Begin the BGAN: City-bound Inmarsat looks to regain the high ground as its satellite blasts off

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At Cape Canaveral on Friday, Inmarsat launched the world's largest commercial communications satellite into a trajectory that will place it at 64 degrees east over the Indian Ocean. But the communications company also started the countdown to what is widely expected to be a flotation on the stock market.

At Cape Canaveral on Friday, Inmarsat launched the world's largest commercial communications satellite into a trajectory that will place it at 64 degrees east over the Indian Ocean. But the communications company also started the countdown to what is widely expected to be a flotation on the stock market.

The new satellite, the I4-F1, will be one of three that will provide broadband to government, military, maritime and commercial users around the world, even if they have no access to the fixed-line internet or to a mobile network. The I4-F1 will cover most of Europe and Africa, all of India and the Middle East and most of Russia. A second satellite, the F2, will be put into an orbit over South America, with a third planned for the Pacific, if there is sufficient demand.

It is nearly five years since Inmarsat commissioned the European aerospace company EADS Astrium to build three I-4s. In that time the London-based operation has changed beyond recognition. Inmarsat started life in 1979 as an inter-governmental organisation, providing maritime safety communications. In the late 1980s it was turned into a company, and in December 2003 it was privatised, with the majority of shares now held by venture capitalists Apax Partners and Permira.

Andy Sukawaty, who joined Inmarsat as non-executive chairman at privatisation and took over as chief executive last March, says talk of a flotation is inevitable. "It was said to me when Inmarsat was privatised that private equity firms start to look for liquidity the day you sign the papers," he says. "They look at it long before that. They look at it as part of a plan to provide a return on investment."

Sukawaty will not be drawn on a date for the float, but last week this newspaper revealed that the company could list in London this spring with a market value of up to £1.5bn.

"Speculation [about a listing] has risen as a result of us putting more attention on our satellite launches," he says, "but we are doing the same thing as we have been for a year." He is wary of basing the case for a float on a single, risky event such as a satellite launch.

Nonetheless, the I-4 s are important to the future of Inmar- sat. The company posted Ebitda (earnings before interest, taxes, depreciation and amortisation) of $304m (£157m) for its 2004 financial year, but revenues from its existing services have come under pressure.

As well as the I-4s, which will drive Inmarsat's Broadband Global Area Network (BGAN), the company operates shipping and aviation communications services, and slower ground-based satellite communications using its GAN and Regional BGAN equipment.

GAN equipment gained prominence in the Gulf War, through its use by TV news teams filing reports by satellite phone. Inmarsat is still notching up sales, such as a recent deal providing 40 units to the New York Fire Department. But its interim Regional BGAN service, based on leased satellite capacity, has not met expectations. "The issues with RBGAN were quite broad," admits Sukawaty. "It is a data-only service, and customers want voice and data. And large groups of our customers are not very regional, so it tended not to get bought by customers with broader coverage requirements." Low sales volumes also deterred manufacturers from bringing out smaller terminals.

The more powerful I-4 satellites have other advantages. They have 200 spot beams, which can be used to bring extra capacity to a particular part of the world, for example during a large sporting event or following a natural disaster. And the BGAN technology opens up the possibility of handheld terminals. Sukawaty envisages a handheld unit with support for internet telephony, known as Voiceover IP (Voip).

Inmarsat, though, needs its I-4s to regain lost ground from the low-orbit satellite operators, such as GlobalStar and, at the high end, VSAT systems.

"The competition in satellites today is from hand-portable voice, which we don't have. That has put us under pressure but we hope to claw that back with Voip," he says.

"At the high end, very large users of voice and data have gone to VSAT operators. Cruise ships are a good example of a market that was lost to us eight to 10 years ago."

Sukawaty believes that new maritime and aviation products, based on the BGAN network, will help Inmarsat. For example, the new Airbus A380 will come ready equipped for BGAN.

The company also hopes that the BGAN service will expand its customer base among business users, especially in fields such as distribution and oil, gas and mineral exploration. But do not expect businessmen to carry Inmarsat terminals in their suit pockets any time soon.

"We have 3 to 4 per cent revenue growth a year," says Sukawaty. "Satellite serves niche markets and there is healthy growth in that.

"I don't much see it as a road warrior product, but it will continue to serve government and commercial communications needs of the highest order."

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