Inmarsat doubtful over mobile TV via S-band

MSS operator Inmarsat has questioned the future of mobile TV via satellite as the key driver of European S-band services.
In its FY 2009 results conference call, Inmarsat’s chairman and CEO, Andrew Sukawaty, argued that mobile TV has not proved to be the…

MSS operator Inmarsat has questioned the future of mobile TV via satellite as the key driver of European S-band services.

In its FY 2009 results conference call, Inmarsat’s chairman and CEO, Andrew Sukawaty, argued that mobile TV has not proved to be the “killer app” that it had been predicted to be, and that S-band spectrum would more likely be used for more traditional services such as two-way data communication.

Sukawaty said: “If you go back two years, when it was speculated as to what this (European S-band) would be used for, I think most people saw it for mobile TV. I think that has probably diminished in terms of an opportunity and I think what has stepped up in its place is more traditional two-way communication services and mobile satellite radio with these hybrid systems. So those are the types of players we continue to be engaged in with this.”

The Inmarsat chief added that the satellite operator is already in talks with terrestrial operators regarding such services. “Since receiving a licence we’ve had broad-ranging discussions with a variety of different providers on the terrestrial side and we thing things are looking up in that regard…We have been talking to partners in four application areas about the development of this service. While there is nothing imminent, we are encouraged by those discussions and continue to work on the applications developed around that,” Sukawaty said.

Since it was awarded an S-band licence alongside the Eutelsat SES joint venture, Solaris, back in May 2008, Inmarsat has remained relatively cagey about the plans for its European S-band project, EuropaSat. Sukawaty has previously stated that there are a number of issues that need to be resolved before the company pushes ahead with any definite plans.

One of these is the fact that while the European Commission has issued its S-band operating licences, individual countries had not. Sukawaty, though, was optimistic on this being completed relatively quickly, saying: “The licences on a country by country basis have not been awarded at this stage. We expect that to happen shortly.”

Sukawaty also noted that any future plans are still reliant on the resolution of ICO Global’s legacy claim with Ofcom. “There is still a pending lawsuit which is challenging the validity of these licences, so clearly that has to be cleared.”

Results emphasise five years of growth since IPO

Inmarsat reported a strong set of annual results with total group revenue, which includes Stratos, up 4.2% to US$1.38bn and EBITDA up 11.9% from US$531.2m in 2008 to US$594.2m in 2009. On its own, Inmarsat Global saw revenue rise 9.5% to US$694.8m and EBITDA up 14.8% to US$495.5m.

Having completed a US$650m debt refinancing in Q4 2009, which pushed out the maturities on that debt to 2017, Inmarsat had net debt of approximately US$1.319bn as of December 31, 2009, made up of cash of US$226.8m and total borrowings of US$1.55bn. This gave the company a net debt-to-EBITDA of 2.1x, compared to 2.6x at the end of 2008

The company also pointed to the continued revenue, EBITDA and dividend growth that it has maintained since its IPO in 2005, with EBITDA having risen from US$316m in 2005 to 2009’s US$594.2m while dividends have increase by a CAGR of 6.8% from 25.62 cents to 33.36 cents in the same period. Rick Medlock, CFO of Inmarsat, said: “I believe we have achieved the five year targets of the 2005 IPO one year ahead of plan.”

As for its 2010 outlook, Inmarsat stated: “We believe demand from commercial and government customers is continuing to expand, particularly for our data services. In addition, we are excited about entering the handheld satellite phone voice market and believe this represents an attractive new growth opportunity for the future.”

It added: “Allowing for approximately US$10m of planned capital expenditure that has been deferred from 2009 to 2010, we expect our 2010 cash capital expenditure to be in the region of US$160 to US$170m, including capital expenditure for our Stratos division and deferred satellite payments.”

Inmarsat expects to launch its new handheld satellite phone IsatPhone Pro in June and has 11 distributers currently in place. The phone will retail at US$500 to US$600, which Inmarsat claims is much lower than its rivals. The satellite operator reiterated its objective to take a 10% market share within two years of launch.