LightSquared Boosts Payment to Inmarsat by $40 Million
PARIS — Mobile satellite services operatorhas received an unexpected $40 million in cash from U.S. satellite-terrestrial wireless broadband startup to compensate for the investment Inmarsat will make to adapt its use of L-band satellite spectrum in the United States, Inmarsat announced May 9.
London-based Inmarsat did not specify what the payment covers, but it comes at a time when Reston, Va.-based LightSquared is fending off attacks from users of the GPS positioning, navigation and timing satellite constellation who allege that LightSquared’s use of L-band spectrum will interfere with GPS signals.
In a May 9 financial statement, Inmarsat said LightSquared made the $40 million cash payment April 29 following an April 25 agreement with the two companies that modified their existing cooperation agreement.
“We are incurring additional costs,” Inmarsat said in a May 10 written response to Space News inquiries. “[This] is an incentive to do more, and faster,” to accommodate LightSquared’s network.
In a May 9 conference call, Inmarsat Chief Financial Officer Rick Medlock said the $40 million payment is an add-on to LightSquared’s substantial existing financial obligations to Inmarsat. To clear sufficient spectrum for its 4G mobile broadband network, which also uses L-band spectrum, LightSquared won Inmarsat’s agreement to modify its longstanding use of the spectrum.
As a result, some Inmarsat customers will be obliged to add filters or make other modifications to their existing Inmarsat communications equipment, and some may face a degradation of service. Inmarsat officials have said the service declines should be minor, and especially small for those customers that have invested in Inmarsat’s latest, higher-speed hardware.
LightSquared has agreed to pay Inmarsat $368.8 million to make modifications to the existing Inmarsat network, as well as to its customers’ terminals. Inmarsat has said that it expects to spend around $250 million to make the modifications, and perhaps less.
LightSquared’s base payment to Inmarsat has now been increased by $40 million. Medlock said during the call that Inmarsat is uncertain how much of this sum it will need to perform the additional work it is supposed to cover, but he suggested that Inmarsat expects to make a profit on this deal, much as it expects to make a sizable profit on the LightSquared relationship overall.
Beyond the payments to compensate for the inconvenience Inmarsat’s modifications will cause for its users, LightSquared is paying $115 million per year, rising at 3 percent per year, in return for Inmarsat’s agreement to rearrange the use of L-band spectrum to allow LightSquared to have larger unbroken chunks of it, which is necessary for mobile broadband.
Meanwhile, LightSquared and representatives of GPS users have created a working group to assess the effect of LightSquared’s planned 40,000 ground transmitters on GPS signals. Inmarsat officials have said they are confident that a technical solution will be reached that respects GPS signal integrity but also permits LightSquared to deploy its network. The working group is scheduled to report its conclusions by June 15.
During the conference call, Inmarsat Chief Executive Andrew Sukawaty said the company recently posted a key symbolic victory in its battle against VSAT, or very small aperture terminal, satellite networks that, using Ku-band spectrum from conventional satellites, have been encroaching on Inmarsat’s core maritime communications market. These operators have been touting VSAT links as offering higher speeds, at lower cost, than what Inmarsat’s L-band network can provide.
Starting in 2013 Inmarsat expects its primary weapon against VSAT networks to be its Global Xpress system, featuring three all-Ka-band satellites under construction by Boeing Space and Intelligence Systems of El Segundo, Calif. Boeing has also agreed to invest in Global Xpress in return for rights to sell the service to the U.S. Defense Department. With the satellites expected to be positioned to maximize ocean coverage, Inmarsat believes it can meet the Ku-band VSAT challenge to is maritime business.
In the meantime, the company is offering what it calls Fleet Broadband Plus, which uses incentives to encourage maritime fleet owners incentives to invest in Inmarsat’s Fleet Broadband service while using competing VSAT links on the same ships.
In what Inmarsat sought to portray as an example of Fleet Broadband besting a VSAT operation in a head-to-head competition, the company announced that a maritime operator of 38 ships that had just finished installing VSAT hardware has agreed to remove the gear and replace it with Fleet Broadband.
In its May 10 statement, Inmarsat said its distribution partner handling this maritime customer has requested that the customer not be identified. Inmarsat said the maritime fleet owner was presented with a package that permitted volume discounts for Fleet Broadband use, and that the VSAT service was not delivering the advertised bandwidth.
“The customer states that VSAT speeds were not reliable and that Fleet Broadband’s consistent and better performance, along with attractive airtime pricing, made the choice for them,” Inmarsat said in its statement.
Inmarsat announced that, as part of its wider defense against its competitors, it is reducing its maritime voice charges.
In addition to its Global Xpress satellites in Ka-band, Inmarsat has a large L-band satellite on order and scheduled for launch in 2012. Sukawaty has said the satellite, called AlphaSat 1-XL, will not be the last of Inmarsat’s L-band spacecraft, and that the company will replace its full Inmarsat 4 constellation of L-band satellites when the time comes.