Boeing gets $1.2 billion order from Inmarsat, strikes partnership
Inmarsat Plc, the world's biggest provider of satellite services to the maritime industry, said first-half profit jumped 56 percent as it placed a $1.2 billion order with Boeing Co. for three satellites.
Profit before tax rose to $151.8 million from $97 million a year earlier, the London-based company said in a statement today. Revenue climbed 12 percent to $570.7 million. Inmarsat proposed an interim dividend of 14 cents, up 10 percent. It said it was "confident" of sustaining 10 percent dividend growth for the three years from 2010 to 2012.
"Our first-half performance continues to show the profitable growth in the markets we serve and we are well- positioned to deliver our growth objectives for the year," Chief Executive Officer Andrew Sukawaty said in the release.
Inmarsat is benefiting from demand for data services from commercial and government customers. It has expanded broadband services to all the countries it serves and offers voice services via handheld satellite phones.
Maritime revenue rose 0.6 percent to $177.7 million as revenue growth was held back by "the challenging economic climate in shipping" in the first six months, the company said. Still, the three months through June represented a "record quarter" for maritime revenue, Sukawaty said in a telephone interview today.
Inmarsat fell 0.8 percent to 707 pence at 9:08 a.m. in London trading.
"We remain confident the future will be a good one for our maritime business," the CEO said.
Global BroadbandSales at the aeronautical and land mobile businesses gained 40 percent and 14 percent respectively. Voice services declined while data business increased "as clients substitute e-mails to phone calls," the CEO said.The new Ka-band satellites, expected to start operations in 2014, will allow Inmarsat to boost its global high-speed mobile broadband services. Inmarsat is targeting $500 million annual revenue from Ka-band offerings five years after the start of the services."We will be the first operator to offer global mobile broadband coverage," the CEO said. The company will have "unparalleled speeds and bandwidth to customers in remote locations around the world."Boeing Buys CapacityUnder a separate arrangement, Boeing has agreed to become a distribution partner for both Inmarsat's Ka- and L-band services and has pre-committed to capacity purchases representing more than 10 percent of Inmarsat's target Ka-band revenue in the first five years after global service launch.Inmarsat aims to fill the capacity of the new satellites with traffic from defense, maritime, air, oil and gas clients. The company will address government and business customers as it doesn't plan to tap the consumer market, the CEO said.Inmarsat estimates that the total cost of Inmarsat-5 and Global Xpress will be $1.2 billion over 4.5 years, incorporating the fixed cost of the satellites, as well as the cost of additional ground network infrastructure, product development, launch services and insurance."We see no funding issues," Chief Financial Officer Rick Medlock said in an interview. "We expect a substantial part of the funding for the program to come from the Export Credit Agency." The Agency may provide about $500 million of debt "at very good conditions," he said.The investment will also be financed by Inmarsat's liquidity as the company predicts it will "keep generating lots of cash" in coming years, the CFO said. Medlock ruled out selling new shares to raise funds.The company revised its capital expenditure forecast for 2010 to $240 million to $250 million.