Inmarsat

Inmarsat said it had installed its Global Xpress Ka-band in-flight-connectivity service on 65 Lufthansa planes as of March 31, with another 950 aircraft under signed contracts. The Lufthansa agreement obliges Inmarsat to finance the installation costs. In return, Inmarsat owns the customers who use the service on Lufthansa flights. Credit: Inmarsat

PARIS — Mobile satellite services provider Inmarsat on May 4 reported a 25 percent increase in its government business, mainly the result of its take-or-pay contract with Boeing for Inmarsat’s Global Xpress (GX) service to the U.S. military.

Inmarsat said its government division revenue for the three months ending March 31 was $86 million, with an EBITDA margin of 74.8 percent versus 70.9 percent a year ago.

Boeing committed to paying Inmarsat a fixed sum over a five-year period in return for being given exclusive rights to sell GX’s Ka-band service, including a high-capacity overlay on the three Inmarsat-5 GX satellites, to the U.S. Department of Defense.

Inmarsat and Boeing have pitched GX to U.S. military units as a fill-in for when the U.S. Air Force’s own Wideband Global Satcom (WGS) capacity, ultimately featuring 10 satellites, is unavailable.

The Boeing deal, made as part of Boeing’s contract to build the GX satellites, was to give Inmarsat greater entry into the U.S. government market, priming the pump for GX before Boeing handed the business back to London-based Inmarsat.

The revenue ramp-up in the take-or-pay contract was expected regardless of the underlying U.S. government demand, making it difficult to assess the trend in U.S. military use of GX.

Recently won U.S. Navy contract revenue starts

More recently, Inmarsat has won a U.S. Navy contract to provide a broad array of satellite services in many parts of the world. That contract, called the Commercial Broadband SateCommercial Broadband Satellite Program Satellite Service (CSSC), took effect in March after incumbent Intelsat lost its protest of the deal.

In a conference call with investors, Inmarsat Chief Financial Officer Tony Bates said Inmarsat expects about $20 million in annual CSSC revenue on a full-year basis. Having started in March, this year’s CSSC revenue is expected to be about $17 million, he said.

With the CSSC contract adding to the total, if only marginally, Inmarsat said its U.S. government re venue was up 37 percent in the first three months of 2017. The U.S. government accounts for 60 percent of Inmarsat’s total government-sector revenue but governments outside the United States also increased their Inmarsat business, by 9.6 percent, in the first quarter.

Outside the GX business and the CSSC contract addition, Inmarsat revenue from the U.S. government declined. In the rest of the world, Bates said overall government demand is flat and that growth is coming from a growing Inmarsat market share.

4th GX satellite, to launch May 15 on SpaceX, to operate over Europe

Inmarsat has three GX satellites in service in geostationary orbit and has planned to launch the fourth and final model on May 15 aboard a SpaceX Falcon 9 rocket.

Inmarsat Chief Executive Rupert Pearce has been coy about where the final GX spacecraft would be located as the company weighed several options.

Chinese President Xi Jinping’s October 2015 visit to Inmarsat headquarters, during which Pearce attempted to integrate GX into China’s One Belt One Road development initiative, raised speculation that the satellite would be placed over the Asia-Pacific.

With less than two weeks before the launch, Pearce still declined to commit to a permanent location for the fourth GX satellite but said it would operate first over Europe, the Middle East and Africa.

GX capacity is being adapted throughout Inmarsat’s aeronautical and maritime businesses.

GX Aviation: 65 Lufthansa aircraft installed as of March 31

On the aviation side, Inmarsat has an agreement with Lufthansa to install GX on the airline’s passenger jets. Sixty-five Lufthansa jets had been outfitted as of March 31, with another 950 aircraft by Lufthansa and other airlines awaiting GX installation.

The Inmarsat-Lufthansa agreement calls for Inmarsat to finance the installation of the hardware on Lufthansa planes. The company said it incurred $45.4 million in capex costs in the first three months of 2017, up from $3 million for the same period ayear ago, to perform the installations.

Having paid the installation cost, Inmarsat will own the GX customers on the Lufthansa aircraft.

GX will provide in-flight-connectivity to airline passengers worldwide. To handle the high-density air traffic over Europe, Inmarsat is building an air-to-ground network with Deutsche Telekom, featuring ground towers in 31 European nations.

Inmarsat plans commercial operations of its European Aviation Network later this year, with an S-band satellite, co-owned with fleet operator Arabsat of Saudi Arabia, scheduled for launch in June by Arianespace of Europe.

To begin service, Inmarsat will need license authority in all 28 European nations. As of May 4, the company said it was confident it would have full regulatory authority for the service and the ground towers in time.

“We have all 28 EU territory [mobile satellite service] authorizations, plus Norway and Switzerland,” Inmarsat said. “In addition, 27 countries have provided us with authorizations or in-principle approvals for the CGC.”

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Peter B. de Selding
Peter B. de Selding
Peter de Selding is a Co-Founder and editor for SpaceIntelReport.com. He started SpaceIntelReport in 2017 after 26 years as the Paris Bureau Chief for SpaceNews where he covered the commercial satellite, launch and the international space businesses. He is widely considered the preeimenent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes