PARIS — Mobile satellite-service providers disagree on whether the current global market for hand-held satellite telephones is set to grow substantially as more providers and higher-quality products arrive, or has about reached its limit.

In the next 18 months, both Inmarsat of London and Thuraya Satellite Communications Co. of Abu Dhabi, United Arab emirates are scheduled to


new satellites to expand the reach of their hand-held products.

Globalstar Inc. plans to start launching a new 48-satellite constellation in mid-2009, and Iridium already is planning a $2.6 billion second-generation system to be in orbit around 2013. In the United States, ICO Global, Mobile Satellite Ventures and TerreStar Corp. all are investing in large geostationary satellites for mobile voice and data links, although each is tacking a different segment of the market.

Current estimates are that there are around 700,000 hand-held satellite telephones now in use worldwide, a figure that is difficult to verify because not all service providers publish clear figures distinguishing between phones manufactured, distributed, sold to customers and, finally, in regular use.

Inmarsat Chief Executive Andrew Sukawaty said growth in the market has slowed to near-zero in the past year or two after climbing in part because Globalstar and Iridium, emerging from Chapter 11 bankruptcy in the United States, could price their products at below manufacturing cost.

“They were sitting in inventory and many of the early stage products were given away,” Sukawaty said Sept. 4 at the Euroconsult satellite-finance conference here. The current global market, he said, “has slowed down dramatically, and that comes at a very bad time for people who want to build new constellations. [Market growth] is just not happening.”

Inmarsat’s new hand-held telephone, borrowed from the Asia Cellular product of Jakarta, a service that Inmarsat has taken over, will retail for about $500, with air time priced at about $1 per minute, Sukawaty said. He said Inmarsat expects only to take a share of the existing market and is not counting on growth in the overall market.

Sukawaty conceded that Inmarsat, which is not subsidizing the cost of its telephones, will not be able to offer its telephone distributors the same profit margins as these companies now generate from selling Globalstar or Iridium handsets. “They’ll probably have to sell more of them to get the same gross-margin dollars,” he said.

Iridium Chief Executive Matt Desch is not buying Sukawaty’s assessment. In a Sept. 10 presentation to a Jeffries & Co. investor conference in New York, Desch said Iridium cannot keep up with demand for its telephones.

“We’ve gone from delivering when people requested service to having a significant backlog of business,” Desch said. “We’re still not going to catch up through this year. We don’t subsidize, and our margins are well over 40 percent on all our devices.”

Desch said part of the recent surge in demand for Iridium’s products is because some of Globalstar’s customers have moved to Iridium because of a degradation of Globalstar satellites’ ability to provide voice communications. It is unclear how much of Iridium’s growth is from users new to the satellite-telephone market.

In his Sept. 10 presentation, Desch provided details on how Bethesda, Md.-based Iridium plans to finance its second-generation constellation. The company currently operates a fleet of 66 satellites and nine spares in low Earth orbit. The second-generation constellation, he said, will cost about $2.6 billion.

Desch said Iridium expects to grow by an average of 12.3 percent per year over the next 10 years, generating $1.6 billion in cumulative earnings over the period.

That would leave a $1 billion


in funding that Desch said could be filled by U.S. government, international organizations or private-sector operators paying Iridium to fly their sensors as piggyback payloads on Iridium’s next-generation satellites.

Alternatively, he said, Iridium would take on one or more private-sector strategic partners to help with financing. In addition, the company is planning an initial stock offering within the next 18 months to raise capital.

Iridium expects to lose 1 to

2 satellites per year to on

board failures, meaning its nine in-orbit spares will be deployed for service by 2014, Desch said. His estimates are based on an evaluation of Iridium’s satellites performed by the Aerospace Corp. of El Segundo, Calif., at the request of the U.S. Defense Department, which accounts for more than 30 percent of Iridium’s current revenue.