Inmarsat says mobile focus better suited to global satellite price downturn
PARIS – Mobile satellite services operator Inmarsat on Aug. 4 sought to persuade investors that the pricing pressure affecting worldwide satellite prices will have less effect on Inmarsat than on its competitors, who are more focused on fixed data markets.
London-based Inmarsat said the price declines expected from the arrival of high-throughput satellite (HTS) systems is likewise more of an issue for companies offering fixed consumer broadband services, a business that Inmarsat has not entered.
Addressing a conference call, Inmarsat Chief Executive Rupert Pearce specifically said the company is not worried that very-high-throughput satellites being designed by competitor ViaSat Inc. of Carlsbad, California, pose no threat to Inmarsat’s aviation-connectivity business.
ViaSat-3 still a beast, but no longer mythical
“It is no longer a mythical beast, I’ll accept that,” Pearce said of ViaSat-3, a planned global network that will compete in Europe with Inmarsat’s satellite-terrestrial European Aviation Network (EAN).
“But we haven’t got hard numbers on ViaSat-3” costs yet, Pearce said. “It isn’t designed, it isn’t funded, it isn’t built and it certainly isn’t launched. So we’re tilting at windmills a little bit here. But from what we know about ViaSat-3 today, I am very confident that EAN will have superior economics in terms of cost per bit.”
Pearce said EAN, whose satellite will be launched by mid-2017, would be operational sometime in the second half of 2017, at least two years before the European ViaSat-3 satellite enters service.
EAN is designed to allow Inmarsat to scale capacity to demand as it develops, and adjust capacity through its network of terrestrial signal towers to different airline routes.
Pearce dismissed any possible regulatory threat to EAN following from the fact that the satellite will be late entering service because of delays at launch-service provider SpaceX of Hawthorne, California.
No threat to European Aviation Network from launch delay
“Such is the nature of the queue and the backlog around SpaceX that we don’t believe we will get launched before late Q1 or early Q2 next year,” Pearce said. “I don’t think that is in any way material either commercially, or from a regulatory perspective. Being late to launch will put us in breach of some license regimes for some regulators in Europe. We do not believe that is a material adverse event at all.
“Our regulators understand that the launch manifest is not in our control. They are very supportive. I would add that the regulators are bound by law to act proportionately. As soon as we saw this coming, we immediately and proactively engaged with regulators about this,” Pearce said.
Inmarsat Chief Financial Officer Tony Bates said the company had secured all 28 European Union government approvals for the mobile satellite service, and 20 of the 28 licenses needed for the ground network.
The EAN satellite, called EuropaSat/Hellas-Sat 3, is between Inmarsat and Arabsat of Saudi Arabia. It is currently scheduled for launch on a SpaceX Falcon Heavy, which has yet to make its inaugural flight.
Inmarsat said the world’s airlines continue to adopt in-flight passenger connectivity at a furious pace. Requests for information from connectivity providers have been issued by airlines for a total of 2,800 aircraft, according to Inmarsat estimates.
“There is an awful lot of potential revenue out there,” Bates said. “It is grinding through fairly slowly, but it is grinding through.” More than half of the commercial aircraft in service today, have had satellite connectivity terminals certified for them by air traffic authorities, he said.
Inmarsat’s aviation revenue was the brightest spot in the company’s half-year earnings, with revenue for the six months ending June 30 up 11.6 percent, to $64.6 million, over a year ago.
Inmarsat has added staff to capture the airline passenger connectivity potential and is now spending about $40 million per year on salary and personnel costs, double the rate of a year ago. More increases are to come, Bates said.
Fourth Global Xpress satellite likely over the Atlantic
Inmarsat has another SpaceX Falcon 9 launch, of the Inmarsat 5 F4 Global Xpress satellite, set for late this year. To protect against possible delays, it has purchased an option with International Launch Services for a Russian Proton launch.
This satellite will add capacity to the three Global Xpress spacecraft providing Ka-band broadband globally. Inmarsat had been discussing with Chinese authorities over whether the fourth satellite should be placed over China.
Pearce said the current thinking, still not finalized, is that the fourth Global Xpress satellite will be positioned over the mid-Atlantic. He said he would not make a final decision until Inmarsat had to select an orbital position for the satellite.
“We’ve got plenty of orbital slots available,” he said. A final decision is expected this autumn. The addition of the fourth Global Xpress will raise Inmarsat’s current $500 million estimate of total Global Express revenue in 2020. “The business case will be incremental” to the current Global Xpress revenue picture.
Despite its focus on mobile markets, Inmarsat’s financial results have been affected by some of the same pressures that have weakened results among the fixed satellite services fleet operators.
Inmarsat’s government revenue was up 2.6 percent in the first six months of the year, to $140.7 million. Pearce said the U.S. government business continues to suffer from low operational tempo and tight budgets. But the company remains hopeful that the U.S. Defense Department is moving, if slowly, toward Ka-band.
“The new platforms are all going to be Ka-band,” Pearce said of future U.S. military procurements. “And they are going to migrate their older platforms over time, budgets permitting, from Ku- to Ka-band as well.”
Global Xpress includes a steerable military Ka-band payload that Inmarsat has positioned as a gap-filler for the U.S. Wideband Global Satcom (WGS) constellation of Ka-band satellites.
Maritime markets still sluggish
Inmarsat’s core maritime business has slowed because of broader forces relating to regional economies and the drop in crude-oil prices. Many ships have been removed from service, at least temporarily, and those in operation run at less-than-optimal fill rates.
For the six months ending June 30, Inmarsat reported $289.7 million in maritime revenue, down 2.5 percent. EBITDA for the maritime business was down 1 percent, and was equivalent to 78 percent of revenue.