Inmarsat sees shipping driving slow recovery
London, March 6, 2012
British satellite communications group Inmarsat predicted a return to revenue growth in its core services business this year, with rising demand from shipping customers offset by less military activity in Libya and Afghanistan.
Inmarsat, whose terminals are deployed on ships, aircraft and in remote locations worldwide, said on Tuesday revenue from satellite services would be flat to up 2 per cent this year, against a 0.9 per cent decline in 2011.
Inmarsat has suffered a slowdown in revenue from shipping as users switch to its next-generation broadband terminals. Sailors use the devices to send email and update Facebook rather than make costly voice calls.
Finance director Rick Medlock said activations of the new terminals were strong, with 9,818 added in 2011, and average revenue per user (ARPU) was rising as people spent more time on the devices.
"We see good growth characteristics in maritime - ARPUs are increasing on fleet broadband, plus terminal activations," he said.
But aviation revenue would probably be flat, he said, and land revenue could fall as military operations were scaled back in Afghanistan. Revenue from the country declined from about $40 million in 2010 to about $25 million in 2011.
"We could probably lose $10 million of Afghanistan," he told reporters on Tuesday.
"In 2011 the fall-off was ameliorated by event revenue from North Africa. We had very strong North Africa revenue from the end of Q1, Q2 and Q3 and that abated in Q4 once NATO withdrew and the media moved out of Libya."
Inmarsat predicted that growth would bounce back after 2013 when it launched a new generation of satellites to provide its Global Xpress high-speed broadband services.
It said from 2014 to 2016 core revenue growth, including from Global Xpress, would be between 8 per cent and 12 per cent.
LightSquared prospects dim
Inmarsat's revenue and profit were shored up in 2011 by a spectrum sharing agreement with LightSquared, the company backed by hedge fund manger Philip Falcone with ambitions to build a new mobile network in the US.
Other income, nearly all of which came from LightSquared, totalled $238 million in 2011, helping total group revenue to rise 20.2 per cent to $1.41 billion. Earning before interest, tax, depreciation and amortisation climbed 23 per cent to $854 million. Both figures were broadly in line with analyst expectations.
The LightSquared income looks very much in doubt for this year, however, after the Federal Communications Commission said it would bar it from building a network that interfered with other satellite services.
Inmarsat said on Tuesday it was not sure it would receive any outstanding payments after LightSquared missed a payment last month, nor any further payments.
"We are asking people to remain very cautious about the prospects of us receiving more money from LightSquared," chief executive Rupert Pearce said.
"The money is certainly owed but LightSquared's business model has clearly taken a knockback."
Inmarsat's shares fell 1 per cent, in line with the index of medium-sized companies. It is paying a final dividend of 24.96 cents, up 10 per cent. – Reuters