The International Maritime Satellite Organization has announced more detailed investment plans for “corporatizing” its Inmarsat-P handheld mobile satellite service, stating it hopes to raise an initial $1 billion from its signatories to launch an affiliate company. While significant by itself, this effort also would be a trial run for making the entire Inmarsat organization a commercial entity.
Following a meeting of its governing council the week of Sept. 5, Inmarsat said it plans to invest up to $150 million in the new company, which would be about 15 percent of the affiliate’s ordinary shares. Its interest in the company also would include additional equity, equivalent to about 5 percent of the shares, as payback for work it has already done, according to spokeswoman Elizabeth Hess.
A business plan was scheduled to be issued privately to the signatories Sept. 16, with investment commitments due by mid-December. The company, to be registered in the United Kingdom, would be formed following an investors’ meeting scheduled in January.
Once the affiliate company is formed, it would then invite a second round of investments from strategic partners. Inmarsat estimates it will need $2.6 billion to launch the system, which will comprise 12 satellites operating in intermediate circular orbit.
The affiliate company is being established to give investment flexibility to Inmarsat signatories, whose current investment amounts are tied to how much they use the system, said Hess.
Comsat, for example, owns a 23 percent share in Inmarsat. Therefore, it would have had to pay for 23 percent of the Inmarsat-P project’s bills under the way Inmarsat currently operates.
Comsat has not revealed what its investment intentions are for Inmarsat-P. The company will look at the business plan “very carefully,” commented Comsat spokesman Joe Tomkowicz.
Analysts say Comsat was a driving force behind turning the Inmarsat-P project into a commercial operation. Hess asserts, however, the plan was not developed just as a result of Comsat’s urging and that it has been met with widespread agreement from Inmarsat signatories as a whole.
“Comsat’s been driving the privatization (cause) even before Inmarsat-P,” said Betsy Kulick, an Oakton, Va.-based independent consultant. She explained that Comsat wants Inmarsat as a whole to be “privatized,” not only for investment reasons but because Inmarsat is not capable of operating “as is” in a competitive environment.
Kulick said the organization has been slow to develop it business, taking many years after its formation in 1979 to sell its first 10,000 terminals.
Comsat believes a privatized Inmarsat would react more quickly to the marketplace and be more customer-focused, according to Tomkowicz.
Hess acknowledged that Inmarsat is considering the option of turning the organization into a commercial entity, but she added that such an event would not happen “for years.”
For now, the challenge will lie in turning Inmarsat-P into a successful operation, in spite of high start-up costs and likely an extremely competitive market.
Comsat’s Joslyn Read, vice president of international relations, said the initial market for Inmarsat-P in the United States will be for business persons traveling internationally. She added that launching the service in 1999 will not handicap the company, even though services such as Motorola Inc.’s Iridium are scheduled to launch in 1998.
“We think that really all the systems are going to be launched around the same time frame,” said Read. “People who have experience in the satellite business know that these things take a little bit longer and are a little bit harder than we all anticipate when we get started.”
Diane Hammer is a freelance telecommunications writer based in Denver, Colo.
