Market Validating Global Xpress Investment, Inmarsat Says

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PARIS — Mobile satellite services provider Inmarsat on Oct. 9 sought to convince investors that its $1.2 billion Global Xpress Ka-band satellite system, using both military and civil frequencies, is even more promising now than when it was decided in mid-2010, especially since no competing Ka-band system is under construction.

Inmarsat repeated its estimate that Global Xpress will generate at least $500 million in revenue by 2019, its fifth full year of service, a figure the company said will be no more than 15 percent of the global market that year.

London-based Inmarsat said the current wholesale market for mobile satellite bandwidth for very small aperture terminals, or VSATs, is about $1.9 billion and growing at 7 percent per year.

If these growth rates hold, the market will reach $3.5 billion by 2019, making Inmarsat’s $500 million Global Xpress target easily within reach, said Leo Mondale, managing director for Global Xpress. The figures do not include any revenue from aeronautical mobile broadband or income from Inmarsat’s network of distributors.

In a presentation to Inmarsat investors, Mondale said Inmarsat has already booked 20 percent of its total Global Xpress revenue goal through 2019, mainly from three sources.

The first two are take-or-pay capacity contracts with Boeing Commercial Satellite Services and Honeywell for Global Xpress sales to the U.S. government and to business aviation customers, respectively. Boeing and Honeywell have agreed to five-year deals during which they will sell certain undisclosed amounts of Global Xpress capacity in their respective markets, or pay for it on their own if they cannot book the business.

Boeing’s agreement is to take at least 10 percent of Global Xpress capacity for the first five years. Boeing has teamed in its effort with Artel of Reston, Va., a veteran provider of satellite services to the U.S. government.

The third is Inmarsat’s XpressLink service, which through the company’s recently acquired ShipEquip business offers maritime customers Ku-band VSAT links  — using bandwidth provided by Inmarsat competitors — with a guarantee of a low-cast transfer to Global Xpress once that capacity is commercially available. The XpressLink service also includes Inmarsat’s lower-speed L-band links, to be used as a Global Xpress backup on the ships.

Inmarsat and its partners are offering to give away the hardware needed to modify the ship antennas from Ku-band to Ka-band compatibility even if customers ultimately will be paying less for Global Xpress than they are for their current Ku-band VSAT service. Installation of the hardware will be at the customer’s expense unless individual distributors decide to include it.

Frank Coles, president of Inmarsat Maritime, said there are about 20,000 commercial ships that are good candidates for VSAT broadband satellite links, and 5,200 of those are already equipped. Inmarsat’s ShipEquip is providing services to 1,100 of these vessels.

Coles said that as of the end of August, XpressLink had been booked for 450 ships, half of which are already operating with the service. He estimated that nearly half of all new VSAT installations on ships were for XpressLink.

Depending on the level of service demanded, XpressLink customers pay between $2,600 and $3,400 per month for the service.

Coles said Inmarsat forecasts between 300 and 350 new XpressLink orders by the end of 2013.

Inmarsat’s Global Xpress is enabled by three Boeing-built Ka-band satellites scheduled for launch, all aboard Russian-built Proton rockets marketed by International Launch Services, between late 2013 and late 2014. Each satellite is insured at launch for more than $350 million, Inmarsat Chief Financial Officer Rick Medlock said during the presentation.

The satellites are designed to capture the market for mobile broadband in Inmarsat’s core maritime markets, and to develop a broadband offer for aeronautical and land-based users as well. Inmarsat said it is keeping to its $1.2 billion budget for Global Xpress, including the satellites’ construction, launch, insurance and ground infrastructure.

Military users are a key market for Global Xpress. The U.S. Defense Department and other militaries are outfitting their mobile platforms for broadband links, and Inmarsat’s L-band services are ill-suited to broadband applications.

Global Xpress is intended to limit the migration of Inmarsat customers to broadband providers using Ku-band VSATs by offering Ka-band broadband.

Key Inmarsat Global Xpress competitors include KVH Industries of Middletown, R.I., which has introduced dual-mode C- and Ku-band VSAT hardware for maritime users; and satellite fleet operator Intelsat of Washington and Luxembourg, which is deploying a global network of Ku-band satellites with beams over air and sea routes.

In a series of presentations Oct. 9, Inmarsat officials said Ka-band has inherent advantages over Ku-band, an assertion that is the subject of debate in the industry.

One clear distinction of Global Xpress is its High-Capacity Overlay payload providing military-frequency Ka-band.

Peter Hadinger, head of Global Xpress global government services, said the system’s military Ka-band payload “looks and acts like a modern government satcom fleet.”

In particular, Hadinger said, users of the Wideband Global Satcom (WGS) Ka- and X-band network now being deployed for the U.S. military and allied nations — 10 satellites in all — will be able to switch from WGS to Global Xpress seamlessly.

Hadinger said Inmarsat is investing in highly secure gateway Earth stations for Global Xpress, and that the system is timed to take advantage of a trend in government communications toward Ka-band and away from Ku-band.

How far and fast this trend will go is also a subject of debate given the cost to military operators of manned and unmanned aerial platforms of switching out Ku-band hardware for Ka-band-compatible antennas.

The same encrypted military hardware using WGS will be able to use Global Xpress without any new equipment, Hadinger said.

WGS began as a six-satellite constellation that has since grown, with contributions from allied governments, into a constellation now expected to total 10 satellites.

But Hadinger said WGS will be able to meet only about 50 percent of the expected demand for military Ka-band, especially as the air and naval platforms move from their home bases toward their operational theatres.

Operating in orbits separated from the WGS satellites, Global Xpress will have sufficient military Ka-bandwidth available to permit military services to perform far more tasks during the voyage to and from a theater of operations than they would otherwise, Hadinger said.