PARIS
— Mobile satellite services operator Inmarsat reported double-digit increases in revenue and profit for the three months ending March 31 and said its key maritime sector business continues to grow despite the impact of the global recession on commercial shipping.
The company also said it was taking fresh aim at satellite-constellation operators Orbcomm, Iridium and Globalstar with its $10 million purchase of SkyWave Mobile Communications of Canada. The agreement, announced in April, gives Inmarsat a nearly 19 percent stake in SkyWave, a provider of low-data-rate satellite services.
The SkyWave purchase will steer business to Inmarsat’s fleet and give the company a position in machine-to-machine communications, including asset tracking, Inmarsat Chief Executive Andrew Sukawaty said. The move offers considerable potential at little cost to Inmarsat, he said.
The business model – low per-terminal revenue, but a large-volume terminal market – is much different from Inmarsat’s current business, which counts on heavy use of mobile satellite equipment by a relatively low number of subscribers.
In a May 8 conference call, Sukawaty said he expected one or more of the current providers of low-data-rate mobile satellite services to shut down, sweetening the SkyWave revenue potential.
In the conference call, London-based Inmarsat said SkyWave holds long-term potential, and that Inmarsat’s current business continues to do well despite the poor global economy. The company cautioned that it will not necessarily maintain the 72 percent EBITDA (earnings before interest, taxes, depreciation and amortization) margin it reported in the quarter, but said its goal of an average 70 percent margin is within reach.
Sukawaty
said the decision by some maritime fleet owners to take ships out of service, which deprives Inmarsat of service revenue, has been offset by increased market uptake of Inmarsat’s newer Fleet and Fleet Broadband maritime communications services.
Inmarsat
reported that the number of active maritime terminals rose to 162,000 as of March 31, up 11.5 percent from a year earlier. Maritime revenue grew by just 2.3 percent, but Sukawaty said the growth was 7.7 percent after removing the effects of a change in the way Inmarsat attributes volume discounts to its distributors.
On April 15 Inmarsat entered into a new contract with its distributors wherein volume discounts will be reduced. But the discounts that remain will now be distributed quarterly rather than at year’s end.
Sukawaty
said these discounts in the three months ending March 31 had a particularly strong effect on the maritime revenue, depriving Inmarsat of $5 million that was kept by the more-successful distributors instead of being returned to Inmarsat.
Inmarsat
Chief Financial Officer Rick Medlock said that while the company will be paying more in volume discounts in the first and second quarters of each year, the total amount paid per year will be substantially less under the new distribution contract.
Medlock
said more than 50 percent of Inmarsat’s current maritime business for new, higher-speed services comes not from new ships, but from older vessels being refitted with newer Inmarsat gear. A decline in new shipbuilding programs in the financial recession will therefore have a diluted effect on the company’s revenue.
Inmarsat’s
broadband data services for land-mobile terminals rose by 13 percent during the period ending March 31, to $32.1 million. Land-mobile voice services continued their decline, accounting for just $2.4 million.
Sukawaty
said the company is all but surrendering the land-mobile voice business to competitors Thuraya and Iridium while waiting for the arrival of Inmarsat’s own handheld satellite telephone to enter the market in mid-2010.
Inmarsat’s
aeronautical services business grew 32 percent in the quarter compared to the same period a year ago, to $16.8 million. This growth reflects commercial airlines’ introduction of in-flight communications services for crew and passengers despite the poor economy.
Inmarsat’s
total revenue for the three months ending March 31 was $163.4 million, up 10.4 percent over the same period a year earlier. Its subscriber base, meaning the total number of active terminals, rose 7.9 percent, to 248,000.
