EMS Technologies To Acquire DSpace

In a move designed to bolster its aeronautical broadband offerings and facilitate its entry to the land and maritime markets, EMS Technologies Inc. signed a definitive agreement to acquire Australia’s DSpace, EMS announced June 25.

Norcross, Ga.-based EMS will pay $5.7 million for DSpace, which helped develop the satellite radio protocols for Inmarsat’s Broadband Global Area Network (BGAN) service.

“DSpace will further strengthen our product leadership in aero-broadband for military, corporate and commercial aircraft while giving us the ability to more aggressively pursue new Mobile Satellite Services (MSS) markets in the land-mobile and maritime sectors,” Paul Domorski, president and CEO of EMS, said in a statement.

The transaction is expected to close in early July, with DSpace to maintain operations in Australia but become part of the Ottawa-based EMS Satcom division, which contributed $70.7 million, or 27.1 percent, of EMS’s $261 million in total revenues in 2006.

EMS Satcom’s primary business is production of vehicle-based terminals for communications-on-the-move systems. The DSpace acquisition will provide EMS Satcom with more engineering resources to develop advance satellite modems, Gary Hebb, general manager of EMS Satcom, said.

“DSpace helps us in the MSS market, where we and DSpace were instrumental in developing the BGAN market,” Hebb said. “We’ve been focusing on aeronautical applications using Inmarsat equipment aboard airplanes. … We also have the capability to work these into the land and maritime markets,“though we’ve been so busy with aero that we haven’t yet gotten into those markets.”

Both DSpace and EMS have been making moves into the land and maritime markets in the past few years, but the acquisition “allows us to make more concentrated efforts,” Hebb said. “Mostly we suspect we’ll be providing key technology to core players.”

The acquisition was a logical one, said Chris Baugh, president of Northern Sky Research (NSR). “The MSS players are in acquisition mode, so it makes sense to add key software,” he said. “I think it’s an interesting announcement — nothing in the top tier of what the ramifications for the business will be — but it’s just adding to the bottom line in the near term.

Baugh added that “the MSS space is ripe for activity. It falls in line with where a publicly traded company like EMS has already mentioned that they’re going for acquisitions. They’re strong in the L-band markets, and aeronautical is a big part of their revenues. Aeronautical is the smallest segment of the market, but that’s where EMS plays today,” he said.

Noting that companies like Thrane & Thrane and Raytheon compete for the existing aeronautical market, Baugh said EMS Satcom’s entrance to the land mobile and maritime spaces should be expected.

“Inmarsat products and L-band spaces has become more competitive as late,” Baugh said. “It’s good for the customer, but then it leaves a question of what that means EMS will do in other markets. I think that short term they will continue to grow in the aeronautical segment, where the trend is pointing toward getting down to smaller aircraft and specialized solutions. But there’s an absolute ceiling as to how many aircraft there are at any one time. What they can do in the land and maritime [segments] will be the key challenge.”

An indication for growth in the air transport market was suggested in an October 2006 report from TMF Associates.

"The Market for In-flight Passenger Communications: Lessons from Connexion,” said in the best-case scenario, overall revenues for in-flight passenger connectivity service could reach $950 million by 2016. In 2005, total revenues were about $50 million.

Equipment revenues for the principal MSS systems (excluding mobile C-, Ku-, and S-band) totaled about $334 million in 2006, with those revenues expected to grow to $1.2 billion by 2012, according to “Mobile Satellite Services, 3rd Edition Report,” released June 26 by NSR.