 million.

Inmarsat said the drop in U.S. government business is likely to be a drag on growth in 2014 as well. The company nonetheless reiterated its forecast that, for the next three years, its wholesale mobile satellite services revenue will grow at an average annual rate of 8-12 percent.

The three-satellite Global Xpress system is costing Inmarsat around $1.25 billion. Inmarsat agreed to spend another $150 million this year on a fourth Boeing-built Global Xpress spacecraft, which will be stored on the ground or in orbit until needed in the event one of the three others has a problem. It could be available for launch in 2016.

Inmarsat Chairman Andrew Sukawaty said that despite the U.S. defense spending cutbacks, U.S. forces continue to modernize around Ka-band with the Air Force’s Wideband Global Satcom (WGS) constellation, which when fully deployed will have 10 satellites.

Global Xpress will operate as a gapfiller between the WGS coverage areas and should offset the continued decline in use of Inmarsat’s heritage L-band satellite services, Inmarsat has forecast.

Sukawaty said Inmarsat’s first-to-market lead will not last forever, but noted that to date there is no competing global mobile broadband system under construction, giving Inmarsat at least several years to address the market for civil, military and commercial mobile Ka-band.

Competitors Iridium and Globalstar, whose constellations are global, do not have sufficient bandwidth to meet broadband applications, he said. Thuraya, whose satellites are, like Inmarsat’s, in geostationary orbit, covers a large region, but high-end users, military and commercial, favor a network available worldwide.

Satellite fleet operator Intelsat is assembling a near-global network of satellites called Epic that will offer Ku-band broadband. Sukawaty said the Epic system, to be deployed starting in 2016, continues to lack a global footprint, as does ViaSat Inc.’s Ka-band network.

Inmarsat’s aero-mobile business has been growing fast in percentage terms for several years, but now appears to be ready for takeoff as Global Xpress and the willingness of airlines to invest in crew and passenger broadband access arrive at the same time.

Inmarsat’s aviation sector grew 13.2 percent in 2013, to $114 million, and this year looks just as good. 

“Aviation is our fastest-growing sector,” Sukawaty said. “Now it’s mainly for government and business aviation, but we appear to be at an inflection point. There are multiple bids requests coming out from airlines that we’re responding to.”

Inmarsat’s core maritime sector remains the company’s largest business. Total maritime connectivity revenue grow by 4.8 percent in 2013, to $431 million, as Inmarsat’s Fleet Broadband L-band product gained market share. The company said it added 7,200 Fleet Broadband subscribers in 2013, bringing the installed base of subscribers to 41,000 by the end of 2013. 

Iridium’s maritime business stumbled in 2013, but the hardware defect that was cited as the cause has since been corrected. Iridium has said it expects to better compete with Fleet Broadband in 2014.

Inmarsat Chief Executive Rupert Pearce said Inmarsat’s maritime business, which includes ships using satellite links in Ku-band from Intelsat and other fleet operators, is successfully luring these Ku-band subscribers to Global Xpress.

Inmarsat signs up a Ku-band customer to a five-year contract called XpressLink with the understanding that, after two years, the customer will migrate to Global Xpress.

Inmarsat said XpressLink had signed 792 ships by the end of 2013, out of 1,478 ships that Inmarsat serves with high-speed satellite links, called VSATs. Pearce said Inmarsat has been winning 40-60 percent of the new bid requests for maritime VSAT links in recent months.

 

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