Inmarsat To Enter Satellite Telephone Market

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  Space News Business

Inmarsat To Enter Satellite Telephone Market

By PETER B. de SELDING
Space News
posted: 13 March 2006
11:19 am ET


Mobile satellite services provider Inmarsat offered an olive branch to rival Mobile Satellite Ventures (MSV), saying the two companies could coexist in North America despite their competing claims on L-band radio spectrum.

In a March 9 conference call reporting the London-based company’s financial results, Inmarsat Chief Executive Andrew Sukawaty appeared to open the door to a possible joint venture with MSV in providing a hybrid terrestrial-satellite service in the United States and Canada.

Industry officials have speculated for months that Inmarsat and Reston, Va.-based MSV could join forces in offering L-band mobile satellite services coupled with a network of ground-based signal amplifiers, known as Ancillary Terrestrial Components, or ATCs.

U.S. and Canadian regulators have granted mobile satellite companies the right to deploy a network of ATCs without paying for the spectrum, as long as the user terminals can communicate with both the satellite and the terrestrial ATC network.

The regulatory authorities have concluded that without free use of their satellite spectrum for ground-based services, no mobile satellite company will be able to profitably offer ubiquitous coverage. Guaranteeing the existence of a satellite service in times of emergencies that disable terrestrial communications is a regulatory priority.

MSV has ordered three satellites from Boeing Satellite Systems International and is seeking partners to finance the ATC network.

Inmarsat, which already has a profitable business offering voice and data services via satellite globally, has launched two Inmarsat 4 spacecraft that are capable of providing the hybrid satellite-ATC service that MSV is seeking.

Industry estimates are that it will cost at least $5 billion to deploy an ATC network in the United States alone.

Without mentioning MSV by name, Sukawaty appeared to be laying the groundwork for a future collaboration between the two companies during the conference call. Inmarsat and MSV have a long-standing dispute at the U.S. Federal Communications Commission over the division of L-band spectrum. Sukawaty said MSV and Inmarsat could coexist despite this.

He said any company seeking to deploy a satellite-ATC network should consider Inmarsat as a partner because Inmarsat’s $1.5-billion investment in its new-generation satellites already has been made.

MSV officals have said their three-satellite contract with Boeing is valued at less than $1 billion, a figure Sukawaty said is unrealistic.

“We think it’s a minimum of $1 billion in capital investment, and probably closer to a billion and a half,” Sukawaty said, noting that the FCC has said any hybrid system must have a spare satellite on hand in case an operating satellite fails.

Inmarsat Chief Financial Officer Rick Medlock said revenues of $100 million per year to Inmarsat might be possible following deployment of a satellite-ATC network, but he cautioned that this figure was “highly speculative.”

Sukawaty also said Inmarsat plans to have a hand-held satellite telephone in service by late 2008 in a bid to take advantage of the coming weakness of its competitors.

Inmarsat’s two rivals in offering global satellite telephony, Iridium and Globalstar, operate low-orbiting constellations of satellites that will need to be replaced around the end of the decade.

Both Iridium and Globalstar are weighing possible moves away from the costly low-orbiting constellations. Sukawaty said he doubts whether either competitor will stay with its current design, saying anyone who would fund a low-orbiting constellation today “should have his head examined. It’s insanity.”

Inmarsat hopes to take advantage of the Iridium and Globalstar transitions to take a large slice of the global satellite-telephone market, whose annual revenues are estimated at about $550 million.

Sukawaty said Inmarsat would need to spend no more than $50 million to $60 million over two years to introduce a hand-held product to its existing laptop computer-sized product line.

Inmarsat reported 2005 revenues of $472.5 million, a 3-percent increase over 2004. Aeronautical revenues, while still relatively small at $23 million, were up 34 percent. Maritime revenues, Inmarsat’s largest business, grew 6.2 percent to $267 million. The company’s leasing business was up 7 percent, to $61 million.

Land-based services were the only problem area. Revenues declined by nearly 9 percent, to $122 million, as Inmarsat continued to face pressure from the two resurgent satellite-telephone constellations, Globalstar and Iridium, as well as regional player Thuraya.

Medlock said that as of March, about 16,000 Inmarsat broadband mobile terminals, called BGAN, had been ordered by BGAN distributors. Early indications of the market appeal of BGAN will not be available before mid-2006, he said.

Comments: pdeselding@compuserve.com