It has been in development for over two year but MSS operator Inmarsat has finally revealed its next generation Ka-band plans, signing a fixed-price contract with Boeing to build three 702HP Ka-band satellites.
The new spacecraft, which will be called…
It has been in development for over two year but MSS operator Inmarsat has finally revealed its next generation Ka-band plans, signing a fixed-price contract with Boeing to build three 702HP Ka-band satellites.
The new spacecraft, which will be called Inmarsat-5, are expected to enter commercial services in 2014 and will support the company’s next generation global service, Global Xpress.
Inmarsat estimates that the total cost of Inmarsat-5 and Global Xpress will be US$1.2bn over 4.5 years, incorporating the fixed cost of the satellites, as well as the cost of additional ground network infrastructure, product development, launch services and insurance. The company has yet to sign any contract for the latter requirements.
As with other recent next generation mobile satellite constellations, Inmarsat is looking to tap ECA financing and has an application with the US Ex-Im Bank currently under consideration. Boeing is ‘strongly supporting’ Inmarsat on this.
However, the satellite operator stated that it had no immediate financing needs for Inmarsat-5 and planned to largely fund the project from its internally generated cash flows. As of June 30 2010, Inmarsat had over US$400m of available liquidity.
In its interim results presentation, Inmarsat CFO Rick Medlock said that while the company remained confident that it would secure Ex-Im backing, if for some reason it did not, then the company would hope that its existing banking group of 12 senior lenders would prove to be supportive.
Medlock added that the Inmarsat-5 system enables the company to push out the replacement requirements of the L-band network by two years from 2018 to 2020 and to purchase the next generation Inmarsat-6 L-band satellites on a rolling procurement. This results in a net capex deferment of more than US$500m for its L-band system over the next eleven years and in turn means that the Ka-band project will lead to a net capex increase of between US$600 to US$700m over the next ten years.
Inmarsat is confident though that it will quickly recoup this investment. As with all its new ventures, the company is aiming for a minimum return on investment of at least 15% and has targeted US$500m of annual Ka-band revenues 5 years after global service launch.
The company has identified a US$1.4bn incremental market opportunity in VSAT services and expects this to continue growing, driven in particular by booming demand from the maritime, energy and government sectors. The latter in particular is expected to be rapidly increasing market opportunity over the next decade.
In addition, Boeing has agreed to become a distribution partner for both Inmarsat’s Ka- and L-band services and has pre-committed to capacity purchases representing more than 10% of Inmarsat’s target Ka-band revenues in the first five years after global service launch.
Andrew Sukawaty, Chairman and CEO of Inmarsat, said: “This is a new investment for new growth. With the Global Xpress network, we will be the first operator to offer global mobile broadband coverage, offering unparalleled speeds and bandwidth to customers in remote locations around the world.
Global Xpresswill be faster and less expensive than current Ku-band market offerings, delivered to smaller and cheaper terminals and be the first offered on a seamless, global, end to end basis with high quality of service. Picture 50MB/s services to a ship or aircraft and 10MB/s to an antenna the size of an iPad (20cm).
Inmarsat-5 will also complement our existing global L-band services, allowing us to offer unique hybrid packages using both networks, giving users unprecedented levels of resilience and reliability in remote and harsh environments.”
Each new 702HP Inmarsat-5 satellite will have 89 Ka-band spot beams and will have twenty times more capacity than the Inmarsat-4 satellites. The company has maintained high priority filings with the ITU for the 500MHz of MSS spectrum that has been set aside from the 3.5GHz of spectrum made available for Ka-band services.
As to whether the new Ka-band network might potential eat away at the company’s L-band revenues, Inmarsat remained confident. Medlock said: “I don’t think it is going to cannabalise our existing revenues. There are bandwidth demands that we simply couldn’t meet with our current network. This is going to be incremental revenue and we still expect L-band to grow.”
Indeed, the company has set a new five-year target average annual revenue growth rate of between 5-7% between 2010-2014 in its interim results. Inmarsat reported a 12.2% rise in H1 2010 total revenues to US$570.7m, with EBITDA up 15.4% to US$334.4m.
