07 November 2013, London, UK: Inmarsat plc (LSE: ISAT.L), the leading provider of global mobile satellite communications services, today provided the following information for the three months ended 30 September 2013.
Rupert Pearce, Inmarsat’s Chief Executive Officer, said, “The third quarter results continue to show that we are on target to achieve our objectives for the full year. Our MSS subscriber growth remains solid and we had a record quarter for our maritime XpressLink service, demonstrating the growing market interest and potential demand for GX.
With the first GX satellite launch now a matter of weeks away, we are turning our attention to 2014 which will be a year of transition. While GX revenues will begin late in the year, due in part to a later than planned first launch, much of the cost necessary to support GX will come on line as planned. In addition, while we have tightly controlled costs in 2013, we have added cost investment in L-band growth opportunities and this will continue. In 2014, this operating cost investment will coincide with a very difficult outlook for our US government business, particularly in our Inmarsat Solutions business, which we now expect to be even more pronounced in 2014.
The timing of these factors will naturally combine to apply some downward pressure on operating profits during the year 2014, but we remain confident in the outlook for GX and we reiterate our target of 8%-12% compound annual MSS revenue growth over the 2014 to 2016 period.”
|Three months ended 30 September|
|(US$ in millions)||2013
|Inmarsat Global – MSS revenue||187.6||186.7||0.5%|
|Inmarsat Global – Other income (incl LightSquared)||10.7||11.7||(8.5%)|
|Intercompany eliminations and adjustments||(79.7)||(78.4)|
We are on track to complete global coverage for our GX network by the end of 2014. We expect the first Inmarsat-5 satellite to be launched in December 2013 and the two further launches to be completed in 2014. The ground infrastructure is already in place to support the first two satellites and we are on track to fully complete the ground network during the course of 2014. We have continued to attract and appoint new GX distribution capability and equipment partners. Our recent transaction with RigNet, which is progressing towards closing in line with expectations, will be a major catalyst for GX services in the energy market. We are also seeing rapid take-up of XpressLink, which is building a base of customers who we will transition to GX in due course. We expect commercial GX services to begin in the second half of 2014 after a period of extensive testing and trials.
In our L-band business, we will shortly begin commercial operations using Alphasat, which will enhance our L-band network capability and provide in-orbit redundancy, meaning the loss of any one satellite in the Inmarsat-4 fleet will not impair our global coverage or our ability to support all of our revenues. In market development we are making progress in targeting new L-band opportunities, such as in the M2M market where our recent collaboration with ORBCOMM will significantly improve our service proposition. We are also rolling out innovative new services, such as our L-TAC service, which has already won new government business. With Alphasat deployed, our network is capable of supporting all of our L-band growth ambitions through the end of the decade.
|Three months ended 30 September|
|(US$ in millions)||2013
||Increase / (decrease)|
|Maritime voice services||17.5||19.6||(10.7%)|
|Maritime data services||90.1||85.4||5.5%|
|Total maritime sector||107.6||105.0||2.5%|
|Land mobile voice services||5.6||3.7||51.4%|
|Land mobile data services||24.6||30.6||(19.6%)|
|Total land mobile sector||30.2||34.3||(12.0%)|
|Total MSS revenue||187.6||186.7||0.5%|
|Other income (including LightSquared)||10.7||11.7||(8.5%)|
Growth in our maritime data revenues was driven by increased take-up and usage of our FleetBroadband service and by pricing and service package changes primarily implemented in March 2013. During the third quarter we added 1,702 FleetBroadband subscribers and saw continued take-up of higher value package based services. We are continuing to promote internal customer migration from older services to FleetBroadband and we are stepping up our efforts to encourage an increased pace of migration. The on-going process of migration serves to constrain revenue growth in the short term because the price of our FleetBroadband services is typically lower on a unit basis than the services being replaced. In addition, where customers move to our XpressLink service, this transition reduces wholesale revenues, but typically increases retail revenues reported under Inmarsat Solutions by a greater amount. Overall, we are confident that we are growing our total maritime subscriber base and seeing positive trends in ARPU.
In the land mobile sector, we saw strong growth in voice services offset by a decline in data revenues due to on-going troop withdrawals from Afghanistan and by lower levels of BGAN revenues more generally and in certain territories. We estimate that global events including Afghanistan contributed $1.6m more revenue in the third quarter 2012 when compared to the third quarter 2013. Growth in land mobile voice revenues was driven by continued take-up of our IsatPhone Pro handheld service and we ended the quarter with approximately 92,000 IsatPhone Pro subscribers.
The increase in aviation revenues continues to be driven by strong growth from our SwiftBroadband service, offset by a decline in Swift 64 revenues due to lower usage by certain government customers, including usage related to reduced activity in Afghanistan. Growth in SwiftBroadband revenues was driven by take-up in business aviation and for commercial in-flight passenger connectivity services. The decrease in leasing revenues was due to a reduction in revenue from certain government aviation and maritime contracts.
|Three months ended 30 September|
|(US$ in millions)||2013||2012||Decrease|
|Broadband and Other MSS||94.1||101.8||(7.6%)|
The decrease in Inmarsat MSS revenues at the Inmarsat Solutions level was driven primarily by a combination of lower leasing revenues and by lower BGAN revenues arising from Afghanistan. In addition, there was a reduction in aviation revenues due to lower US Government spending on our Swift 64 service. As Inmarsat Solutions has a disproportionately higher share of both our leasing and BGAN business, the lower revenues from these business lines contributed to an overall decrease in Inmarsat MSS revenues reported by Inmarsat Solutions, even though MSS revenues grew at the wholesale level.
The decline in Broadband and Other MSS revenues was primarily due to a reduction in revenues from the managed network services segment of our US Government business unit. This decrease was primarily a result of contract renewals at lower rates and non-renewals, and follows the implementation of US Government defence spending reductions and by a related increase in competition. This decline was partially offset by growth in VSAT revenues as a result of further take-up of our XpressLink service. At the end of the quarter we had an installed base of 1,386 ships using our VSAT service, including 664 ships using XpressLink. During the quarter we added a record 138 XpressLink subscribers.
At 30 September 2013, the Inmarsat plc group had net borrowings of $1,656.6m, made up of cash and cash equivalents of $293.6m and total borrowings of $1,950.2m. Including cash and available but undrawn borrowing facilities, the group had total available liquidity of $1,243.2m. We remain fully-funded as to all our capital needs for the foreseeable future.
While Inmarsat plc is the ultimate parent company of our group, our subsidiary Inmarsat Group Limited is required by the terms of our Senior Notes to report consolidated financial results on a quarterly basis. A copy of the full financial report for Inmarsat Group Limited for the third quarter ended 30 September 2013 can be accessed via the Investor Relations section of our website.
Please note that we have revised the timing for our third quarter results call. Inmarsat management will now host a third quarter results conference call on Thursday 7 November at 08:00 hrs UTC London time, (03:00 hrs ET). To access the call please dial +44 (0) 20 3427 1900 and quote conference id 3288537. The call will also be available via a live webcast accessible through our website www.inmarsat.com/webcast. A replay of the call will be available for one week after the event. To access the recording, please dial +44 (0) 20 3427 0598 and enter the access code 7673855#.
Certain statements in this announcement constitute “forward-looking statements”. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those projected in the forward-looking statements. These factors include: general economic and business conditions; changes in technology; timing or delay in signing, commencement, implementation and performance or programmes, or the delivery of products or services under them; structural change in the satellite industry; relationships with customers; competition; and ability to attract personnel. You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. We undertake no obligation to update or revise any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances.
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