Inmarsat + Boeing Satellite Systems—Fourth I-5 Build Initiated (Satellite—Manufacturing)

[SatNews] Inmarsat (LSE:ISAT.L) has triggered an option to purchase a fourth Inmarsat-5 satellite under its existing contract with Boeing Satellite Systems International, Inc. (“Boeing”)—the program schedule from Boeing has a satellite delivery date of mid-2016.

The fourth Inmarsat-5 satellite will have a dual strategic role. Initially the satellite will serve to provide an early available spare in the unlikely event of a launch failure of any of the first three Inmarsat-5 satellites. As a result, Inmarsat will be able to achieve global service launch for Global Xpress (“GX”) more rapidly than if a replacement satellite were only commissioned following a launch failure. Where customer commitments and demand for GX requires a global network to be in place, the fourth satellite will therefore insure the global network delivery date and this measure of redundancy is expected to encourage further commitments to GX. In the event the satellite is not required as a launch spare, Inmarsat is developing an incremental business case to support the launch of the fourth satellite to increase capacity and strategically enhance network coverage.

Rupert Pearce, Inmarsat’s Chief Executive Officer, said, “Our confidence in the Global Xpress programme and our target market opportunities continues to grow. We have signed multiple pre-sale agreements and received significant expressions of interest, some of which are tied to the completion of global coverage with three satellites. This has encouraged us to not only move to a strategy to physically insure our global service date with a fourth satellite, but also to consider incremental opportunities that have emerged and could drive enhanced returns via the launch of a fourth satellite.

“Our decision announced today reflects the fact that we are already close to incremental opportunities that could justify a fourth satellite, but our highest priority is our coming launch campaign and we will take time to develop these plans in the coming year. In the meantime, our target markets can now be confident of our commitment to the GX global service delivery schedule.”

Boeing will immediately begin construction of the fourth Inmarsat-5 satellite. The total cost of the option and certain related expenditure will be between US$220m and US$250m. In the event the fourth satellite is required as a spare, the impact on total capital expenditure over the period to 2016 will be broadly neutral as the insurance proceeds from any loss would be expected to cover the construction, launch and insurance costs for the fourth satellite.

GX will be the first globally available high-speed broadband network. It will offer the unique combination of global coverage from a single operator, consistent higher performance of up to 50Mbps, and the network reliability for which Inmarsat is renowned. Based on Ka-band technology, GX will consistently deliver higher performance through more compact terminals at a lower cost than existing VSAT services, making it accessible to many more users.