Inmarsat Keeps Options Open for Fifth-generation System

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MUNICH, Germany — Mobile satellite services operator Inmarsat is exploring a range of options for its next-generation global satellite system including advanced L-band, Ka-band and other frequencies as it plots its future in mobile broadband, Inmarsat Chief Executive Andrew Sukawaty said March 10.

In an interview following Inmarsat’s report on its 2009 financial performance, Sukawaty said the company has not narrowed down the choice to L-band, the radio frequency Inmarsat currently uses, or to Ka-band.

“We really should be shot as a management team if we weren’t looking at this,” Sukawaty said. “But we have made no decisions. We need to consider spectrum availability, orbital slots in geostationary orbit, a whole host of factors. Everything is on the table.”

London-based Inmarsat sent out a request for information to satellite manufacturers in late 2009 asking them to evaluate possible alternatives for a fifth-generation Inmarsat system, including a Ka-band alternative, according to industry officials.

Inmarsat’s three fourth-generation satellites, launched between 2005 and 2008, were repositioned in geostationary orbit in 2009 to maximize their coverage for Inmarsat’s new suite of broadband services to maritime, land-mobile and aeronautical customers. The company has no immediate need for new spacecraft, as the Inmarsat 4 fleet is healthy in orbit and expected to operate for 15 years.

In addition, Inmarsat is investing about $400 million in the large Alphasat 1-XL satellite, to be launched in 2012, which is being built in part with European Space Agency investment.

Sukawaty said Inmarsat is not looking at a next-generation system out of concern that today’s fixed satellite services operators, using Ku-band and, to a lesser extent, Ka-band, are taking much business from Inmarsat. Aside from the fact that these operators in general do not offer coverage over the oceans, their success in harvesting Inmarsat customers has been “a lot less than what you sometimes hear,” he said.

Sukawaty insisted Inmarsat has not abandoned plans to launch an S-band satellite for mobile communications under a license granted in 2009 by the European Commission. The other licensee, Solaris Mobile of Ireland, a joint venture between satellite fleet operators Eutelsat of Paris and SES of Luxembourg, has been struggling because of a defect with the S-band antenna on its satellite.

Eutelsat and SES are evaluating how and whether to proceed with Solaris Mobile.

Sukawaty said Inmarsat, before proceeding with a contract to build its S-band Europasat satellite, will need further clarity on the European licensing system, and will also need to be assured that a challenge to the licensing process made by competitor ICO Global of the United States does not threaten the Inmarsat license. Just as important, he said, is securing a strategic partner willing to co-invest in the S-band venture. “Things are looking up in this regard,” Sukawaty said in a March 9 conference call with investors, referring to S-band discussions with terrestrial telecommunications providers.

Sukawaty said the company is on track to introduce its first-ever satellite telephone handset, to be priced at between $500 and $600 retail and to bill customers at rates of less than $1 per minute. Sukawaty has never hidden his belief that the satellite-telephone market, which Inmarsat estimates at about $350 million in annual wholesale revenue, is not a high-growth business. “It’s growing, but only at a rate of 3 percent to 5 percent a year,” he said.

Inmarsat plans to skim off from current satellite telephone providers a 10 percent market share within two years of the availability of its new phone, which the company says will be substantially less expensive than competitors’ offerings.

Inmarsat reported 2009 revenue of $1.04 billion, up 4.2 percent over 2008. Nearly half the revenue came from Stratos Global of Bethesda, Md., which Inmarsat purchased in 2009. Stratos revenue was up just 1 percent in 2009 as the company’s broadband business to energy companies suffered with the general decline of that market.

Inmarsat’s global mobile satellite services revenue, not including Stratos, was $682.8 million, up 10.4 percent from 2008 led by the company’s maritime data segment, which grew by 11 percent to $252.3 million.

Aeronautical satellite services, while still small, continued to grow at double-digit rates, increasing by nearly 18 percent, to $75.8 million, in 2009 as more businesses and commercial airlines adopted the technology.

Land-mobile voice services continued their multiyear decline — one argument for Inmarsat’s decision to offer its own satellite phone — in 2009, dropping by nearly 25 percent, to $8.5 million. Land-based data services increased by 5.7 percent, to $138 million, as Inmarsat’s BGAN broadband service found increased market acceptance and BGAN users generated increased monthly revenue.

Inmarsat counted 256,600 active terminals across its product lines as of Dec. 31, up 4.8 percent from a year earlier.

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