Inmarsat Reports Drop in Revenues, Earnings in 2004

by

PARIS — Mobile satellite-services fleet operator Inmarsat Group Ltd. reported lower revenues and earnings in 2004, saying increases in its aeronautical and maritime businesses could not offset the steep drop in the land-mobile sector.

Reduced military activity in the Middle East in 2004 is partly to blame for the drop and had been expected, Inmarsat officials said in a March 7 conference call with financial analysts.

London-based Inmarsat reported that its revenues in 2004 totaled $473.8 million, down 6 percent from 2003. EBITDA, or earnings before interest, taxes, depreciation and amortization, was $303.8 million, or 64 percent of revenue, down from nearly 68 percent in 2003.

Officials declined to forecast the company’s performance for 2005. Inmarsat’s Broadband Global Area Network (BGAN) service is scheduled to debut late this year assuming successful launch of the first two Inmarsat 4 satellites, but Inmarsat Chief Financial Officer Rick Medlock said the business likely would not have any substantial impact on revenues until 2006.

BGAN terminals, ranging in size from hand-held to laptop computer-size devices , are expected to provide Internet links at data-transmission speeds of 432 kilobits per second.

Inmarsat for the past two years has been testing a similar, lower-performance service called Regional BGAN using satellite capacity provided by Thuraya Satellite Telecommunications Co. of Abu Dhabi, United Arab Emirates.

The Regional BGAN service has not been as successful commercially as Inmarsat had hoped, with only a few thousand terminals sold. But the Thuraya-enabled service has given Inmarsat experience in managing a BGAN-type system and will speed the introduction of BGAN starting late this year.

Inmarsat Chief Executive Officer Andy Sukawaty said Inmarsat’s long-term Thuraya lease ended in late 2004 and was replaced with a monthly lease that is more costly but will enable Inmarsat to terminate its Thuraya payments by mid-2005 at the latest, once the first Inmarsat 4 satellite is operational.

Inmarsat’s maritime business remains the company’s biggest source of revenue and while voice services appear to have peaked, the maritime data business is still growing. Overall, maritime revenues increased by 2.4 percent in 2004, to $251.4 million.

Sukawaty said the company’s higher-speed Fleet line of products for ocean-going and coastal vessels appears to have achieved market traction.

Land-mobile services profited from the military activity in Afghanistan and Iraq and have declined as those conflicts have subsided . Land-mobile revenues in 2004 were down 18 percent from 2003, to $133.7 million. Medlock said it remains difficult to forecast the level at which military-related land communications will settle.

Revenue from the Regional BGAN service has not increased since late 2003.

Sukawaty said the aeronautical sector shows signs of substantial growth. Inmarsat has a service called Swift64 — 64 kilobits per second — for data transmissions on board corporate and government aircraft. While starting from a much smaller base, the aeronautical business in 2004 posted the biggest percentage growth, increasing by 29 percent, to $16.9 million.

“We’ve seen that take off very well,” Sukawaty said, adding that Inmarsat’s traditional voice service aboard commercial passenger jets has not increased much in the past year.

Inmarsat is working with Geneva-based OnAir, a joint venture between jet manufacturer Airbus and Sita Inc., to commercialize the Swift Broadband service that will be enabled by the Inmarsat 4 satellites. This service will compete directly with Connexion, a subsidiary of Chicago-based Boeing Co. that is already providing broadband links to commercial passenger jets in Asia and Europe.

Sukawaty said OnAir would offer cellular telephone services aboard aircraft as well and is working with Telenor ASA of Norway and A rinc Inc. of Annapolis, Md., toward that end.