Iridium Sees No Threat from Inmarsat Handset

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Mobile satellite services provider Iridium Communications said it is feeling no pressure from competitor Inmarsat’s June entry into the satellite handset market, and that demand for Iridium’s higher-priced phones is holding up so well that a minor electronics parts shortage made Iridium unable to meet all customer orders.

McLean, Va.-based Iridium grew its base of billable subscribers by 16.8 percent, to 383,000, as of June 30, compared with a year earlier. It said its equipment revenue, which the company has been willing to sacrifice to secure more subscribers, is expected to grow through 2010 despite the introduction of the first hand-held product produced for London-based Inmarsat.

Inmarsat has said the global market for satellite handsets will grow by no more than around 5 percent in the coming years and that its lower-cost product will win business when Iridium customers decide to purchase new models.

Iridium Chief Executive Matthew J. Desch, who has said Iridium is prepared for Inmarsat’s entry into the handset market, said that as of early August the Inmarsat product has had little effect, if any, on the competitive landscape.

“We’re not seeing much reaction at all” by the market to the Inmarsat product, Desch said. “They have very modest views on the growth of their product, and I think that’s appropriate” given the lackluster market reaction thus far.

Desch said Iridium is maintaining its 40 percent gross-profit margin on its principal handset model, although he has said in the past the company would reduce margins, if need be, to meet the Inmarsat challenge.

Desch said the company was forced to cut back shipment of handsets in the spring because of an industry-wide electronics parts shortage.

Inmarsat’s decision to invest some $1.2 billion in a new Ka-band mobile broadband satellite system was “a really good move” insofar as Inmarsat has been facing pressure from Iridium at the low end of Inmarsat’s business and from conventional C- and Ku-band telecommunications satellite operators at the high end to serve the broadband needs of mobile customers, Desch said.