In a move both to bolster its aeronautical broadband offerings and facilitate its entry to the land mobile and maritime markets, Norcross, Ga.-based EMS Technologies Inc. has signed a definitive agreement to acquire DSpace, of Adelaide, Australia, for $5.7 million.
The acquisition allows EMS Technologies to capitalize on demand for Inmarsat’s Broadband Global Area Network (BGAN) service. Founded in 1995, DSpace helped develop Inmarsat’s BGAN satellite radio protocols.
“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,” said EMS Technologies President and CEO Paul Domorski 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 represented $70.7 million, or 27.1 percent, of its parent company’s $261 million in 2006 revenues.
Gary Hebb, general manager of EMS Satcom, said the move “means that we have a lot more engineering resources, specifically to develop advance satellite modems.”
EMS Satcom primarily delivers communications-on-the-move, most specifically terminals in vehicles, as opposed to portables that might be set up on a table or the ground.
“DSpace helps us in the MSS market, where we and DSpace were instrumental in developing the BGAN market,” Hebb explained. “We’ve been focusing on aeronautical applications, using Inmarsat equipment aboard airplanes, and we do that both through EMS-branded equipment plus that from partners like Rockwell Collins, Honeywell and Thales.”
Hebb added that EMS Satcom recently added air traffic control applications to its portfolio of safety services.
“We also have the capability to work these into the land and maritime markets,” Hebb said, “though we’ve been so busy with aero that we haven’t yet gotten into those markets … DSpace and EMS [were] already starting to make moves into both areas, but this allows us to make more concentrated efforts. Mostly we suspect we’ll be providing key technology to core players.”
The acquisition was a logical one, according to analyst Chris Baugh, president of Northern Sky Research (NSR).
 “It makes sense,” Baugh said. “The MSS players are in acquisition mode, so it makes sense to add key software. 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.”
Noting that companies like Thrane & Thrane and Raytheon compete for the existing aeronautical market, he said EMS Satcom’s entrance to the land mobile and maritime spaces ought 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 that in the best-case scenario where the services are implemented rapidly, overall revenues for in-flight passenger connectivity service could reach $950 million by 2016. In 2005, total revenues were approximately $50 million.
Last week, EMS Satcom announced its finishing more than 300 hours’ in-flight testing of its Early Entry SwiftBroadband communications system aboard two Boeing Business Jet aircraft. In-flight trials of its Enfusion SwiftBroadband communications system had been conducted en route between cities in the United States, Europe and the Caribbean. The company said alpha and beta trials planned this summer would precede the scheduled launch of commercially available SwiftBroadband services later this year.
In its newly released Mobile Satellite Services, 3rd Edition Report (available June 26), NSR notes that equipment revenues for the principal MSS systems (excluding mobile C-, Ku-, and S-band) totaled approximately $334 million in 2006, with those revenues expected to grow to $1.2 billion by 2012.