[Satellite News 08-09-10] The government’s expanding need for mobile broadband satellite services drove Inmarsat to order three Ka-band satellites and form a distribution partnership with Boeing, Inmarsat CEO Andy Sukawaty told Satellite News.
    Inmarsat plans to spend $1.2 billion on three Boeing Ka-band satellites that will be used to launch Inmarsat’s Global Xpress service in 2014. Inmarsat expects a $1.4 billion incremental market return for Global Xpress VSAT maritime, energy and government services delivered from the Inmarsat-5 constellation at speeds up to 50 megabits-per-second to customer terminals from 20 to 60 centimeters in size. While the service has a variety of potential customers, the primary target market for Global Xpress is government Ka-band, which the operator expects to generate $500 million of annual revenues five years after global service launch. 
    Rebecca Cowen-Hirsch, Inmarsat’s vice president of Global Government Systems, said Boeing will act as Inmarsat’s Global Xpress retail arm for the government sector alongside its existing distribution partners in the commercial realm. “Boeing is very patched in with the needs of our government and military customers. Inmarsat and Boeing both understand that the economy has resulted in government budget cuts and that the military’s primary concerns are performance and cost. Especially following the cancellation of the TSAT program in 2009. The military’s global requirement, however, has increased for the past 31 years. To market as cost-saving and high-performance, we’re going to provide truly mobile worldwide Ka-band coverage at 20 percent of the cost of Ku-band per-megabit to terminals that are the size of laptops,” she said.
    “Finding a partner was a highly competitive process with four companies competing for this contract,” Sukawaty said. “All of them had credible proposals. Having said that, Boeing had something like 70 percent of the Ka-band transponders that are in the sky. In terms of minimizing risk on the program, Boeing stood out from that perspective. Boeing has been very active in most of the U.S. government’s major satellite programs, so they were a natural fit. They know the market, so they know how to position this service and customize it in a way that the government customer will find attractive.”
    Cowen-Hirsch said the availability of Ka-band would greatly benefit government customers. “In the realm of regulatory issues and orbital slot locations, Ka-band is widely available. There is 2.5 gigahertz of total Ka-band capacity available with 500 megahertz already designated for government use. The high-speed of Ka-band also supports high-performance military applications, such as airborne surveillance intelligence and reconnaissance and comms-on-the-move and allows us to focus Inmarsat 4 satellites on more low-data rate applications, such as Blue Force Tracking.”
    Inmarsat plans to launch the first of the three Boeing satellites at the end of 2013, with the other two following in mid- to late-2014 and the end of 2014. The company expects to have the constellation fully operational by the end of 2014. Inmarsat also plans to announce development contracts for terminals and ground infrastructure by the end of the year, Sukawaty said.
    Two years ago, with the economy in freefall, a $1 billion Ka-band investment project may have been unimaginable in the MSS sector. However, Inmarsat, like other satellite operators, has financing options. While Sukawaty claims the company can fund Global Xpress from its own cash flows, Inmarsat decided to take on a small amount of additional debt. “We have one of the lowest debt levels in the satellite industry, so this is well within our ability. Our current leverage is double the size of our EBITDA. We do not foresee having to take on any more than half a turn, so a maximum of two-and-a-half times our EBITDA with this program and Alphasat and the other programs we have while also still paying our dividend and growing that dividend. We have also applied for export credit facilities, through Ex-Im, the U.S. export credit agency, and we expect to have that facility in place by the end of the year.”
    Cowen-Hirsch said the company is not yet pre-scheduling customers for capacity space on the satellites. “There will probably be a variety of commercial and government capacity on each of the three satellites. We’re a commercial company, so our priority will be determined by the demand.
    Sukawaty said the company has not set any pre-sale targets. “We are not putting this up with the presumption that we will sell a huge amount of capacity. On the other hand, we signed a contract with Boeing that commits them to a healthy piece of that capacity. We may do another deal or two like that, although it is not our intent to fill these satellites in this way. We have different models to FSS operators, and we intend to continue that way. There is a portion of this capacity we will look to pre-sell, but we have not disclosed this target. Whatever that target is, it is not going to be so much capacity, that we can’t sell capacity under our existing model.”