{"id":67047,"date":"2017-10-20T01:35:52","date_gmt":"2017-10-19T17:35:52","guid":{"rendered":"https:\/\/wp-productionenv-bjg9h2g2bgg5b8aa.southeastasia-01.azurewebsites.net\/news\/inmarsat-ceo-and-the-1-billion-target\/"},"modified":"2017-10-20T01:35:52","modified_gmt":"2017-10-19T17:35:52","slug":"inmarsat-ceo-and-the-1-billion-target","status":"publish","type":"post","link":"https:\/\/starpath.global\/news\/inmarsat-ceo-and-the-1-billion-target\/","title":{"rendered":"Inmarsat CEO and the $1 Billion Target"},"content":{"rendered":"<p>Inmarsat is one of the biggest investors in new satellites and new capability. Thanks to a rising profile in mobility markets, Inmarsat is likely to remain a highly influential player in the market and remain a major investor in new satellites. In an interview with Via Satellite, CEO Rupert Pearce talks about the challenges ahead for the operator.<\/p>\n<p>Key to its future success is likely to be aviation. While Inmarsat\u2019s business used to be substantially maritime, things are changing, with aviation, government and enterprise offering the operator significant growth opportunities. \u201cFrom this diversified position, we can achieve many more shots on goal than we did a decade ago, and aviation passenger connectivity is a classic example of that. It could be a billion-dollar revenue stream for us in a decade or more, if we are successful, and if the market grows the way commentators think it will do,\u201d says Pearce.<\/p>\n<p>\t\t\t\t<img loading=\"lazy\" width=\"300\" height=\"225\" src=\"https:\/\/www.satellitetoday.com\/wp-content\/uploads\/2017\/11\/X17VP7M5R5iCiLduB6Pf_01_VS_110117_Cover_DGTL-300x225.jpg\" class=\"attachment-medium size-medium\" alt=\"\" style=\"width: 120px; height: auto;\" decoding=\"async\" srcset=\"https:\/\/www.satellitetoday.com\/wp-content\/uploads\/2017\/11\/X17VP7M5R5iCiLduB6Pf_01_VS_110117_Cover_DGTL-300x225.jpg 300w, https:\/\/www.satellitetoday.com\/wp-content\/uploads\/2017\/11\/X17VP7M5R5iCiLduB6Pf_01_VS_110117_Cover_DGTL-800x599.jpg 800w, https:\/\/www.satellitetoday.com\/wp-content\/uploads\/2017\/11\/X17VP7M5R5iCiLduB6Pf_01_VS_110117_Cover_DGTL-640x480.jpg 640w, https:\/\/www.satellitetoday.com\/wp-content\/uploads\/2017\/11\/X17VP7M5R5iCiLduB6Pf_01_VS_110117_Cover_DGTL.jpg 1280w\" sizes=\"(max-width: 300px) 100vw, 300px\">\t\t\t<\/p>\n<h3 class=\"fs-5 mt-0\">Explore the November\/December 2017 Issue<\/h3>\n<p class=\"mb-0 fs-smaller text-balance\">Check out more from this issue and find your next story to read.<\/p>\n<p>\t\t\t<button class=\"btn btn-primary\" type=\"button\" data-bs-toggle=\"offcanvas\" data-bs-target=\"#offcanvasMENU\" aria-controls=\"offcanvasExample\" aria-label=\"button\" style=\"white-space: nowrap;\"><br \/>\n\t\t\t\tView More <i class=\"bi bi-arrow-right-circle\"><\/i><br \/>\n\t\t\t<\/button><\/p>\n<p>It strikes me as a bullish prediction, so I ask Pearce again whether a $1 billion revenue stream in aviation is realistic. He breaks down why that figure could be realistic. \u201cIf you look at the Average Revenue Per User (ARPU) based on services already in the market, we\u2019re seeing revenues of between $150,000 to $200,000 per plane, per year; and these are for regional services that aren\u2019t exactly fabulous in terms of the customer experience. On that basis, we\u2019d reach a billion dollar annual revenue stream with some 5,000 aircraft under contract \u2014 and we\u2019re already at 1,200, so it\u2019s not an impossible target as commentators are projecting more than 25,000 connected aircraft globally by the mid-2020s. Passengers want Wi-Fi and it is valuable to them. The latest survey we did in aviation showed that people regard it as a necessity, not a luxury, and this is more the case in Asia than anywhere else,\u201d says Pearce.<\/p>\n<p>If aviation does grow into a $1 billion a year business for Inmarsat, it would \u2014 depending upon the growth in other segments \u2014 make it one of Inmarsat\u2019s biggest businesses, if not the biggest, according to Pearce. <\/p>\n<p>But aviation is more than just In-Flight Connectivity (IFC) for Inmarsat. The company has three other aviation businesses \u2014 government, business and general aviation \u2014 and its safety business. What matters to Inmarsat in the medium term is free cash flow generation, meaning that gross margin, net profit margin and capital expenditure levels are vital to the trajectory of its business. Pearce says Inmarsat believes that after an initial period of intensified investment in market capture, the IFC business will settle down into the kind of scalable business model and sustained profitability that will enable it to sit happily alongside the company\u2019s other businesses in terms of free cash flow generation. <\/p>\n<p><script>var AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b4411;googletag.cmd.push(function(){var AIMAP_29b58f13885ebf8ea6b032f958eb0748 = googletag.sizeMapping().addSize([992, 100], [[970, 90], [970, 250]]).addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_737ce075cc05dd766c8f8ea08f3faa73 = googletag.sizeMapping().addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_21fe3bcfb86a8660aba4e721ee9338f3 = googletag.sizeMapping().addSize([1200, 100], [970, 250]).addSize([768, 100], [600, 300]).addSize([320, 100], [300, 250]).build();AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b4411 = googletag.defineSlot('\/987\/satellitetoday.com\/via-satellite-digital-issue-ads', [ [600, 300], [300, 250], [970, 250] ], 'div-gpt-ad-1774631144891- 0-6a6d5f99b4412').defineSizeMapping(AIMAP_21fe3bcfb86a8660aba4e721ee9338f3).setCollapseEmptyDiv(true).addService(googletag.pubads());   });<\/script><script>googletag.cmd.push(function() { googletag.display('div-gpt-ad-1774631144891- 0-6a6d5f99b4412'); });<\/script><\/p>\n<p>\u201cThe thing that is still up for discussion is the extent to which we have to build further capacity to feed into the specific demands of passenger connectivity. We have already procured a fifth Global Xpress satellite to support a combination of the deals we have got in Europe and the Middle East today, triggered by a long term IFC deal with Qatar Airways, but this begs the question of how many more deals can we do? The answer is as many as we need, as long as it is justified by enhanced growth and a strong intrinsic return on the capital we actually invest,\u201d he adds. <\/p>\n<p>It could be argued that aviation is a golden ticket for operators like Inmarsat. It is a notion that Pearce doesn\u2019t dispute. He points to the fact that IFC is a market where connectivity is supplied globally almost exclusively by satellite, which means it is sustainable for an operator like Inmarsat. This means Inmarsat feels it can confidently invest on the long-term, and sees this as a high value market. \u201cWhether to the cockpit or the cabin, it is seen as mission critical by airlines, and I include passenger Wi-Fi now in that attribute. Airlines know that if they don\u2019t install passenger Wi-Fi, their passengers will go elsewhere. Aviation is also a global market, where wide area coverage matters. It is also about mobility. So, it ticks the boxes of many of our core differentiators. I think aviation is going to be one of the core competencies of Inmarsat going forward,\u201d he says.<\/p>\n<p>However, while aviation maybe a golden ticket, Pearce also believes markets such as maritime and government will also be key to Inmarsat\u2019s future, and share many of the same core characteristics that play to its strengths and its competitive differentiators. \u201cWe look to pick areas where satellite has sustained relevance and where our focus on global coverage and mobility are long-term differentiators. That is why you have seen us pull back from areas where we might otherwise have gone with GX, which are regional and fixed opportunities, like enterprise Very Small Aperture Terminals (VSAT),\u201d he adds. <\/p>\n<h3>OneWeb\/Intelsat<\/h3>\n<p>The satellite industry feels like it is on the cusp of change, particularly as ambitious new operators look to disrupt an ecosystem that has not really seen huge change over the years. Nowhere was this more evident than the proposed deal between Intelsat and OneWeb, which eventually fell through. Pearce admits he expected this would prove a difficult deal to implement. <\/p>\n<p>\u201cIntelsat has a very complicated capital structure and it must have been a very complicated exercise to get everyone aligned around the SoftBank offer. Bondholders are notoriously difficult to negotiate with and in this case, with the underlying Intelsat business being strong and well-managed, the alternative for bondholders was relatively benign. I was still a bit surprised that it didn\u2019t happen because normally when these types of deals are announced they take place, unless there is a regulatory problem. Maybe it will come back in another guise,\u201d he says.<\/p>\n<p>So, could there be a play for Inmarsat in Low Earth Orbit (LEO)? Pearce says that Inmarsat \u201clooks at these things\u201d all the time and that the operator is not \u201caverse to new technologies.\u201d The operator has moved into different bands, and has launched an integrated satellite\/terrestrial network, as well as High Throughput Satellite (HTS) and military satcoms. However, Pearce seems to downplay suggestions that Inmarsat could make a move in this area. He says in the case of Non-Geosynchronous Orbit (NGSO) networks, it has looked at the technology and done the math, and as yet, Inmarsat doesn\u2019t see a global NGSO offering as something that will be better for its core customers. \u201cThere are a lot of things to like about non-GEO in terms of latency and coverage of the poles. But even at the economics that OneWeb say they are going to deliver, for our global mobility business it would be a sledgehammer to crack a nut and, to some extent, you have lots of expensive capacity in the wrong places. In terms of the effectiveness of deploying this technology into a business plan, the return on investment doesn\u2019t look compelling for us. As such, at the moment our next investments are more likely to be in Ultra-HTS GEO satellites, like the recently-ordered GX 5,\u201d he says. <\/p>\n<p>So, no real interest in GEO then? \u201cNot at the moment, but never say never \u2014 we would change our mind if we saw the economics stack up or if we decided to target markets outside our current core sectors; ones where LEO is a very powerful differentiated proposition,\u201d he concludes on this topic. <\/p>\n<figure><img decoding=\"async\" alt=\"Placeholder alt text\" src=\"https:\/\/s3.amazonaws.com\/marquee-test-akiaisur2rgicbmpehea\/2qTXqSEQtWekMNrDyh93_32509aqm_gx_installation.jpg\"><\/figure>\n<h3>IOT, New Business Areas<\/h3>\n<p>While maritime and aviation remain core to Inmarsat, one of the key questions for any satellite operator now is what other verticals they can play in as we move into an Internet of Things (IOT) world. Pearce says there are four to five areas Inmarsat has started to talk about more readily as it lays out the value proposition, finds the right partners to scale, and determine the right business models. He highlights intelligent transport systems, saying this is \u201cclose to our heartland.\u201d This can include the connected aircraft and the connected ship, but includes trucks, trains and cars as well. <\/p>\n<p>\u201cThe utility for satellite is that you can put connectivity through a very small device on your car or on your train and the applications are many and various. For trains, you are looking at next generation signaling, safety management and operation of the cargo. For cars, you are looking at Over-the-Air (OTA) updates to patch software and protect the vehicle,\u201d he says. \u201cYou are also looking at a new era of telematics and treating cars as a large community that you can track and draw situational awareness from.\u201d<\/p>\n<p><script>var AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b4b09;googletag.cmd.push(function(){var AIMAP_29b58f13885ebf8ea6b032f958eb0748 = googletag.sizeMapping().addSize([992, 100], [[970, 90], [970, 250]]).addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_737ce075cc05dd766c8f8ea08f3faa73 = googletag.sizeMapping().addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_21fe3bcfb86a8660aba4e721ee9338f3 = googletag.sizeMapping().addSize([1200, 100], [970, 250]).addSize([768, 100], [600, 300]).addSize([320, 100], [300, 250]).build();AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b4b09 = googletag.defineSlot('\/987\/satellitetoday.com\/via-satellite-digital-issue-ads', [ [600, 300], [300, 250], [970, 250] ], 'div-gpt-ad-1774631144891- 0-6a6d5f99b4b0a').defineSizeMapping(AIMAP_21fe3bcfb86a8660aba4e721ee9338f3).setCollapseEmptyDiv(true).addService(googletag.pubads());   });<\/script><script>googletag.cmd.push(function() { googletag.display('div-gpt-ad-1774631144891- 0-6a6d5f99b4b0a'); });<\/script><\/p>\n<p>Pearce also talks about smart agriculture, where the reach of satellite into very rural areas is valuable because that is where terrestrial networks don\u2019t go. Satellite can stimulate next-generation farming using smart autonomous machinery or by deploying a host of farming applications such as smart irrigation or pesticide programs, where one can deliver 30 to 40 percent productivity gains. <\/p>\n<p>Interestingly, \u201csmart cities\u201d also comes up in the conversation. Inmarsat has been involved in the Transform Africa Initiative, which is deploying a smart city environment in Kigali, Rwanda. This is seen as a test case for the whole continent. In fact, hundreds of city mayors and many heads of state turned up to a conference in Rwanda recently to look at a smart cities policy. Pearce speaks about how Africa is modernizing and industrializing very quickly and that Rwanda, as an example, needs another eight Kigalis in the next 30 years. This puts primacy on the question of what kind of cities should be built in Africa. <\/p>\n<p>\u201cThe answer is ones that are smart and digitally connected, empowering digital natives through innovation centers. So, it is an end-to-end holistic approach to empowering a knowledge-based economy in Africa. But it is also about overturning how cities have been developed in Africa to date. They have traditionally developed in a relatively unplanned way, which means by the time a settlement has become a city, it can be very hard to deliver at scale clean water, dependable power, sewerage and connectivity,\u201d Pearce says. \u201cThis in turn means it is difficult to have good roads and public transport and other forms of transport connectivity. A smart city environment is a digitally enabled, connected environment from its foundations and we are proud to be helping members of the Smart Africa Initiative to experiment with a lot of different use cases in Kigali. I am very confident that we will be talking about core use cases for any new smart cities in Africa, which will be fundamentally liberating to the economy.\u201d<\/p>\n<h3>Reusable Rockets, Launch<\/h3>\n<p>On the subject of reusable rockets, Pearce says Inmarsat will be into that market as soon as it is comfortable that it is safe and appropriate. He admits that Inmarsat is not usually an early adopter of launch technology because it doesn\u2019t launch enough satellites to be able to deal with a failure with equanimity. \u201cWe don\u2019t launch as much as an SES, for example. The bigger Fixed Satellite Service (FSS) operators are able to stimulate this innovation earlier and be earlier commercial customers. But we are fast followers; I think you will see us use a refurbished rocket in the near future,\u201d he adds.<\/p>\n<p>One of the big talking points at the SATELLITE 2017 Conference &amp; Exhibition this year was the deal between Eutelsat and Blue Origin. Pearce says he \u201capplauds\u201d Eutelsat and their vision for being an anchor tenant for Blue Origin. He says he is very excited about this new launch provider coming into the market, as well as increasing access to space. Pearce believes we are now seeing more innovation in the launch market than ever before, and that prices are coming down where it is becoming really meaningful in terms of total return. <\/p>\n<p>\u201cWe have been a relatively early adopter in terms of SpaceX and will definitely be back to launch more rockets with them. Blue Origin is a very welcome addition to the launch community and we will look to use them when the time is right,\u201d he says.<\/p>\n<h3>Capital Expenditure Plans<\/h3>\n<p>Inmarsat has got three launches around the turn of the decade. It has its fifth GX satellite, which it will launch at the end of 2019; its Inmarsat 6 F1, which it will launch at the end of 2020, and then its Inmarsat 6 F2 a year later. Pearce says that the operator is building satellites faster than ever before, and that its capital expenditure is definitely intensifying. <\/p>\n<p>\u201cThe days when we would launch a fleet of three to four satellites and then wait 10 years to do it again seem to be over for the time being. However, we are moving into an environment that is very interesting in terms of growth opportunities. We now have two fully global networks, each with redundancy in space. Our L-band network has four latest generation satellites, as does our Ka-band network. Going forward, instead of launching fresh global constellations, I believe we are more likely to deliver high-value, high ROI surgical augmentation to our global networks to dramatically lower our overall cost per bit and to deliver new capacity where it is needed most,\u201d he says. <\/p>\n<h3>Pearce Reflects on His First Six Years<\/h3>\n<p>Rupert Pearce has been the CEO of Inmarsat for around six years. It has been a time of change, both in the industry and the company itself. There have been some surprises along the way and Pearce admits that he didn\u2019t expect the digital side of the business to become as important as it has. He says it is not enough in the satellite business today to be a \u2018dumb pipe.\u201d<\/p>\n<p><script>var AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b52d0;googletag.cmd.push(function(){var AIMAP_29b58f13885ebf8ea6b032f958eb0748 = googletag.sizeMapping().addSize([992, 100], [[970, 90], [970, 250]]).addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_737ce075cc05dd766c8f8ea08f3faa73 = googletag.sizeMapping().addSize([768, 100], [728, 90]).addSize([320, 100], [320, 50]).build();var AIMAP_21fe3bcfb86a8660aba4e721ee9338f3 = googletag.sizeMapping().addSize([1200, 100], [970, 250]).addSize([768, 100], [600, 300]).addSize([320, 100], [300, 250]).build();AIAD_fcd45f981d570e35cee941b23edc69c7_6a6d5f99b52d0 = googletag.defineSlot('\/987\/satellitetoday.com\/via-satellite-digital-issue-ads', [ [600, 300], [300, 250], [970, 250] ], 'div-gpt-ad-1774631144891- 0-6a6d5f99b52d1').defineSizeMapping(AIMAP_21fe3bcfb86a8660aba4e721ee9338f3).setCollapseEmptyDiv(true).addService(googletag.pubads());   });<\/script><script>googletag.cmd.push(function() { googletag.display('div-gpt-ad-1774631144891- 0-6a6d5f99b52d1'); });<\/script><\/p>\n<p>\u201cA dumb pipe gets commoditized \u2014 a dumb pipe does not participate in the value inherent in connecting people and connecting solutions. In order to become a \u2018smart pipe\u2019 that facilitates innovation over our network and broadens our long term business opportunities around connectivity, we have had to invest a lot in digital and solutions enablement, in the construction of digital based platforms at the edge of our network, and applications platforms at the heart of our network. That work is incredibly important and is one of the four foundations of our growth strategy going forward,\u201d he adds. <\/p>\n<p>He also highlights a \u201cwelcome surprise\u201d that he perhaps didn\u2019t realize the potential of L-band as it relates to IoT. This refers to an emerging digital society in which everything around us is going to be smart and remotely enabled, and which therefore won\u2019t function properly without being connected. <\/p>\n<p>\u201cConnectivity for IoT will be vital. When you look at what is needed in that arena, it is very small and cheap devices, pervasive coverage, high levels of network reliability and ultra-high levels of cyber-resilience. Services like precision navigation and broadcast are going to be important in that context too. You are ticking a lot of boxes where satellite has real utility,\u201d he says. \u201cFive to six years ago, I didn\u2019t think our L-band services would have a big role to play in the global IoT, but today I am increasingly confident that there is real value for us in diverse segments.\u201d  <strong>VS<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inmarsat is one of the biggest investors in new satellites and new capability. Thanks to a rising profile in mobility markets, Inmarsat is likely to remain a highly influential player in the market and remain a major investor in new satellites. In an interview with Via Satellite, CEO Rupert Pearce talks about the challenges ahead [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":67050,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[2],"tags":[],"class_list":["post-67047","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/67047"}],"collection":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/comments?post=67047"}],"version-history":[{"count":0,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/posts\/67047\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media\/67050"}],"wp:attachment":[{"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/media?parent=67047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/categories?post=67047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/starpath.global\/blog\/wp-json\/wp\/v2\/tags?post=67047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}