PARIS — Mobile satellite services operatorhas “not ruled out” bidding for the mobile services distribution business of Airbus Defence and Space, which Airbus has put up for sale just three years after its $960 million purchase of what was then called Vizada.
Inmarsat also warned investors that it was not ready to say the decline in its government business had hit bottom but that the rate of decline appears to be slowing.
Inmarsat hopes to give new impetus to its government business starting in mid-2015, when the company expects that all three of its Global Xpress Ka-band mobile broadband satellites will be in orbit. The satellites are carrying payloads with both civil and military Ka-band capacity.
Inmarsat began limited commercial service in July on the lone Global Xpress satellite in orbit but the system’s full potential will not be reached before all three spacecraft are operational.
London-based Inmarsat is one of several customers awaiting launches on Russian Proton rockets. Despite lingering concerns about whether an October Proton launch, of a Russian telecommunications satellites, was an unblemished success, Inmarsat Chief Executive Rupert Pearce said the company remains optimistic that the second Global Xpress satellite will be launched in late January, with the third following in time for a mid-2015 start of global service.
Airbus is selling only the commercial piece of the former Vizada business, which accounts for a majority of its revenue. Since the Airbus announcement in September, industry speculation has been that Inmarsat may be forced to stay out of the bidding by antitrust concerns.
Inmarsat’s past purchases have taken the company further in to the downstream services end of the business where it competes with other Inmarsat resellers. A purchase of the Airbus/Vizada portfolio would give Inmarsat a dominant share of the mobile satellite services reseller business in addition to its role as wholesale provider of satellite capacity.
In a Nov. 6 conference call with investors, Pearce said Inmarsat has no intention of leaving its wholesale heritage, but that the Airbus announcement is of more than passing interest to the company.
“We are obviously keenly interested in who comes to own” Airbus’ ex-Vizada business, Pearce said. “We have not ruled out eventually becoming the owner ourselves, although strategically we have no desire to be further downstream in this business. … The relationship between wholesaler and value-added reseller works extremely well.”
Pearce said the profitability of the Airbus mobile satellite services business “suggests that anyone buying it would want to build on that, and not break it. I’m confident that the Vizada business would be a positive for us.”
As a mobile satellite capacity provider whose business features fewer long-term contracts, Inmarsat felt the effects of the coalition troop withdrawal from Iraq and Afghanistan, plus U.S. Defense Department budget cuts, sooner than its fixed satellite services counterparts such as commercial fleet operators, and .
By that same logic, Inmarsat should be among the first to benefit from any sign of an upturn.
Pearce said the near-term signs are not good but are better than they were at the beginning of the year.
“The decline in U.S. government revenue has not yet bottomed out but it is materially slowing,” Pearce said, noting the company’s expansion into other government markets, including China, which should develop in the coming years.
For the nine months ending Sept. 30, Inmarsat’s government revenue fell by 24.5 percent, to $236.3 million, the company reported Nov. 6.
For the last three months of that period, revenue fell by 18.9 percent, to $76.3 million.
“What you’re seeing is a deep and profound negative impact from budget constraints and a reduction in operating tempo,” Pearce said of military demand. The slow in the rate of decline could signal a gradual upturn, “but it’s still early days and I would not call any turn yet,” he said.