Erik Ceuppens

Chief Executive Officer, Vizada


he September acquisition of mobile satellite services provider Telenor Satellite Services by Vizada, the former France Telecom Mobile Satellite Communications, is the latest consolidation play among the distribution partners of London-based Inmarsat.

It may not be the last. While Vizada’s owner, private-equity investor Apax Partners, has not

set out its strategy publicly, the world of Inmarsat distributors is likely to change dramatically when their current contract with Inmarsat ends in April 2009.

London-based Inmarsat has said it will insist on much tougher terms and conditions with its

distribution partners

under the new contract. For example,

wants to scrap

the volume-based discount scheme, which permits distributors to reap substantial savings in what they pay to Inmarsat once they hit pre

determined annual sales targets.

As it stands now, Paris-based Vizada and Stratos Global of Bethesda, Md., together account for more than 75 percent of Inmarsat’s annual business. Both are benefiting from the volume-discount scheme.

The bigger the distributor, the more quickly the volume-discount milestones are reached – a factor that provides incentives for

further consolidation in the business.

In another sign of the changes occurring between Inmarsat and its distributors, Inmarsat has financed the purchase of Stratos Global by CIP Canada, with an option to take over Stratos itself in 2009.

Chief Executive Erik Ceuppens declined to discuss how his company will respond to Inmarsat’sStratos move or Inmarsat’s plans for future multi-year distribution contracts, preferring to limit his comments to Vizada’s view of the current market for mobile satellite services and its growth potential. But by its size alone, Vizada has become a force that Inmarsat will have to reckon with as it seeks to expand its

mobile satellite services business.

spoke with Space News staff writer Peter B. de Selding.

If I add the France Telecom Mobile business with Telenor Satellite Services, I come to about $586 million in pro forma 2006 revenues for Vizada. Is

that correct?

Those would be our pro forma revenues, but what’s more important to us is becoming the leading provider of satellite solutions. We want to offer the widest, most complete portfolio of mobile and VSAT [very small aperture terminal] solutions to our customers. Our strategy is to make sure our customers are getting the best solution available – independent of wher

e it comes from.

What is your revenue split between mobile satellite

and VSAT services?

Let’s say both business areas are important to us. For MSS [mobile satellite services] we have become the major player, and now we will integrate Telenor Satellite Services’ VSAT portfolio. There are advantages to a combined [MSS/VSAT] strategy.

You offer Iridium, Thuraya, Inmarsat and VSAT services. You don’t distribute Globalstar products and services?

Only to a very limited extent. We are trying to build the most competitive product lineup anywhere.

There is a debate over whether the overall MSS market has room for much growth. How do you see it?

We absolutely see it as growing – Inmarsat traditional services, VSAT networks, the handheld satellite telephone market – all are growing.

Inmarsat is introducing a hand-held product but doesn’t see this particular market as growing much. You disagree?

Yes, we see the hand-held market as growing overall. The existing actors have different strategies. We see strong growth in Iridium’s market, and Thuraya is positioning itself to grow into new markets. We will be working closely with Thuraya to expand their hand-held business.

Inmarsat is a late arrival here, and we need to see what will be offered by way of a second-generation product in early 2009. For now, it is a little too early to make projections on Inmarsat’s effect on the market. But you have already seen Thuraya’s reaction to Inmarsat. It is offering some special pricing schemes and so on. Inmarsat will first have to come up to speed in this market segment before the situation clarifies.

How do you see your relationship with Inmarsat changing as you renegotiate the distribution contract, which expires in April 2009, and given Inmarsat’s new relationship to Stratos?

First, we are not there yet: A lot of things can happen between now and then. But we know that Vizada will be an important partner for Inmarsat. The Inmarsat-Stratos deal will either develop or it will not. There is some uncertainty there. We have a long way to go on the regulatory side before Inmarsat concludes a [takeover] deal with Stratos.

Certainly Inmarsat’s distribution partners and land Earth station owners will be negotiating new arrangements. We are and will remain a very strong business partner for Inmarsat, and we have good reason to believe that our cooperation will continue.

Is consolidation generally among MSS distributors a good thing?

The current wave of consolidation in the industry is a good thing, and the trend continues to be in that direction. It will create a more stable environment.

How do you view Inmarsat’s recently introduced Broadband Global Area Network (BGAN) service, which offers several hundred kilobits per second for voice and data links through laptop-sized terminals?

BGAN is a very interesting technical development. But it’s early days still

. We’re still in the first full year of product introduction. But BGAN is already contributing in a significant way to our growth in 2007. We are probably Inmarsat’s largest BGAN service provider.

Doesn’t Stratos claim to be the biggest?

They might have said that before our Telenor purchase was finalized.

There are early designs, in the U.S. military and elsewhere, for clip-on BGAN terminals. Could BGAN eventually be a consumer-type product?

We are certainly not at that point. What we are seeing is that BGAN is concentrated in the media and government fields. It will take some time for the production to fully penetrate these markets before it expands beyond them.

Is BGAN drawing customers from other Inmarsat products?

What we have seen so far is that BGAN is complementary to other products and we are not seeing much cannibalization of existing revenue streams. In some cases, it might be the same customers who retain their Inmarsat contracts and then add BGAN.

The French Defense Ministry had expressed concerns about Apax taking over France Telecom’s mobile satellite business for security reasons. Do those concerns remain?

We continue to have excellent relations with the French Defense Ministry and I can offer as proof of that the fact that the ministry recently renewed its entire contract for mobile satellite communications with us for three years – 2008 to 2010.

How does Vizada view prospects for U.S. and European companies designing hybrid satellite-terrestrial mobile communications services in L- and S-band featuring

networks of ground-based signal boosters?

We are not a satellite operator and our strategy is to remain technology independent. If the companies you mention come up with a service offer that we like, we could be interested in distributing it.