Inmarsat plc Interim Management Statement
9 May 2012
Inmarsat plc provided the following information for the three months ended 31 March 2012.
MSS active terminals up 10%
Rupert Pearce, Inmarsat’s Chief Executive Officer, said, “The results for the first quarter are in line with our expectations and give us confidence in our outlook. Strong subscriber growth of over 10% in the first quarter continues to underpin our expectations for improved results in 2012. In addition, we are encouraged by rapidly developing market interest in our XpressLink service and in the partnerships we are forming for our Global Xpress service.”
Growth in our maritime data revenue resulted primarily from the impact of pricing initiatives, in particular as a result of the elimination of volume discounts previously available for older services where we are encouraging customer migration to our FleetBroadband service. In addition, we added 2,010 FleetBroadband terminals during the quarter, showing that take up of this service remains strong. Although maritime voice revenue was down year over year, this is largely due to the impact of voice price reductions implemented in the second quarter of 2011. While economic conditions in shipping remain challenging, we remain comfortable with the customer usage trends we are seeing and have a positive outlook for our maritime business in 2012.
Interest in our XpressLink service also continues to build rapidly and we recently announced the appointment of a number of leading maritime communications specialists as dealers for this important new service. Some of these dealers have already concluded agreements with shipping companies to purchase XpressLink. XpressLink is a unique hybrid service combining FleetBroadband with Ku-band connectivity for a fixed monthly price. We believe XpressLink will gain meaningful market traction during 2012 and will contribute to revenue reported for our Inmarsat Solutions business.
In our land mobile sector, while our BGAN and IsatPhone Pro services continue to attract new customer revenue to our network, this growth has been more than offset by the on-going decline in revenue from government and military users in Afghanistan. Lower revenue from Afghanistan, in connection with reduced military activity, remains a material headwind to our overall rate of growth in 2012. We estimate that Afghanistan and events in North Africa and Japan in the first quarter of 2011 contributed $9.5m more revenue year-over-year, compared to the first quarter 2012. While revenue from North Africa and Japan has now largely normalised, our annualised land mobile revenue from Afghanistan remains material, but is expected to decline further in the remainder of the year.
Our IsatPhone Pro service continues to see strong subscriber take up. At the end of the quarter we had over 55,000 IsatPhone Pro subscribers, putting us well on track to meet our market share targets measured by number of users. Although revenue from usage has been slower to develop, we are seeing steady increased usage from a larger base and this was a contributor to strong growth in our first quarter land voice revenue.
Aviation revenue growth for the first quarter was driven by the combination of strong growth in revenue from our SwiftBroadband service, offset by lower usage from Swift 64 mainly due to lower military and government usage in the quarter. The trends in our aviation business are encouraging, as SwiftBroadband is seeing rapid take up in commercial markets, including for supporting in-flight passenger services. The take up of SwiftBroadband is expanding our customer base and reducing our dependence on government aviation business.
Leasing was in line with expectations for the first quarter, consistent with the outlook provided in March 2012. Growth in Other Income was primarily driven by revenue from LightSquared and also by increased equipment sales in relation to our IsatPhone Pro service.
Growth in our Inmarsat Solutions division was primarily driven by recognition of new VSAT service revenues resulting from the acquisition of Ship Equip completed in April 2011, and by growth in our Inmarsat Government business unit, both primarily reported within Broadband and other MSS. Lower Inmarsat MSS revenue at the Inmarsat Solutions level was driven primarily by lower revenue from Afghanistan and lower event-related revenue year-over-year. Inmarsat MSS revenue was also impacted by competition from other Inmarsat distributors.
Liquidity
At 31 March 2011, the Inmarsat plc group had net borrowings of $1,345.1m, made up of cash and cash equivalents of $286.5m and total borrowings of $1,631.6m. Including cash and available but undrawn borrowing facilities, the group had total available liquidity of $1,409.1m. On 4 April 2012, we issued a further $200.0m in principal amount of our existing 7.375% Senior Notes due 2017. The proceeds of the offering are available for general corporate purposes and increase our liquidity. We remain fully funded as to all our capital needs for the foreseeable future.
