MSS Firms Urged To Merge or Perish

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  Space News Business

MSS Firms Urged To Merge or Perish

By PETER B. de SELDING
Space News Staff Writer
posted: 27 December 2007
03:34 pm ET





PARIS —


The mobile satellite services (MSS) industry in the United States is heading for “disaster” unless the six existing companies consolidate into three to make better use of the available radio spectrum and avoid overspending, TerreStar Corp. Chief Executive Robert H. Brumley said Dec. 5.

Brumley
said TerreStar should merge with ICO Global in S-band, and that Inmarsat and Mobile Satellite Ventures (MSV) should merge their L-band systems. The same is true for the two low-orbiting constellations, Iridium Satellites and Globalstar, which ultimately should come together, he said.



Inmarsat Chief Executive Andy Sukawaty said Dec. 7 that the London-based company – the only mobile satellite services operator that does not need to build new satellites or to raise cash in the near term – remains willing to coordinate L-band spectrum with MSV.

Sukawaty
declined to speculate on whether the arrival of Harbinger Capital as Inmarsat’s largest shareholder might facilitate a joint operating arrangement or merger with MSV. Birmingham, Ala.-based Harbinger




notified the London Stock Exchange Dec. 5 that it had purchased a 20.1 percent stake in Inmarsat and is now the company’s largest shareholder. Harbinger also owns a substantial stake in SkyTerra Communications Inc., which owns MSV.

Under London Stock Exchange rules, Harbinger would be obliged to make an offer for the whole of Inmarsat if its ownership stake surpassed 29.9 percent.

“I have no idea what the intentions of this or any other shareholder are,” Sukawaty said. “But it is true that our U.S. ownership interest has become larger.”

Addressing a UBS investor conference in New York, Brumley said his own company ultimately should merge with ICO Global, bringing together the two projects that




now are spending several billion dollars between them to build separate S-band mobile voice and data networks in North America.

Brumley
said that as soon as the two companies launch their first satellites – ICO’s is scheduled for March, TerreStar’s for September – they will have met their principal U.S. regulatory milestones and




then can negotiate the terms of a merger, or at least a joint service-provision agreement.

Reston, Va.-based TerreStar and ICO, also headquartered there, each has been given access, free of charge, to 20 MHz of S-band spectrum on the condition that they launch their satellites. Brumley said combining the two blocs into a single, 40-MHz segment “makes a tremendous amount of sense. We already are planning to broadcast over all 40 MHz. We really believe these two companies are destined to be put together – the same as Inmarsat and MSV and, I believe, Iridium and Globalstar.”

Like ICO and TerreStar, MSV is building a next-generation mobile satellite network but is facing financial challenges to assure cash flow up through its in-service date. The current debt-market environment makes it more difficult for all these companies to raise fresh capital.

But Inmarsat and MSV are both also operating satellites today. MSV’s satellites, though, are aging and being replaced with much more powerful spacecraft. Brumley said that because both companies have satellite assets available today, they should




begin talks on joining forces immediately.





Owned by SkyTerra Corp., Reston, Va.-based MSV has two satellites under construction at Boeing Satellite Systems International of El Segundo, Calif., and scheduled for launch in 2009 and 2010.

The company has said its contract payments to Boeing and other contractors, in addition to the continued functioning of the business, will make it necessary for




MSV to raise between $125 million and $150 million in cash by the end of 2008.

It is unclear whether MSV will be able to secure its additional funding without surrendering a substantial share of its equity to a strategic investor.

Sukawaty
said any spectrum-sharing arrangement with MSV would take three to five years to complete because Inmarsat would need to carefully calibrate the spectrum allocated to its current users, and replace many user terminals. “We have a lot of sensitive users are there who have very precise requirements,” Sukawaty said. The U.S. Department of Defense is Inmarsat’s largest customer.