Inmarsat named former Nokia CEO Rajeev Suri as CEO. Photo: Inmarsat

Inmarsat recently released a financial update showing encouraging signs aviation, maritime, and government market. Inmarsat is not publicly traded and normally does not release financial results, but this release comes as the company is in the midst of a deal to be acquired by Viasat. Aviation in particular was strong, showing nearly 50% growth in the first quarter of 2022 compared to the first quarter last year. Government revenues grew by 10% year-on-year. Overall, revenue of $348 million was up 8% compared to the same time last year.

Inmarsat CEO Rajeev Suri spoke with Via Satellite about the results, how he views the recent SpaceX/Hawaiian Airlines deal, and the latest on when the Viasat deal will go through.

VIA SATELLITE: Aviation was up 45% year-on-year, a very strong increase. Did this growth beat expectations? What does this mean for Inmarsat’s business? 

Suri: If you look underneath that, there was 35% growth in the cockpit communication services. There was 53% in the business jet and 34% in IFC [in-flight connectivity]. Some of it is hard to predict, as we didn’t know when flights were going to resume. Business jets came back into service earlier, last year. That one we could more precisely predict as we knew the order backlog. The order backlog is strong on both business jets and commercial aviation. We have also been winning new customers in IFC and installs have been growing too. We monitor both the installs and the order backlog closely and they both are robust. We saw a 23% increase in installs year-over-year in the business jet business. With a good order backlog, we knew that this was going to start turning into revenue if we executed on our strategy correctly.

Some of the growth is just flights resuming. We have got a good aviation business. Notwithstanding what we are seeing with Starlink, and the noise around the LEO [Low-Earth Orbit] players, we remain strongly positioned, both in technologies and in our business model. Customers need reliable services, an effective business model and global coverage. They need strong speeds and capacity in the hub locations. We tick all of those boxes and have good customer relationships.

VIA SATELLITE: SpaceX/Starlink recently did a deal with Hawaiian Airlines. Is this an ominous sign for other satellite operators, including Inmarsat here?

Suri: Our deal flow has strengthened. We are winning new deals, our backlog is strong, and our installs are growing. All of the metrics point to strong growth in that business. We remain strongly positioned, both in technology and what we offer in terms of our business model – both what we can offer commercial airlines and business jets.

Having said that, every competitor should be taken seriously. I am not one to dismiss anybody. I think competition makes us better. I still maintain that the most cost-effective and most superior way of building these satellite networks is a combination of GEO [Geostationary Orbit] and LEO, and 5G where needed. We are multi-band as well, with Ka-band and L-band. You get global coverage with Global Xpress. You insert the capacity where you need it, as opposed to everywhere. It is very expensive to build a pure play LEO network. We believe in targeted LEO constellations. A focus on a multi-dimensional, seamless and global network is the basis of Orchestra. We believe in hybrid networks. We are continuing to win. I don’t worry about it. Our metrics are very good. When aviation customers give us new deals, it is not with a two-year outlook, it is with a long-term outlook. When we win deals now, we are winning against the new LEO players.

VIA SATELLITE: What do you think are the main takeaways are from these numbers?

Suri: The main takeaway is that we grew substantially faster than the market last year. The global market, according to NSR, and other external projections, grew around 3% to 3.5% annually. We grew around 9% last year. Our profits are growing faster than our revenue, which means we are getting operating leverage. I think a year ago when I came into the business, I said aviation needs to grow, but we can’t forget about business jets. It is not just about IFC. We need to give them the fuel to grow.

The other one I thought about particularly when I joined was that the government business is fantastic. This is not only the U.S. government business, but the non-U.S. government business too. We gave them the resources to go and execute on their strategy. We are seeing the results of that. We saw 31% growth in the non-U.S. government business. The U.S. government, though it was a bit slow off the mark, will get single-digit growth over the full year. The big takeaway is the strategy is working and the teams are executing well.

VIA SATELLITE: What verticals are performing better than expectations?

Suri: Aviation is performing better than expectation. When I say aviation, I mean all three segments within aviation – business jets, cockpit communications, and IFC. Non-U.S. government is really hitting its stride. The 31% growth is the fastest they have ever had, at least in a very long time. Maritime has to grow sustainably for Inmarsat to continue to grow. We now have seen the second consecutive quarter of sequential growth and the strategy has worked well.

We watch for a couple of metrics. What is the backlog for Fleet Xpress installations? That is at a record level. We are approaching this inflection point between Fleet Xpress and FleetBroadband. It is now 60/40. Where the newer service is 60 and the legacy is 40. This points to sustainable growth for that business, as long as we can continue to increase the ARPU as well.

Do I want more growth in maritime? Absolutely, but I think the growth is going to plan. We expected that we would start to grow from a declining revenue stream. Maritime was declining for around five years, but started to grow again last year. It has seen underlying growth in the first quarter of this year.

In terms of enterprise, we are suffering due to supply chain issues due to component shortages, when it comes to satellite phones in particular. There, the pivot to IoT is important for us. We have global coverage. We have an IoT end-to-end portfolio. We have a good ecosystem of partners, and the idea is to pivot to that business, but that will take some time to have an impact on our revenue stream.

VIA SATELLITE: Are you worried about the enterprise figures, which saw a double-digit decrease?

Suri: It is all supply chain related. It is very tough to know when that will get better but it is likely to be a headwind for the next few quarters. Luckily, enterprise is a small business for us. But it is profitable. The more important thing is to pivot that business to IoT, focus on railways, utilities, agriculture, the key segments for IoT. I think it will take some time before that headwind goes. It is across every vertical. I am on a couple of boards, and I see that. I see it in the medical technology sector, and terrestrial infrastructure communications. We are all struggling with it. But, I credit the supply chain and procurement teams at Inmarsat as they have managed this very well.

VIA SATELLITE: What is the latest on the Viasat takeover? Is everything still on track?

Suri: Our goal is to close the deal by the end of the year, and we are driving toward that. The latest milestone is the Viasat shareholders are scheduled to vote on the transaction on June 21. We have some regulatory approvals. There are more to come. So far, so good. We really want to close this by the end of the year.

VIA SATELLITE: Has Inmarsat been impacted by Russia’s war in Ukraine? 

 Suri: Our exposure to Russia and Ukraine is very low. So, we have not been impacted directly. But there is global uncertainty. We are more impacted from global uncertainty, including flights, rerouting, etc. Other than that, we have very limited exposure.

VIA SATELLITE: With Viasat being involved in a high profile security incident recently, are you seeing more attacks on Inmarsat’s assets? Are you changing your approach towards cybersecurity?

Suri: I have an interest in becoming a growing cybersecurity expert because it is an important area for CEOs of large companies. We have not seen an impact, but I can tell you the increase in cyber events is significant over the last few years. The main threat has come from supply chain. Supply chains are becoming more digital. There are more insider threats. There is more wiper type malware. This isn’t the geek in the basement trying to attack the critical infrastructure that we are trying to protect.

We have seen an increase, as have others, in terms of the raw events we get. We have a very good cyber team. There is no such thing as perfect security, but there is such a thing as better security. We are in the good camp, and we want to get better and better. The risks are always there. We are seeing more sophisticated forms of attacks. There are lots of new things that are happening such as malware-as-a-service. It is now available, and you can get it on a subscription basis. The threats are continuing to evolve and grow and we have to continue to get better and better and we are doing that.