The orbit of Britain’s largest satellite company has slowed dramatically after it pledged to spend more than expected on its new launch programme.
Inmarsat, based on London’s Silicon Roundabout, said that it would spend $500-600 million a year over the next three years as it continues to propel new satellites into space to pipe faster broadband to its customers.
The possible $1.8 billion expenditure was much higher than the market had factored in; it was 40 per cent above the capital costs for 2018 pencilled in by John Karidis, an analyst with Haitong . That outlay, combined with a choppy outlook statement from Inmarsat, pushed shares in the FTSE 100 company up to 6 per cent lower yesterday before they closed off 52½p at 913½p.
Inmarsat, which was founded as a marine rescue beacon service in the 1970s, is refreshing its constellation of satellites, with its new Global Express models offering broadband to remote areas that is faster than most people in Britain receive at home.
That has changed its business model, however, as fewer customers in the marine, aviation and military sectors need to buy enormous satellite phones and pay hefty fees for voice calls.
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Inmarsat said that its revenue next year would be between $1.2 billion and $1.3 billion , rising to $1.45 to $1.6 billion by 2018. That compares with $1.2 billion last year when revenue growth stalled.
The company warned that its long-term revenue target was dependent on the launch of its fourth GX satellite, the I-5 F4, scheduled for later this year. The previous GX launch was delayed owing to a rocket failure at the Baikonur cosmodrome in Kazakhstan last year. Inmarsat is now weighing up where to launch the new satellite this year and could opt to use Elon Musk’s SpaceX company at Cape Canaveral in Florida for future launches.
Pre-tax profit at Inmarsat fell to $338 million in 2015 from $342 million the previous year owing to higher finance charges . It raised its final dividend by 5 per cent.
Rupert Pearce, the chief executive, has talked about the new market for in-flight broadband signals as a growth area for the company and its aviation revenue surged 25 per cent to $127 million in 2015.
That helped offset a 10 per cent drop in government revenue and a slight dip in maritime sales as shipping companies reduced their spending.
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Mr Pearce, who was the company’s general counsel before being promoted to the chief executive’s job in 2012, said that Inmarsat was operating in a difficult market.
“It’s not a benign environment out there,” he said.
The company is still benefiting from the LightSquared project in the US that once threatened to consume it. The plan to build a wireless broadband network across the US using Inmarsat’s signals generated $88 million in sales last year, an 18 per cent rise.
LightSquared was once owned by Philip Falcone’s Harbinger Capital hedge fund, which said it was going to buy Inmarsat but the offer never materialised and LightSquared was put into bankruptcy.
That knocked shares in Inmarsat but the project has slowly gained traction again, although Mr Pearce argued that he does not include LightSquared revenue in the company’s guidance.
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Satellite has become a cause célèbre for the technology industry with both Facebook and Google talking up the benefits of the space technology to connect the four billion people in the world who cannot get an internet signal.