[Satellite News 05-12-10] Inmarsat’s 2010 first quarter performance, highlighted by company profits and revenues jumping 40 and 12 percent year-over-year, respectively, also saw the MSS operator complete its acquisition of managed service provider Segovia.
    Inmarsat CEO Andy Sukawaty said its purchase of Segovia was a “nice fit” for the company, as it looks to extend its presence into the U.S. government and defense services sector.
    Sukawaty spoke with Satellite News about the acquisition and the potential of the ISatPhone Pro handheld, which will see Inmarsat enter yet another market in May.

Sukawaty: With managed services playing a bigger role in our business, it was natural for us to look at a company like Segovia.  If you consider how the defense sector views its procurement, we believe that they will increasingly look at buying a service package as opposed to putting a bundle together themselves of information and communications services. It is economical for a defense department to do this and requires highly trusted suppliers to maintain a highly trusted position.

Sukawaty: We made the decision that we wanted to expand our focus in defense about three to four years ago. We put more resources into the idea and started looking at potential acquisitions. Initially, Segovia was not on our radar. The way it came on the radar, is that Segovia kicked off a process of either partnering with a bigger company or selling the business. It is through that process we came into contact with them and carried it through to a sale.

Sukawaty: We will not integrate the Segovia business into our own. It is initially in the portfolio of Stratos. If you look at vertical integration, we have been very clear that in terms of our services distribution, we will work not only through Stratos but through the other indirect distributors with whom we work. Segovia fits in with the downstream services piece, which fits closely with Stratos. Stratos Government Services has been quite successful in the government sector, and this enhances the positioning of Stratos Government Services. This does not mean that Segovia would not deal with other distribution partners as they have in the past. It is a separate element even within Stratos, in particular in managed services.

Sukawaty: While I believe that it is a good market, I think the enthusiasm over the niche opportunity of satellite phones in remote environments is a little more temperate than what others have projected.  However, with our distribution and our brand position of trust with government and industrial users, we are very well positioned to jump into the hand portable satellite phone market and take our share of that market. Technology has moved along so we can support it on a GEO satellite with smaller reflectors but still have an extremely robust quality service.

Sukawaty: We’re hitting the market at an interesting time, because Globalstar has virtually exited the market for two-way, voice handhelds. It will re-enter the market with its new satellites. Globalstar, with its configuration, is more focused on land-based customers. Most of their sales have historically been in North America. With Iridium’s satellite constellation reaching the end of its life and the fact that they haven’t ordered new satellites yet, I think the market is ripe for us to step in and take a decent share of the market with a service that people can invest in and know that it will last a long time into the future.
At the same time, our aspirations are fairly modest. We will be very careful about rolling it out to a select band of distribution partners. We will make sure we have a very solid service in the way it is distributed and that the support is there as well as the voice quality. We will get more aggressive over time in how we market the service.

Sukawaty: We have set a fairly modest target of 10 percent market share within two years of the service launch, which I think is a realistic expectation. The mobile satellite phone market, or, at least the handheld part, is not growing that fast. It sees mid single-digit growth per year. It is not a market where you see a lot of expansion, but at the same time, there is a lot of churn in the market, so I think there is an opportunity.