Inmarsat Expects Revenue Boost from Completed Global Xpress Constellation

Unloading I-5 F3 from Antonov AN-124 heavy transporter at Baikonur Cosmodrome. Photo: Inmarsat

[Via Satellite 05-07-2015] Inmarsat is confident that the upcoming launch of the third satellite in the Global Xpress constellation will open the floodgates for new business. The date for full commercial service has slipped slightly again, now from early in the second half of 2015 to mid-to-late third quarter. Nonetheless, Inmarsat expects no material impact from the delay on revenues in 2015 or its growth trajectory for 2016.

“As we’ve said since the start of the program, we expect global coverage to be the takeoff point for GX revenue growth. The launch of regional service on F1 at the half year in 2014 enabled some customers, in particular various U.S. government users, to start to trial and then buy GX and to commence operations over the network,” Rupert Pearce, CEO of Inmarsat, said during the company’s first quarter earnings call. “However, many of our largest customers including many U.S. government as well as commercial customers in target markets for GX, have been waiting for global coverage before they commit to buying and deploying in bulk. And when F3 enters commercial service and we have full service available globally, that will be the trigger for them.”

Inmarsat 5 F3, the third spacecraft in the Ka-band High Throughput Satellite (HTS) constellation, shipped recently from Boeing’s El Segundo facility in Los Angeles, Calif., to the Baikonur Cosmodrome in Kazakhstan. International Launch Services (ILS) is slated to conduct the mission using a Proton rocket in June. Despite the delays of ILS’ current Mexsat 1 mission — which a satellite issue elicited and not a launch vehicle problem — Pearce said Inmarsat is not concerned about any read-across to its launch date or satellite. The Mexsat 1 satellite, also known as Centenario, is the first of three Boeing-built satellites for the Mexican government’s Ministry of Communications and Transportation.

“This launch date will put F3 on station and ready to start payload testing early to mid third quarter. That, in turn, will enable F3 to be brought into full commercial service by mid to late third quarter, which will trigger our launch of GX commercial services globally,” said Pearce.

The GX satellite network is a $1.6 billion investment that Inmarsat expects will generate annual revenues of $500 million by the fifth anniversary of the commencement of global services. The first GX satellite launched in December 2013, and the second satellite in February 2014. Following this, the failure of a Federal Proton mission introduced a significant delay in achieving global services. Still, Inmarsat has signed customers on GX, of which one notable capacity buyer is the U.S. government. Though government sales were down in the quarter by $12.7 million to $66.8 million, Pearce expects this sector to be a major user of GX services.

“We do see government as a substantial contributor to that $500 million, because they are big buyers, and we see them being particularly interested in global Ka-band and the unique military Ka-band capabilities that we bring with Global Xpress,” he said.

Pearce added that much of the U.S. government’s current interest in GX has been for regional services. Boeing is a prominent partner of Inmarsat’s for sales to the U.S. government and Pearce expects this will be an important component of GX’s success in the early years.

Aviation is another top market for GX in which Pearce highlighted progress. Inmarsat now has approval from 11 countries for the ground component of its European Aviation Network, and 25 of 28 European Union (EU) states have issued S-band licenses for EuropaSat, currently under construction by Thales Alenia Space. The hybrid system comprised of the EuropaSat satellite and an Air-to-Ground (ATG) network, will be compatible with GX. Pearce said he expects regulatory concerns will be largely retired by the end of this year, paving the way for rapid deployment in 2016.

“We would note that Inmarsat talked more about a hybrid S-band/GX solution on the conference call than we have heard from them in the past, which makes sense given the greater capacity in the ground network and better coverage from GX,” Andrew Spinola, senior analyst at Wells Fargo pointed out in a research note. “Success in aviation would be a key driver of Inmarsat.”

Aviation revenue grew during the quarter by $4.9 million to $27.1 million, a 22.1 percent increase. In partnership with Honeywell, Inmarsat is working with Kymeta on a lightweight antenna specifically for the business and commercial aviation market. The exclusive partnership will see Kymeta’s mTenna tested and integrated into Honeywell’s JetWave product line for Inmarsat’s GX aviation service.

Global Xpress is also currently being used in Nepal as part of the emergency response to the magnitude 8.7 earthquake that struck the South Asian nation on April 25. Pearce said Inmarsat deployed GX with a media customer and with a humanitarian agency to support the relief effort.

Inmarsat’s fourth GX satellite, I-5 F4, is under construction by Boeing. The company said in its earnings report that the spacecraft remains on schedule for completion in mid-2016, with a potential SpaceX launch in the second half of 2016. The fourth satellite could serve as a spare in the event of a launch failure, or alternatively as a means to support incremental growth opportunities.