The U.S. radio-spectrum auction scheduled for Aug. 9 will increase the value of prospective hybrid satellite-terrestrial systems that several mobile satellite services companies are seeking to develop, Inmarsat Chief Executive Andrew Sukawaty said Aug. 4.
Sukawaty said early bidding for the Advanced Wireless Services (AWS) auction being run by the U.S. Federal Communications Commission has spurred interest in licenses that, unlike the AWS spectrum, cover the full United States.
The AWS spectrum auction has attracted the interest of more than 100 companies — cable operators, satellite-television broadcasters, terrestrial wireless providers and others. But even the biggest of the licenses covers only about 15 percent of U.S. territory.
In an Aug. 4 conference call to discuss Inmarsat’s financial results, Sukawaty said the early AWS bidding “drives the interest in a national license covering every square inch of ground.” Inmarsat is one of several mobile satellite services providers that are positioning themselves to offer hybrid terrestrial-satellite services in the United States using networks of ground-based signal boosters called Ancillary Terrestrial Components, or ATCs.
Deploying an ATC network in the United States is a $1 billion-plus investment, and Sukawaty said it remains unclear whether such a network will ever be built. “We have made specific proposals [to prospective partners], and we have worked with MSV [Mobile Satellite Ventures] to put a service proposal together,” Sukawaty said, referring to the Reston, Va., company that competes with Inmarsat and is a possible ATC partner. “But the big players will wait to see what happens in the AWS auctions before making a decision.”
London-based Inmarsat on Aug. 4 reported revenues for the first six months of 2006 of $245.9 million, down 3 percent from the same period a year earlier. Inmarsat Chief Financial Officer Rick Medlock said several one-off contracts in 2005 distort the comparisons. When the one-time revenues in 2005 are removed, Inmarsat’s 2006 performance represents a 2.2-percent increase.
The company reported an EBITDA, or earnings before interest, taxes, depreciation and amortization, of $171.4 million, up 3.6 percent from a year ago once the one-time items are removed.
The core revenue driver for Inmarsat in the coming years is expected to be its BGAN, or Broadband Global Area Network, mobile-broadband service that was introduced in Europe and Asia in December and made its debut in the Americas this past spring.
Sukawaty declined to provide any specific figures for BGAN beyond saying the early results are in line with what Inmarsat expected, including the average revenue generated per BGAN terminal. He promised to provide details later this year.
Perhaps the biggest surprise in the Inmarsat results was the performance of the Regional BGAN service, a BGAN precursor that provides data throughput at just 144 kilobits per second, compared to more than 400 kilobits per second for BGAN. Unlike BGAN, Regional BGAN provides no voice option, and its terminals are more bulky.
Despite its disadvantages, Regional BGAN sales jumped 75 percent in the three months ending June 30 compared to a year earlier as new users in Africa and South America bought the service. These regions were not covered by Regional BGAN until this year. Previously the service had been provided by Abu Dhabi-based Thuraya Satellite Communications, which operates a satellite-telephone service covering the Middle East, Europe and much of Asia. Inmarsat leased capacity on the Thuraya satellite.
Sukawaty said the Regional BGAN experience illustrates how long it can take for products to be adopted by government and corporate users, especially military customers.
“People thought Regional BGAN would just fall off a cliff,” Sukawaty said. “Many of our own projections went that way, too. Why is it accelerating? Because customers have seen it work. It’s gone through all the testing requirements.”
Revenues from Inmarsat’s overall land-mobile services have fallen in 2006 in part because of reduced U.S. military use of Inmarsat terminals in Iraq, Sukawaty said.
Sukawaty repeated Inmarsat’s commitment to have its own hand-held telephone product by 2008 at the latest. But he declined to discuss how Inmarsat will enter the market. Industry officials say Inmarsat is about to purchase a controlling stake in the Asia Cellular Satellite business based in Indonesia.
Sukawaty also said Inmarsat has not scheduled the launch of its third and last Inmarsat-4 satellite, intended to cover the Pacific Ocean region, because the business case has not been confirmed. Medlock said launching the satellite would cost between $130 million and $150 million, including the cost of an additional ground station needed once the Pacific Ocean satellite is in orbit.