North American mobile satellite operators TMI Communications, based in Ottawa, and Motient Corp. announced last month that they have secured US$55 million in funding for a proposed joint venture, dubbed Mobile Satellite Ventures LLC.
The companies said the new entity would consolidate the two companies and develop a “highly innovative and spectrally efficient combination” of satellites and terrestrial base stations.
The funding will provide Mobile Satellite Ventures (MSV) to close a pre-existing agreement to consolidate the satellite-related assets of both Motient and TMI, allowing MSV to move forward as a stand-alone operating entity, the companies said.
Integrating TMI and Motient into MSV would create one of the largest providers of mobile satellite services in the world, the companies said. An estimated 40,000 customers will receive digital voice and data services, including circuit-switched voice, dispatch radio, dial-up and packet data services.
The latest announcement is another step towards a “bigger, better” company that will develop new applications and services in the future, said Larry Boisvert, president and CEO of TMI.
“With the strong support of our investors and the talent and expertise of our people, MSV will make this vision a reality,” Boisvert said in a statement.
MSV will operate as a U.S. company headquartered in Reston, Va. with customer service operations based in Ottawa, said Liz Tasker, vice-president of business development and service delivery at TMI.
“This allows us to combine our operations, bring economies of scale and focus on having two stronger entities that can deliver service all throughout North America,” Tasker said.
“TMI and Motient entered the market a little bit late to capitalize on some of the gaps in cellular coverage and so we’re looking at [MSV] to enhance our ability to provide mobile satellite services.”
Analyst Keith Mallinson, executive vice-president of research at the Boston-based Yankee Group, noted the very fact that TMI and Motient can consolidate shows that this is not the kind of deal that would incur the wrath of anti-trust authorities.
“Although they are some of the biggest players in the satellite mobile sector, it is in itself quite a relatively small niche in the overall global communications marketplace,” Mallinson said.
“Satellite has particular capabilities in that is has very broad geographic footprint which it useful for certain user…but, inherently, that is the thinner part of the market.”
At the moment, data services are provided by satellite and terrestrial-based, specialized data networks, Mallinson said, and there is pressure to consolidate them because it is becoming difficult to get critical mass economies of scale.
“Merging is the thing to do in this time in the marketplace. If you think of the business cycle, when it’s in growth you get lots of new companies founded…when the market turns down, you tend to get consolidation,” Mallinson said.
“This is a consolidation play, which I think is very much in keeping with the business cycle.”