Mobile satellite communications services provider Inmarsat (LSE: ISAT) announced today that it has agreed a contract with The Boeing Company (Boeing)(NYSE: BA) for the delivery of three 702HP Ka-band satellites.
The three satellites will form the Inmarsat-5 constellation and are expected to start operations in 2014 in support of Inmarsat's next-generation global service, Global Xpress, which is targeted at the predicted USD1.4bn incremental of market opportunity in VSAT services. Global Xpress is designed to deliver global coverage of mobile broadband with speeds of up to 50 MB/s to customer terminals from 20 to 60 cm in size.
Inmarsat hopes to achieve USD500m of annual Ka-band revenues within five years of the launch of the service.
The company also said that under a separate arrangement, Boeing will become a distribution partner for both Inmarsat's Ka- and L-band services. Boeing has pre-committed to purchase capacity representing more than 10% of Inmarsat's target Ka-band revenues in the first five years after the launch of the Global Xpress service launch.
Inmarsat-5 will complement Inmarsat's existing L-band services, which will not only allow Inmarsat to offer a hybrid package using both networks, but will also allow it to move to a more gradual replacement of its L-band network, according to the company, which will result in a deferment of more than USD500m of previously planned replacement expenditure over the next 11 years.
No specific financial details of the order were provided, but the company estimates that the total cost of Inmarsat-5 and Global Xpress will be USD1.2bn 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.
