Business & Finance Club - Dubai : Inmarsat, the leading provider of global mobile satellite communications services, has agreed a contract with the Boeing Company for the delivery of three state-of-the-art satellites.

With operations expected to start in 2014, Inmarsat-5 constellation will enable Inmarsat to provide a unique global high speed mobile broadband service offering, a statement said.

It will support a next generation global service, Global Xpress, which will target a $1.4 billion incremental market opportunity in VSAT services. Global Xpress will address the established, growing markets for VSAT services in the maritime, energy and government sectors, with further growth potential in developing markets such as the aeronautical sector.

Global Xpress will deliver seamless global coverage and unprecedented mobile broadband with speeds up to 50MB/s, to customer terminals from 20-60 cm in size, according to the statement.

Inmarsat will target $500 million of annual Ka-band revenues five years after global service launch.

Under a separate arrangement, Boeing has agreed to become a distribution partner for both Inmarsat’s Ka- and L-band services and has pre-committed to capacity purchases representing more than 10 per cent of Inmarsat’s target Ka-band revenues in the first five years after global service launch.

Inmarsat estimates that the total cost of Inmarsat-5 and Global Xpress will be $1.2 billion over four and a half years, incorporating the fixed cost of the satellites, as well as the cost of additional ground network infrastructure, product development, launch services and insurance.

“With the Global Xpress network, we will be the first operator to offer global mobile broadband coverage, offering unparalleled speeds and bandwidth to customers in remote locations around the world,” said Andrew Sukawaty, chairman and CEO of Inmarsat.

“Global Xpress will be faster and less expensive than current Ku-band market offerings, delivered to smaller and cheaper terminals and be the first offered on a seamless, global, end to end basis with high quality of service.”

“Inmarsat-5 will also complement our existing global L-band services, allowing us to offer unique hybrid packages using both networks, giving users unprecedented levels of resilience and reliability in remote and harsh environments,” he added.

Rick Medlock, Inmarsat’s chief financial officer, said: “We expect the Inmarsat-5 programme to be largely funded from our internally generated cash flows and, with significant available liquidity today, we see no immediate financing needs.”

“In connection with the Boeing contract, we are seeking Export Credit Agency financing support from the US Ex-Im Bank, which could provide an attractive source of long-term debt.”

“Given the multi-year build phase and the strong free cash flow from our existing business, we believe the peak impact on our ratio of net debt to EBITDA will be less than 0.5,” Medlock added.

“Furthermore, as a result of our investment in Inmarsat-5, we will move to a more gradual replacement of our L-band network, resulting in a deferment of more than $500 million of our previously planned replacement expenditure over the next 11 years,” he concluded.