MSS Players Persevere As Market Repositions
The MSS CEO session at SATELLITE 2011’s MSUA-8 track was narrowed to four panelists, but highlighted a transformative year for the sector’s remaining players.
Iridium Communications CEO Matt Desch said he was pleased by how his company and the entire sector developed during the past year. “It’s good to be moving forward. The competition in the MSS industry remains healthy. I’m also very happy about Iridium’s subscriber growth this year and the fact that we experienced 50 percent growth in our handheld market. Our products are being sold at lower prices than they were five years ago. While we have to adjust to new margins, it’s a positive development since it leads to more users,” he said during the session, “Competing for Customers: The MSS CEOs Speak Out”
Desch also issued an apology to GlobalStar Executive Chairman Jay Monroe for criticizing the $574 million financing agreement Monroe received from Coface in March 2009. Since then, Desch himself secured a $1.8 billion Coface credit facility to fund his Iridium Next constellation. “I take back the words I said back then. It was my first reaction to criticize it, and I later realized how brilliant of a move it was.”
During the last two years, Monroe has used the company’s French export credit financing to upgrade its Simplex network and repair GlobalStar’s voice service constellation. “2010 was a big year for us,” he said. “We launched and added six satellites to our constellation and just shipped another six to Baikanour for launch in the middle of May. We’re well on our way to bringing our constellation back to health. Our acquisition of Axonn in June allowed us to inherit technology to build up our Simplex market offering. We’re now able to bring new products to market in 120 days.”
Inmarsat CEO Andy Sukawaty said he believes the sector’s financial focus is turning away from EBITDA to free cash flow figures. His company boasted 13 percent revenue growth in the past year, with 70 percent growth in profits. Sukawaty, however, spent much more time on his opening presentation by referring to Japan’s recent earthquake to stress the importance of satellite connectivity for emergency responders. “Much like when we were sitting here last year after Haiti suffered an earthquake, the tragic events in Japan emphasize the need for satellite. This is especially true during a time when satellite spectrum is under attack from the smartphone onslaught. We’re relatively small compared to the cellular industry, but global governments have to be reminded that satellite is a life-saving technology.”
Thuraya Telecommunications CEO Samer Halawi said he entered his role on the crest of a transformation in how the operator launches new products. “We’re still a company that is concentrated on voice markets. There are a lot of consumers on the verticals who want data, and that’s where our focus will remain.”
Halawi also said that he found himself taking control of the company as it was dealing with its signal being intentionally jammed by the Libyan government for a period of two weeks after civil protests broke out in the country. “Maybe we can purchase an F-16 in the future to prevent this type of thing from happening,” Halawi joked. “But seriously, we have a lot of customers in Libya and we have decided to take extensive legal action. The Libyan government was openly disconnecting people from our service. This kind of thing can hit all of us at any part of the world.”
In a subtle reference to TerraStar’s absence from the panel following its October bankruptcy filing, Panel moderator Farrar, president of MSUA, asked if ATC spectrum-enabled, hybrid handsets were taking away from the MSS industry.
Sukawaty called ATC a “public policy dream” and said that LightSquared, which is trying to launch a 4G LTE network in the United States, is breaking the technical ground in the S-band arena. “Technically, the LightSquared solution works. Despite the interference issues that have to — and will be — resolved with the GPS community, we have to embrace this technology, otherwise we’ll get run over by it.”
Desch strongly disagreed with Sukawaty, going so far as to call LightSquared’s efforts “irrelevant” to the MSS story. “While I agree with Andy that LightSquared’s mission involves repurposing spectrum from satellite, I think there is some zone of unreality when it comes to comparing LightSquared to our industry. LightSquared is not a mobile satellite service. They are not even here at this show, but they will be at CTIA next week. To rewind a bit, Iridium had a dual-mode phone, but they didn’t sell as well as our other models. Terrestar was a good example of the consequences of putting two technologies together on the same handset that don’t offer the best of both worlds.”
Monroe, who traditionally approaches the MSS sector from the consumer angle after enjoying success with its Spot messenger service, agreed there is more than enough room in the market for MSS operators to profit off single-mode phone voice services. “My bias on the issue is to get these services down to the lowest operational costs possible. I support anything that has the highest utility. For Globalstar, it’s all about consumer markets. It’s a different orientation that we have and some of the pure MSS providers have as well.”
Farrar then asked Sukawaty to explain how handsets are expanding the market, as Inmarsat launched the IsatPhone Pro handset last year. “The handset market for us has not been growing as fast as we’d like it to at 2 percent to 4 percent per year,” said Sukawaty. “The waveform can be applied to all sorts of different applications and our customer feedback is very positive. Despite the slow pace, we’ll be extremely aggressive in that market. I don’t see Jay’s multi-million dollar market any time soon, but I applaud him for going after the consumer market.”
Monroe defended his plan of a consumer-driven handset. “The key is driving down the costs of your infrastructure. If you look at history, the one-rate plan from AT&T altered the way people thought about cellular services. It changed the way people connected. People could afford to be connected. I don’t expect $100 ARPUs in the handheld market, however, I think $500 for a handset is too high. I think it will come down and we will be coming out with a phone for much less than that.”
Halawi said his background in investment banking naturally causes him to be suspicious of what he believes are “unrealistic numbers,” he noted. “GlobalStar’s figures here remind me of the euphoria that was in the MSS industry before I jumped into it in 1999. When I did join, I saw that the industry actually had a horrible year because of the illogical financing and economics embedded in the business models.”