Inmarsat Shakes Up Europe
London-based Inmarsat Ventures, one of the oldest European satellite companies, is showing that it also is one of the most progressive by adopting a new ownership structure, pursuing a contract to manage the proposed Galileo positioning system and preparing to launch high-speed mobile broadband satellites in 2004.
These bold moves stood out during an update of the European satellite sector offered by representatives from several companies who gave presentations to the Mid-Atlantic Chapter of the Society of Satellite Professionals International (SSPI) in Washington last week. Other speakers represented Dutch-based satellite operator New Skies Satellites, France-based satellite builder EADS Astrium and the French embassy.
Earlier this month, Inmarsat shareholders approved an offer by Grapeclose, a joint venture involving the investment firms Apax Partners and Permira, to take a majority stake in the mobile satellite operator. Court approval for the acquisition is expected this Tuesday and the arrangement is due to become effective Wednesday, Inmarsat officials said.
“Our dilution will be in excess of 50 percent,” said Alan Auckenthaler, Inmarsat’s vice president and general counsel. “Our challenge will be to convince the Congress and [the Federal Communications Commission] to consider the sale sufficient to comply with the ORBIT Act.” The act calls for Inmarsat to dilute the current ownership structure, including the holding of an initial public offering by June 30, 2004.
Until Inmarsat’s new owners take control of the company, it is unclear exactly what their position would be holding an IPO. Poor market conditions that have led to past extensions of Inmarsat’s IPO deadline are continuing and likely will spur the company’s new owners to delay such an offering.
In addition, Inmarsat has joined with EADS Space and the Thales Group to bid to be the prime contractors for Europe’s ambitious Galileo program. The Galileo project is aimed at building a new advanced satellite navigation system that would be technically superior to existing satellite navigation services, such as GPS.
The companies’ bid was submitted to the European Commission (EC) and the European Space Agency (ESA), in response to a recent request for proposals. The winning bidder is expected to take the lead in arranging for private financing of the deployment and operational phases of Galileo, and to become Galileo’s operator.
Inmarsat’s previous experience, along with that of its partners, makes it uniquely able to contribute to oversee the Galileo project, company officials said.
EADS Space recently demonstrated its ability to secure debt financing of $1.6 billion for the UK military satellite Skynet 5 program.
EADS North America Vice President of Space Corrine Kaplan said that there would be “no reluctance” by her company to use U.S. contractors for Galileo.
At the same time, Vincent Sabathier, space attaché at the French Embassy in Washington, said that U.S. export control policies continue to be “troublesome” for Europe and would influence the use of U.S. contractors. Despite attempts by the U.S. Department of State to streamline the export control process, a further “push” is needed to achieve sufficient progress, he added.
Inmarsat also is looking to meet the growing demand for mobile broadband services. The company is moving ahead with plans to launch two satellites near the end of 2004 that would provide global broadband area network services in early 2005.
“Inmarsat has catapulted forward as one of the most dynamic players in the European satellite market,” said Maury Mechanick, counsel in the Washington office of White & Case LLP and a member of the firm’s telecommunications, media and technology practice group. “Its recently confirmed ownership change represents a further bold step away from its [intergovernmental] organization legacy.”
Mechanick sees Inmarsat as well-positioned for future growth through the initial success of its BGAN service, now available regionally but expanding globally with the 2004 satellite launches.
Other parts of the European satellite marketplace are comparatively less dynamic than Inmarsat at the moment, based on comments from the panelists.
For example, the oft-speculated merger between Europe’s two remaining satellite manufacturers, Alcatel Space and EADS Astrium, remains just talk for now.
Kaplan predicted that such a combination “will happen some day,” although there is no agreement about which company’s management would control the merged manufacturer. Meanwhile, EADS Astrium is pursuing a restructuring to cut costs; Alcatel Space already has completed a downsizing of its own.
Stephen Wilson, vice president of marketing and sales at New Skies, commented that his company continues to expand its global service offering but is facing significant pricing pressure from its competitors for certain types of service.
On a positive note, Wilson said demand is recovering for satellite-based Internet services.
“The market is coming back,” he told attendees.
However, it is difficult to lock in long-term prices for IP services due to the fierce competition, Wilson said. As a result, IP service contracts tend to be for two years or less, unlike the much longer-term satellite transponder contracts that can span a decade or more.
The New Skies official observed that it is important to use local sales people who preferably are native to the countries where they work. That approach holds for Western Europe as well as Eastern Europe, where the competition from operators such as Hellas Sat and Amos is heating up, he added.
(Alan Auckenthaler, Inmarsat, 202/413-3007; Corrine Kaplan, EADS North America, 202/292-5168; Vincent Sabathier, Embassy of France, 202/944-6225; Stephen Wilson, 202/478 7110; Maury Mechanick, White & Case, 202/626-3635)
European Internet Trends:
- Healthy demand exists for IP services from customers serving developing markets
- Many European providers are competing in the market
- Price competition is intense
- Each country has its own unique marketplace dynamics
Source: Stephen Wilson, New Skies