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Inmarsat profit drops, sees lift from new services

LONDON - UK-based satellite operator Inmarsat reported as expected a 6 percent fall in its annual pretax profit on Tuesday, as demand for data at sea only cushioned falling revenue from land-based satellite services.

Inmarsat, whose satellites cover around 85 percent of the Earth’s landmass, said pretax profit last year fell to $89.8 million from $95.5 million in 2005 when US hurricanes and the tsunami in Asia wiped out phone lines and created a surge in demand for satellite links.

Analysts had, on average, expected a pretax profit of $88 million according to a poll of nine investment banks carried out by the company.

Revenues from its land services, which target people who need phone and Internet access in remote parts of the globe, fell 4.7 percent while discounts given for bulk buying services also bit into profits after two key distributors merged and gained bigger buying muscle.

Maritime revenue rose 6 percent, helped by an 11 percent rise in the data side while its aeronautical division saw a 35 percent increase.

‘Land including BGAN revenues a little below our expectations, reflecting weighting of volume discounts, seasonality and some inherent volatility,’ said analysts at Cazenove.

Shares in the firm fell over 3 percent in early trading to 397-3/4 pence, to value the business at around 1.8 billion pounds.

Expectations

The firm said its new, smaller satellite phone and data devices aimed at the world’s media, the military, governments, exploration firms and aid workers would boost growth next year and help stem declines in its land business.

Finance Director Rick Medlock told reporters the firm expected an 8 percent rise in revenue fuelled by the new lightweight Broadband Global Area Network (BGAN) satellite receivers and handheld satellite phones (MSS).

‘Analysts’ expectations for 2007 are for 8 percent revenue growth and we feel very comfortable with that,’ he said.

Inmarsat is to provide the satellite backbone to enable airlines Ryanair and Emirates to provide passengers with a mobile phone service on flights, while Qantas, TAP, BMI and Air France are also trialling the technology.

Analysts have estimated that the firm could make anywhere between $30 million to $100 million a year in revenue from these new services from 2009 as more airlines add it to their planes.

Medlock said the actual figure was likely to be somewhere in between.

‘I think that would be a reasonable number.’

‘We genuinely don’t know ourselves how much this is going to grow but we certainly see it as a significant revenue opportunity,’ he added.

Chief Executive Andrew Sukawaty said a number of other airlines would soon announce plans to allow in-flight mobile calls.

‘I would say in the next six months we would expect considerably more airlines to start announcing programmes in this area.’

Inmarsat, which started life in the 1970s as an inter-governmental body designed to look after satellite constellations, said it now expects to see its third new generation satellite in orbit by 2008 following a string of hold-ups which set back a 2007 launch.

‘We still have a slight expectation it could be launched during 2007 but we think it’s likely to be launched in 2008,’ said Sukawaty.