Inmarsat Revenues Climb in 1st Quarter; BGAN Shows Promise

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  Space News Business

Inmarsat Revenues Climb in 1st Quarter; BGAN Shows Promise

By PETER B. de SELDING
Space News Staff Writer
posted: 23 May 2007
04:20 pm ET





PARIS —


Mobile satellite services provider Inmarsat reported growth in all three of its main application areas – land-mobile, aeronautical and maritime – and said it plans to introduce a low-cost hand-held voice terminal by September to take on competitors Globalstar, Iridium and Thuraya.



London-based Inmarsat is transitioning its product line to a broadband-data and voice profile using




its two Inmarsat-4 satellites, with the land-mobile version, called BGAN, or Broadband Global Access Network, being its hottest new product.



BGAN revenues were $7.1 million for the three months ending March 31, when 9,842 terminals were reported in active use. The BGAN revenues were up 40 percent over the previous three-month period, which was not unexpected given the fact that the service is in early commercialization.



Maritime and aeronautical voice and data services continue to grow quickly at Inmarsat. But it is the land-mobile arena, with BGAN for data and a new hand-held telephone borrowed from the Asia Cellular Satellite venture in Indonesia, that have the most near-term growth potential.



Inmarsat officials cautioned that BGAN customers




will vary widely in how much they use their








laptop-size terminals, which provide two-way data communications at rates of slightly less than 500 kilobits per second




. They said counting revenues is a better way of measuring the success of BGAN.

“For example, FEMA [the U.S. Federal Emergency Management Agency




] has 400-600 BGAN terminals which, when activated, will show low usage,” Inmarsat Chief Executive Andrew Sukawaty said in a May 14 conference call on the company’s financial results. “On the other extreme, you have crews from CNN in, say, Southern Lebanon during the conflict there that will be extremely heavy users. We would encourage our distributors to go after that business. But some of our distributors are more oriented toward equipment sales and will go after FEMA. We’ll take 100 media terminals over 1,000 emergency terminals.”



For the three months ending March 31, Inmarsat reported revenues of $140.8 million, a 15.7 percent increase over a year earlier. EBITDA, or earnings before interest, taxes, depreciation and amortization, was up 24 percent, to $99.6 million and represented 71 percent of revenue.





Maritime voice and data revenues were up 13 percent in the period, to $78.1 million. A maritime version of BGAN, called Fleet Broadband, is being introduced.

Aeronautical revenues, mainly from the




use of Inmarsat’s Swift 64 terminals by military and commercial aviation customers, were up 44 percent, to $10.1 million. BGAN’s airline version, called Swift Broadband, is scheduled for introduction this year.

Land-mobile services sales also were up 8 percent




, to $32.3 million,




mainly due to continued demand for data-transmission. But Inmarsat continues to suffer in land-mobile voice services, a market that the company




, the oldest in mobile satellite services




, continues to lose to the Globalstar and Iridium low-orbiting constellations, and to the Thuraya regional satellite-telephone service.

Inmarsat in 2006 purchased most of the Asia Cellular Satellite, or Aces, business and is adapting Aces’ Ericsson-designed hand-held phone for use with




Inmarsat satellites.

Sukawaty said in a May 15 interview that the Inmarsat hand-held device will retail for less than $500, substantially less than the competition. Per-minute user charges also would be competitive with what is already on the market, he said.

Inmarsat Chief Operating Officer Michael Butler said Inmarsat’s hand-held service would not be subsidized by the company. He said Inmarsat will market its product as part of a company that is all but guaranteed to be in business in 10 years. Inmarsat officials say not all of the company’s




competitors can make this claim.

Inmarsat’s 10-satellite fleet offers global mobile communications services, but its BGAN and other broadband products are designed to function with the Inmarsat-4 satellites. Two of these spacecraft are in orbit




, with the third completed and awaiting




the first available slot




on a United Launch Alliance-built




Atlas 5 rocket. With this third satellite Inmarsat will be able to offer global coverage and it will fill in a gap over the Pacific Ocean region, which for military, maritime and aeronautical services will be an important region.

Inmarsat has a 2009 reservation aboard an Atlas 5 but company officials say they will do all they can – even if it means forfeiting a launch-




reservation fee to secure a launch slot elsewhere – to place the satellite into orbit before 2009.

Sukawaty said Inmarsat continues to pursue possible alliances to use Inmarsat’s spectrum to deploy an




Ancillary Terrestrial Component




, or ATC




,




a network of ground-based repeaters that would enable two-way mobile services in the United States that would be available everywhere – even in places that are hard to reach via satellite.









Inmarsat is one of at least five companies that hope to leverage their positions as satellite operators to attract investors willing to finance the several billion dollars needed to field an ATC network. Sukawaty said it may take another year or two before prospective investors such as cellular network operators realize the value of radio spectrum rights held by mobile satellite services companies. The second U.S. government auction of spectrum in as many years is scheduled for later this year and this too may help clarify the value of radio spectrum for fourth-generation cellular network services.