Inmarsat plc reported higher revenues and profit, and a reduced debt load, for the first six months of 2005 despite the erosion of its land-mobile business due in part to declining use by military and other customers in the Middle East.

Inmarsat’s maritime market, which has been slower than land-based mobile customers to move from voice to data services, is now generating most of its growth through data applications, Inmarsat reported Aug. 24. Some 53 percent of Inmarsat’s global revenue comes from maritime users.

The London-based mobile satellite-services provider , in its first financial report since its June stock offering, said it welcomes the planned merger of its first- and third-largest distributors despite the lower revenues that will flow to Inmarsat as a result.

Bethesda, Md.-based Stratos Global Corp. announced Aug. 15 that it had signed a letter of intent with Xantic B.V.’s two owners — KPN of The Netherlands and Telstra of Australia — to purchase Xantic for $191 million, pending an independent financial review of Xantic.

Stratos also must clear the deal with Xantic’s Dutch works councils, or labor unions, and with Dutch and Australian regulators. Stratos Chief Executive Jim Parm said he foresees no major obstacles to the purchase.

Stratos generated 25.3 percent of Inmarsat’s total sales in 2004, and Xantic 18.8 percent. The combined company will be Inmarsat’s dominant distributor, with nearly double the share of its nearest competitor, Telenor of Norway.

The post-acquisition Stratos will save $5 million per year in what Stratos and Xantic now pay Inmarsat for access to the Inmarsat satellite system. Under Inmarsat’s annual volume-discount policy, distributors are awarded price discounts as they hit sales-volume milestones.

Parm said the Xantic purchase likely will be followed by other mergers among Inmarsat distributors. “Consolidation in the LESO [land Earth station operators] sector is both necessary and inevitable,” Parm said during an Aug. 15 conference call with financial analysts. “We are currently the No. 1 provider [of mobile satellite services] in North America, and will remain so with this transaction. We will also become the No. 1 provider in Europe and across Asia.”

But if Stratos’ leverage with Inmarsat may increase, Inmarsat is more than ever Stratos’ lifeline supplier. The enlarged Stratos will depend on Inmarsat for around 80 percent of its revenues. Stratos also distributes Iridium handheld telephone and data services, and has a VSAT-based broadband division as well.

Inmarsat Chief Executive Andrew Sukawaty said during an Aug. 24 conference call with financial analysts that Inmarsat will be a long-term winner as its distributors — there are more than 30 now — consolidate into a few, larger operations.

“We have benefited from consolidation in the past,” Sukawaty said. “It makes for a more efficient distribution. We think the acquisition is highly complementary in that the geography they cover and the products they’re strongest in are not huge overlaps.”

Inmarsat also could benefit if consolidation among its distributors eases a price war among them that Parm has said is unsustainable. Instead of battling each other for market share, Stratos and Xantic as a single company presumably would be freer to concentrate on expanding the market for mobile satellite services. Parm said the purchase should reduce pricing pressure among Inmarsat distributors.

Meanwhile, Inmarsat reported that for the six months ending June 30, revenues increased 4.1 percent to $253.6 million, and profit more than doubled, to $42.8 million, compared to the previous year. EBITDA — earnings before interest, taxes, depreciation and amortization — increased 11 percent, to $171.8 million and was 68 percent of revenue, up from 64 percent a year ago. Inmarsat Chief Financial Officer Rick Medlock said the company’s goal is to reach a 70-percent EBITDA margin.

Aided by the June stock offering on the London Stock Exchange that netted $645 million, Inmarsat’s debt as of June 30 was 2.6 times its EBITDA, compared to 3.8 times EBITDA on Dec. 31.

Inmarsat’s performance also was helped by the fact that EADS Astrium of Europe, which is building the Inmarsat 4 satellites, was obliged to pay for two months of Inmarsat’s lease of capacity aboard a satellite owned by Thuraya Satellite Telecommunications Co. of the United Arab Emirates.

Inmarsat has been paying $2.9 million per month for Thuraya capacity to introduce a regional version of its coming Broadband Global Area Network (BGAN), which will provide 490-kilobit-per-second transmissions to and from portable terminals via the Inmarsat 4 satellites.

The first Inmarsat 4 was launched in March and did not become operational until June — two months after the contract deadline, forcing the Astrium payment, Medlock said. Inmarsat terminated its Thuraya lease July 31.

Sukawaty said Inmarsat has begun offering price discounts on its regional BGAN terminals, which offer just half the transmission speed of the coming BGAN gear, to enter service late this year. Discounting the terminals is better than having several thousand of them sit on the shelf, he said.

After a spike in mobile satellite services use following the U.S.-led invasion of Iraq in 2003, Inmarsat has seen this land-based business decline.

Peter B. de Selding was the Paris bureau chief for SpaceNews.