PARIS — Consolidation among distributors of Inmarsat and other mobile satellite services took a big leap forward Oct. 26 with private-equity company Apax Partners’ purchase of Telenor Satellite Services.
Apax, which in July purchased France Telecom’s mobile satellite division, paid $400 million in cash for the Telenor business, which in 2005 reported revenues of $376.9 million and an EBITDA — earnings before interest, taxes, depreciation and amortization — of $61 million.
Revenues for the first nine months of 2006 were $285.7 million, with EBITDA at $43.7 million, Telenor Satellite Services’ parent company, Telenor ASA of Fornebu, Norway, announced Oct. 26.
With the combination of the Telenor and France Telecom businesses, Apax will generate about 37 percent of London-based Inmarsat’s annual revenues, second only to Stratos Global Corp. of Bethesda, Md. Following its 2005 purchase of rival Xantic, Stratos has a 47-percent share of Inmarsat’s revenue, according to industry estimates.
Stratos’ stock, traded on the Toronto Stock Exchange, rose by more than 10 percent on the day the Apax-Telenor deal was announced, apparently on speculation that Stratos itself might be a takeover target. Stratos shares have dropped by more than 50 percent since the beginning of the year.
Stratos spokeswoman Cindy Hassler said Oct. 26 that the company had made no announcements that might otherwise account for the stock’s movement, which occurred amid unusually high trading volume.
Telenor ASA said it has operated the mobile satellite business since 2002 as a non-core operation and has been looking for an exit for some time.
The parent company announced that it expected to book a one-time gain of about $213 million following the sale.
Telenor ASA Chief Executive Jon Fredrik Baksaas said during an Oct. 26 conference call that the sale to Apax, which is expected to close in early 2007 following regulatory review, was opposed by the division’s employee representatives. Telenor Satellite Services counts 550 employees, of which 40 percent are in Norway and 30 percent are in the United States.
Bjarne Aamodt, chairman of Telenor Satellite Services, said in an Oct. 26 statement that Apax “is a very capable owner. We are pleased that Telenor Satellite Services will now have an owner that is well-positioned to continue the development of the company.”
Apax Partners spokeswoman Agathe Heinrich did not return messages seeking comment on Apax’s strategy in mobile satellite services.
Christopher McLaughlin, a spokesman for London-based Inmarsat, said Oct. 27 that combining the former France Telecom and Telenor businesses by Apax will deprive Inmarsat of around $5 million per year in payments it would have received from the companies had they remained separate.
Inmarsat bills its distribution partners based on annual sales volume, with discounts becoming effective each year as volume targets are hit. A bigger company reaches these targets more quickly and benefits from lower Inmarsat wholesale prices earlier in the year.
McLaughlin said Inmarsat’s strategy remains that of a wholesaler and that the company has no intention of making a bid for its distribution partners . Inmarsat supports consolidation among distribution partners insofar as a stronger, healthier distribution chain is more likely to grow the business, McLaughlin said.
Inmarsat’s contract with its distribution partners comes up for renewal in late 2007.
