Iridium Adds Subscribers, Sells Less Gear in Q3

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Paris — Mobile satellite services provider Iridium Communications Nov. 12 reported a 3 percent increase in subscribers and a 10 percent increase in commercial subscriber service revenue in the three months ending Sept. 29 compared with the previous quarter, even as total revenue was dragged down by a sharp drop in satellite handset and other equipment sales.

Bethesda, Md.-based Iridium said the decline in its highly profitable equipment revenue was not due to prospective subscribers’ electing to use competing services, but rather to the continued rough economy that has led companies to delay equipment purchases.

The result was a continuation in the slide in equipment sales that Iridium had disclosed earlier this year. For the three months ending Sept. 29, Iridium said equipment revenue was $21.1 million, down 16.6 percent from the three-month period ending June 30.

Subscriber count rose 3 percent, to 359,000, compared with the three months ending June 30, and subscriber revenue rose 10 percent, to $43.9 million.

Iridium Chief Executive Matt Desch said in a Nov. 12 conference call that Iridium subscribers pay on a fixed monthly subscription basis, plus usage charges based on the number of minutes spent calling, or the number of kilobytes sent in data messages. Even if commercial ships are sailing less often, he said, crews continue to make calls.

Service revenue from government users of Iridium — the U.S. government remains Iridium’s biggest customer — rose 6.5 percent, to $19.4 million, as of Sept. 29 compared with June 30.

Reflecting the weight of the equipment-sales drop, Iridium’s total revenue for the three months ending Sept. 29 was $84.4 million, a 2 percent increase from the three months ending June 30.

Iridium ended its third quarter Sept. 29 because that is the date of its acquisition by GHL Acquisition Corp., which led to the company’s introduction onto the U.S. Nasdaq stock market.

Iridium officials say operational EBITDA, or earnings before interest, taxes, depreciation and amortization, is their most important financial metric. For the quarter ending Sept. 29, operational EBITDA was $38.4 million, an increase of 4.6 percent over the three-month period ending June 30.

Desch said Iridium continues to evaluate bids made by ThalesAlenia Space of France and Italy, and Lockheed Martin of the United States, to build the IridiumNext constellation of 66 operational satellites. He said a selection will be made “in the next couple of months,” and that Iridium’s financial advisor, Goldman Sachs, is evaluating options for financing the constellation, whose capital costs Iridium has estimated at $2.7 billion.

Iridium Chief Financial Officer Eric Morrison reiterated Iridium’s belief that Iridium’s future cash flow, plus revenue from customers placing piggyback payloads on the IridiumNext satellites, will provide most of the financing needed for the second-generation constellation, which Desch said is scheduled to be launched between late 2014 and late 2016.