M obile satellite operator Inmarsat of London is in final negotiations to purchase a stake in Asia Cellular Satellite (Aces) of Indonesia and essentially take over the business of the struggling provider of satellite-telephone services in Asia, according to industry officials.

One official said the Inmarsat investment in Aces likely would amount to no more than $40 million, and that the deal is likely to be announced by September once Aces’ creditors have approved the arrangement.

Jakarta-based Aces operates the large Garuda-1 satellite in geostationary orbit and is in possession of two assets of high value to Inmarsat: 7 megahertz of L-band radio spectrum over Asia, and a satellite-telephone technology designed by Ericsson and compatible with the GMS standard that is the world’s dominant cellular transmission technology.

One industry official said it remained unclear whether Inmarsat would take over operations of the Garuda-1 satellite only and enter a strategic partnership with Aces, or would also be involved in running Aces’ service-distribution network.

Inmarsat currently is a wholesale provider of mobile satellite services to a global network of distribution partners.

Inmarsat officials have said that they intend to expand their service offerings from the current mix of airborne, maritime and land-based data and voice links to include a cellular-telephone product to drive growth. Inmarsat also is counting on the company’s recently launched third-generation satellites to drive growth.

Inmarsat Chief Executive Andy Sukawaty has said he hopes an Inmarsat hand-held service could be introduced by late 2008.

The company, which is traded on the London Stock Exchange, has said a hand-held product would help staunch the loss of subscribers in its existing land and coastal-maritime businesses.

The Morgan Stanley investment bank on July 28 said a hand-held business for Inmarsat “would … be both defensive (reducing market share loss) as well as offensive (entering a market we estimate at $300 million in wholesale revenues in 2005). … Inmarsat could benefit even more if current [low-Earth orbiting] constellations are not replaced in 4-8 years’ time.”

Inmarsat’s new satellites feature a higher-speed data transmission capability to laptop-size units, called Broadband Global Area Network, or BGAN. Two of the three of the BGAN-capable satellites have been launched, with a third intended to be located over Asia — built and waiting for a launch that may not be available until 2008, according to industry officials.

For Aces, Inmarsat’s satellites could provide a needed in-orbit backup to Garuda-1, which was launched in February 2000 but has suffered multiple in-orbit failures that have reduced its capacity. Aces has been paid more than $100 million in insurance claims for the earlier failures.

In 2005, Aces officials reported the satellite lost almost all its power for a brief period before being returned to service. The satellite is now operating stably, but has lost a portion of its capacity.

The Garuda-1 satellite, a Lockheed Martin A2100 model, features two 12-meter-diameter L-band antennas producing 140 spot beams.

Inmarsat spokesman Chris McLaughlin declined to comment on a possible Inmarsat bid for Aces, and Aces officials did not immediately respond to comment by press time.

Tim Farrar, president of the TMF Associates consultancy in Menlo Park, Calif., said an Inmarsat tie-up with Aces would speed Inmarsat’s entry into the hand-held end of the mobile satellite services sector.

Aces competes with global hand-held providers Iridium and Globalstar, and in portions of its coverage area also competes with Abu Dhabi-based Thuraya, which has indicated it will be moving a satellite over East Asia to extend its coverage eastward.

How valuable the Aces business is for Inmarsat could depend in part on whether Iridium and Globalstar are able to finance the renewal of their current low-orbit satellite constellations in the next six or seven years.

Aces is owned by Pasifik Satelit Nusantara of Indonesia, Philippine Long Distance Telephone Co. and Jasmine International of Thailand. In addition to its hand-held telephone units, the company provides fixed telephone cabins for rural areas without terrestrial links.

Comments: pdeselding@compuserve.com