Star power

In August last year Inmarsat launched the third of its fourth generation I-4 satellites, offering the world’s only global broadband coverage by satellite. Given the strong adoption of its land, aero and maritime voice and data services, Inmarsat has bet its US$1.5 billion investment in the new generation of satellites is money well spent, as it looks to dominate the broadband satellite space and extend the appeal of its services to an even wider audience

The Inmarsat-4 satellites are now located in three new satellite regions:I-4 Americas (98 degrees West); I-4 EME A (25 degrees East); I-4 Asia-Pacific (143.5 degrees East).

Samer Halawi, Inmarsat’s vice president of Strategic Corporate Development is pleased with the company’s commercial and operational performance in 2008, describing the period as a record year.

Inmarsat’s core mobile satellite services business recorded an EDITBA margin of 68 per cent in 2008, to end-December, with revenues up 13.9 per cent year-on-year to US$634.7 million, and EBITDA up 12.5 per cent to US$431.6 million.

Pre-tax profit for the year amounted to US$193.8 million, up 56 per cent year-on-year. For Q408, revenue was up 20.4 per cent to US$160.6 million, while EBITDA came in at US$101.4, up 18.7 per cent.

Increased demand for both voice and data services contributed to growth in maritime sector revenue of 7.2 per cent year-on-year. Growth in Inmarsat’s base of active maritime terminals was up 5.8 per cent for the year, including growth of 36.7 per cent in its base of active Fleet and FleetBroadband terminals.

Inmarsat’s land mobile sector recorded revenue growth of 12.7 per cent for the year. This performance was driven by continued growth of the company’s BGAN service, which continues to attract new users to the network and drive higher usage levels across its user base. Inmarsat’s base of active land mobile terminals was up 2.3 per cent for the year, while the number of active BGAN terminals was up 75 per cent, ending the year at 27,635.

Growth in the aeronautical sector was 45.4 per cent and was the result of sustained demand and high levels of usage for Inmarsat’s Swift 64 service, which continues to primarily serve government aircraft and business jets. Overall active aeronautical terminals were up 13.5 per cent year over year.

In the way of outlook, given that a significant proportion of Inmarsat’s revenue comes from government customers and as commercial customers tend to have a high degree of day-to-day reliance on its services, the company believes its business is well positioned against economic downturn. As a result, Inmarsat is cautiously optimistic that its business will continue to show solid revenue growth in 2009.

“We are set to reach a milestone this month, with the acquisition of Stratos, a leading distributor of Inmarsat products,” Halawi says “This will allow us to exercise greater control of our relationship with end-users and generally strengthen our market position.”

In the company’s annual financial report for 2008, Inmarsat chairman and CEO, Andrew Sukawaty, stated that the company expected to exercise the call option to acquire CIP Canada Investment and Stratos this month. Inmarsat has received all regulatory clearances to do so, and the transaction was funded in 2007 with no additional financing now required for completion.

“We entered into this transaction primarily to put ourselves on a level playing field with all of our competitors in the satellite industry, who are allowed to control some element of their end customer distribution,” Sukawaty said. “However, we remain committed to a business model that primarily sells through our established and growing network of distribution partners and service providers.”

Sukawaty believes that a successful collaborative partnership with all its partners is key for the collective success and the company is committed to this. “We will have new distribution agreements that will come into place from April 15, 2009. While the previous incentive arrangements for distributors will change from May 1, we believe our channel will be motivated to achieve revenue growth and will be incentivised through appropriate arrangements in the new distribution agreements.”

It is developments such as these that make Inmarsat confident about the year ahead despite the economic contraction globally. The fact that the three 1-4 satellites launched have a commercial life into the 2020s, and given that they are all fully-funded at a time of tightened capital markets, boosts the mobile satellite company’s position even further. The latest generation of satellites are 60 times more powerful than the I-3 generation.

“A number of our competitors do not have broadband, they only offer voice services,” comments Halawi. “Others need to replenish their satellites at a cost of around US$2.5 billion, so with respect to our financial and strategic position we remain very strong,” he adds.

The planned launch of Inmarsat’s voice global phone next year is aimed at boosting the company’s participation in the US$500 million annual voice market

Following the launch of the third I-4 satellite, and a successful satellite repositioning programme that ended on February 24, 2009, Inmarsat claims to be the only satellite operator to offer mobile broadband services on a global basis.

The repositioning programme – which involved three generations of Inmarsat satellites, five satellite movements, and the associated transitioning of voice and data traffic between the repositioned satellites – was completed on schedule. The relocations were carefully orchestrated such that there was either no impact on services – such as Inmarsat’s safety services, or a very limited period of interruption.

The first users to access Inmarsat’s broadband services in the Pacific Ocean were the competitors in the Volvo Ocean Race 2008-2009 – currently heading south in the race’s longest leg from Qingdao, China to Rio de Janeiro, Brazil – who established connectivity in the early hours of February 24.

The percentage of revenues being generated from data services has been growing for Inmarsat all the time and now accounts for 70 per cent of its business, up from 40 per cent a few years ago. However, this is not to say the mobile satellite services provider is not looking to build up its presence in the mobile voice arena. Next year Inmarsat is looking to launch a global voice handset, which takes advantage of the satellite company’s global reach.

“The satellite voice market is a US$500 million-a-year opportunity, so it would be a good business to have a share of,” Halawi reveals. And with satellite voice calls typically costing between US$0.80-US$1.00 per minute from anywhere in the world, Halawi believes mobile satellite services are becoming a more viable alternative, price-wise, to the costs of international cellular roaming.

“We’re not the number one in voice because there are three other companies specialising in this, but we are ought to make an impact in it with the launch of the global phone,” Halawi says.

Inmarsat has also been looking to widen the range of services offered over its network, having developed streaming capabilities that are proving popular with media companies. The company plans to offer a new product called BGAN X-Stream, offering 384 Kbps IP streaming by the end of the year, and also views the growth of in-flight communications as a very significant opportunity.

Samer Halawi believes Inmarsat is in a strong position to continue to grow its business during the course of the year despite the global economic downturn

“For in-flight communications I believe BlackBerry and SMS will be the really big opportunities, not so much the voice aspect of the communications,” Halawi states.

The Middle East and Africa region remains a dynamic market for satellite services. Last month, SmartSat, a US$500 million joint venture and the region’s first private Arab company specialised in the satellite industry, revealed that it aims to offer a superior range of services that target the media, telecoms and Internet providers in the region.

SmartSat considers the MENA region a highly dynamic emerging satellite market as regional demand for transponders has risen 12 per cent annually in the last five years according to a study by Euroconsult and the London Satellite Exchange. The study showed that commercial satellitelease revenues reached US$752 million in 2007, representing an average growth of 17 per cent annually since 2003.

A significant growth indicator in the MENA satellite market is the increasing adoption of high-technology appliances and applications such as High Definition Television (HDTV), which has a direct impact on the growth of satellite-carried HDTV channels in the region.

SmartSat is a UAE-based firm created by a joint venture between Smartlink, the Jordanian private shareholding company that operates as a global broadband satellite services provider in the Middle East, North Africa and Eastern Europe regions with offices in Jordan and the UAE; and Al Jawhara Holding, a leading Kuwaiti investment holding company that serves as SmartSat’s financial manager.

Extending the maritime heritage

Sixty-five per cent of Inmarsat’s business continues to be driven by the maritime sector, which constitutes the company’s legacy. As such the organisation strives to remain relevant to the changing requirements of the industry and last year announced it was to expand its FleetBroadband family to offer an entry-level, globally deployable, combined voice and data service targeted at small vessels. The new service, FB150, will deliver voice, IP data up to 150 Kbps and SMS, and is planned to be available by the middle of this year.

Inmarsat developed the new service to address the needs of smaller leisure, fishing and commercial vessels with lower data requirements than the high performance FB250 and FB500. FB150 will offer a voice connection at landline quality, accessible simultaneously with Internet-capable IP data and simple-to-use SMS. The first manufacturers of FB150 hardware will be Thrane & Thrane and AddValue, which is partnering with SpaceCom for antenna production.

FB150 hardware costs and service charges will be priced competitively for the target markets. Inmarsat and the FB150 manufacturers are committed to ensuring the terminal pricing will address the needs of the sub – US$5,000 hardware sector.

The FB150 above-deck antenna unit, as with the FB250, will be compact and easy to install. The below decks unit will be similarly scaled and offer standard interfaces to allow quick and easy connection to PCs and ‘off the shelf’ peripheral services.