Iridium Expects Hosted Payload Deal for Air Traffic Control by June

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PARIS — Mobile satellite services provider Iridium Communications reported a 10 percent increase in revenue for 2011 and said it is close to announcing an arrangement to provide air traffic management support via hosted payloads aboard its second-generation satellite constellation.

Iridium said its revenue increase included a 12 percent jump in service revenue and that the services portion of its business should grow by an average of at least 9 percent annually through 2015. The company said its net debt, which will climb through 2015 to up to five times its operating cash flow as it finances its $3 billion second-generation satellite constellation, will begin to drop substantially starting in 2016.

McLean, Va.-based Iridium plans to launch its 72-satellite Iridium Next constellation over two years starting in 2015, using mainly Falcon 9 rockets operated by Space Exploration Technologies of Hawthorne, Calif. The satellites, designed to operate in low Earth orbit, are under construction by Thales Alenia Space of France and Italy.

Iridium said March 6 that it had spent some $600 million on the Iridium Next program as of Dec. 31.

Iridium has long said that an important component of its financing of Iridium Next will be selling space aboard the satellites for instruments that have nothing to do with Iridium’s core business of providing mobile voice and data communications.

Orbital Sciences Corp. of Dulles, Va., which is integrating the Iridium Next satellites, paid Iridium a nonrefundable $10 million deposit in return for rights to sell up to 20 percent of the satellites’ capacity to host third-party instruments.

In a March 6 conference call with investors, Iridium Chief Executive Matt Desch said the company expects to announce, by June at the latest, a major hosted-payload agreement with global air traffic control agencies.

Desch has been talking about this payload opportunity for more than a year, but in the call he said the company is confident that an agreement with the U.S. Federal Aviation Administration (FAA) and equivalent agencies in other nations is about to be signed.

Desch did not spell out the business model — who will pay for what — in the air traffic control agreement. He suggested Iridium would be paying for the development of the air traffic monitoring instruments and their integration onto the Iridium Next satellites. The company would then receive annual service revenue from a consortium made up of the FAA and the other customers around the world.

Desch said that while other hosted-payload opportunities may yet arise, it is the air traffic monitoring that has emerged as the single, major opportunity.

“Clearly that’s the primary payload we’re looking at right now,” Desch said during the conference call. “The FAA is just one of many customers” for the proposed service, which would permit air-transport authorities to keep track of aircraft globally, including over ocean routes beyond the reach of ground radars.

As is the case with its principal competitor, Inmarsat of London, Iridium is facing a near-term slowdown in revenue growth from its government users, particularly military customers. Downward pressure on the U.S. Defense Department budget, combined with the drawdown of troops from Iraq and Afghanistan, slowed government voice subscriber growth to just 3 percent in 2011.

Iridium’s more recent machine-to-machine service (M2M), which generally yields much less per-subscriber revenue, grew by 57 percent among government users in 2011. Government voice subscribers spent an average of $141 per month on the service in 2011, down 3 percent from a year ago.

Among commercial users, Iridium reported a 13 percent increase in voice subscribers in 2011, to 307,000. Iridium’s base of commercial M2M subscribers increased 50 percent, to 168,000, during the year. Commercial voice subscribers spent $48 per month on the service in 2011, down 6 percent from a year earlier.

Desch said Iridium is positioning itself as a partner with operators of satellite networks using Ku- and C-band frequencies for what are often referred to as fixed satellite services. Operators of these networks are now moving heavily into the maritime market in the face of growing demand from commercial and recreational ship owners for broadband access.

Iridium’s L-band service cannot on its own provide broadband service as the term is commonly understood. But Desch said Iridium and operators of what are known as very small aperture terminal, or VSAT, networks can partner to capture this market.

Offering global coverage from the 66-satellite constellation, Iridium’s OpenPort maritime service can be used in areas where Ku- and C-band satellites in geostationary orbit over the equator do not reach, or when weather conditions compromise reception of broadband signals.

Desch referred to a recent announcement by maritime VSAT service provider KVH Industries of Middletown, R.I., and V.Ships Ltd. of the Isle of Man to install KVH gear on an undetermined number of ships. V.Ships services more than 1,000 vessels.

“We are now expanding broadband OpenPort to be a complementary product to the VSAT industry,” Desch said.

For the year ending Dec. 31, Iridium reported revenue of $384.3 million, up 10 percent from the previous year. The company had 523,000 billable subscribers as of Dec. 31, an increase of 22 percent. The figure will increase by a further 20-25 percent in 2012, Iridium said.