WASHINGTON — Large constellations of satellites planned for low Earth orbit (LEO) present little threat to Iridium’s business despite sharing the same orbit, CEO Matt Desch said April 26.
More important than how high or low those constellations orbit is what spectrum they will use, Desch said.
“There’s confusion a lot of times when people just use the word LEO, because they assume if they are LEO they must be a competitor when in fact if you are using Ku- or Ka-band spectrum in LEO you are really competing against [geostationary]-based broadband systems,” Desch told investors during a company earnings call.
Both Iridium’s legacy satellite constellation and its upgraded Iridium Next fleet that is mid-deployment operate using L-band frequencies. L-band is smaller swath of spectrum that can’t offer the same high throughputs as higher frequency spectrum like Ku- and Ka-band, but is known for its robust signal strength, often making it the frequency of choice for safety communications. Most large LEO constellations that have gained significant attention, including SpaceX, OneWeb, Telesat, LeoSat and Kepler Communications, are designing satellites in Ku and/or Ka-band.
Desch said most new LEO constellations “are focused on communications services targeting commodity broadband” that will compete more directly with existing VSAT — very small aperture terminal — services that already coexist with Iridum.
“This is not the market we play in today, and I consider the specialty broadband services we are soon introducing as complementary to their plans, not competitive with them,” Desch said.
Iridium reported a 14-percent increase in revenue growth for the first three months of 2018 as compared to the same period last year. Money generated from Iridium subscribers, which numbered 996,000 as of March 31 and make up 75 percent of the company’s total revenue base, grew 10 percent.
Operational EBITDA, or earnings before interest, taxes, depreciation and amortization, grew 6 percent to $68.5 million. Net income decreased however from $37.9 million to $11.5 million, a drop Iridium attributed to $25 million of depreciation and amortization expenses and a temporary gain last year from an insourcing transaction with Boeing.
Launch-time funding crunch relieved
Desch said the majority of network traffic going through Iridium is now on the company’s Next satellites, of which 50 out of 66 are currently in orbit. The latest 10 launched March 30 by Iridium’s sole launch provider SpaceX should start operations in the next two weeks, Desch said.
Iridium Chief Financial Officer Thomas Fitzpatrick said Iridium on March 21 completed a $360 million debt raise through senior-secured notes due in five years. Of the proceeds, $60 million went to Thales Alenia Space, manufacturer of the Iridium Next constellation, and $87 million to a debt reserve account that is part of the BPI France Export Assurance (formerly Coface) credit facility used to finance Iridium Next.
Fitzpatrick said in February that Iridium had reached an agreement with BPI to both raise new debt and delay payments owned to BPI-connected banks. Those steps were deemed necessary to avoid reliance on income from Aireon, an aircraft-tracking startup that has yet to become financially sound enough to pay fees owed to Iridium for carrying its hosted payloads on Iridium Next spacecraft. The finalized agreement lets Iridium defer bank payments originally due over the next two and a half years out to 2023 and 2024 instead, he said.
“We’ve ensured that our liquidity is not reliant on expected payments from Aireon,” Fitzpatrick said. “When those payments are received they will pay down our BPI credit facility. In light of these activities we can now complete the Iridium Next launch program without liquidity concerns.”
Fitzpatrick said the new debt also enables Iridium to pay Thales Alenia Space $45 million in deferred payments — money Iridium initially thought it would have made by now with Iridium Next before SpaceX delays drew out its deployment.
SpaceX’s sixth Iridium Next launch is scheduled for May 19, carrying five Iridium Next satellites and two Earth science satellites for NASA and Germany’s Research Centre for Geosciences (GFZ). Desch said Iridium has tentative dates for the final two SpaceX missions, each carrying 10 satellites, but declined to state them. The schedule SpaceX provided is “still meeting our expectations” and will have Iridium Next “completed in the next couple months,” he said. Iridium’s rideshare mission with the GRACE Follow-On satellites will use “another flight proven rocket,” he said, making it Iridium’s third mission to use a pre-flown Falcon 9 first stage.
Maritime safety certification imminent
Iridium has since 2014 sought approval from the United Nations’ International Maritime Organization (IMO) to break competitor Inmarsat’s sole hold on emergency maritime communications. British fleet operator Inmarsat is the only operator certified for the IMO’s Global Maritime Distress and Safety System (GMDSS), which is used to contact rescue personnel during maritime emergencies.
Desch held to Iridium’s 2017 expectation that this will be the year Iridium is also certified. The IMO’s maritime safety committee will meet next month to assess Iridium’s application, he said.
“It’s clear that the maritime market is seeking a choice for GMDSS and we are looking forward to satisfying that need,” he said. “To me it’s not about whether we will be approved, it’s just about when, and we feel good that certification approval will happen this year.”
Getting GMDSS certification isn’t a direct revenue generating opportunity for Iridium, Desch said, but something its maritime resellers will benefit from because they won’t have to carry Inmarsat products as well.
