The satellite phone business has been tarred for years with bankruptcies and brick-sized handsets. However, a small renaissance is about to take place, with the Canadian division of an Atlanta communications solutions company about to play a major role.
Last month the Ottawa-based Satcom division of EMS Technologies won a $26 million contract (all figures U.S.) to design by 2009 a new dual-mode satellite and GSM mobile phone for Inmarsat, which until recently has focused largely on the data side of satellite communications.
Data tracking of assets such as ships, planes and cargo rather than voice has become increasingly important to satellite providers because the spread of inexpensive cellphone packages has eaten into their voice business. Providers also include Iridium and Globalstar, both headquartered in the U.S., and Thuraya Satellite Communications, which focuses on Asia.
However, sensing weaknesses in competitors – especially in Globalstar, which is experiencing satellite failures – U.K.-based Inmarsat is moving aggressively into the voice market.
Last year it got into the handset business by striking a deal with troubled Asian provider ACeS International which allows that carrier to use its new Inmarsat4 satellites. Now Inmarsat covers most of Asia, Africa and the Middle East.
By commissioning EMS Satcom for a new handset core module, Inmarsat hopes to come up with units that are lighter, cheaper and more powerful than competitors, as well as new transceivers to serve fixed base and maritime customers. And with the launch next spring of a third I4 satellite, Inmarsat vows it will have global voice coverage over Europe and North America.
“We think we’re going to have a mouthwatering value proposition,” boasts Rupert Pearce, Inmarsat’s group general counsel, who is also responsible for the handheld business.
He may be right, according to Claude Rousseau, senior analyst for satellite communications at Northern Sky Research (NSR), a research and consulting company. Inmarsat wouldn’t be getting into the handset business if it wasn’t expanding, he said.
Rousseau estimates there are 600,000 satellite handsets in use today. Over the next five years there will be an 18 per cent compound annual growth in sales thanks to new, lighter handsets and better pricing.
The instability in Iraq and Afghanistan and Sudan, where diplomats, the press and the military congregate, have also helped to drive demand for satphones in recent years. Resource explorers, as expected, depend on them. But they are being set up as pay phones for crews on ocean-going cargo ships.
Thuraya, which will launch its third satellite next month to expand its Asia-Pacific coverage, has the biggest share of the handset market, about 39 per cent, in part due to the adoption of a wildly popular pre-paid card offering.
Pay cards are being adopted by other providers, and NSR believes they will drive business in Asia, the Middle East and Africa.
Thuraya introduced a new dual-mode satphone last year, hoping to sell 30,000 in the first 12 months.
Globalstar and Iridium each have under 30 per cent share of the handset share, while Inmarsat/ACeS have two per cent. But Inmarsat has chopped the price of its dated Ericsson-designed phone to below US$500 and priced calls over its new Isat voice service at less than $1 a minute.
“I think Inmarsat will be very successful,” said Rousseau. “They’ll eat up Globalstar’s, and perhaps Iridium’s, pie.”
Aging satellites are Globalstar’s problem. Tony Nadrra, Globalstar’s operations president, acknowledges his company temporarily has to shift its focus from two-way voice and data services to simplex services until a new satellite network is in place in 2009. Four backup birds have been launched so far this year and will come online soon, while four more will be launched in the fourth quarter.
Meanwhile, the company has let out an $850 million contract to build 48 next generation satellites to begin launching in 2009.
However, he concedes that for the short term his subscribers will sometimes have to hold off on calls for up to an hour until a satellite is overhead, which can be determined by an online computer program. Data streams have to be stored and forwarded at the right time.
After emerging from bankruptcy in 2000, Iridium has been profitable since 2005, said Greg Ewert, the company’s executive vice-president for sales and marketing.
But it will need to raise $2 billion to replace its satellite network, for which it just issued an RFI, starting in 2014.
To a Canadian reporter, he emphasized that the company is the only one with services that reaches the Arctic, which Ottawa has recently claimed is a priority.
Tellingly, though, Ewert says that while today voice account for 70 per cent of Iridium’s revenues and data 30 per cent, they will switch positions two years from now.
Despite the optimism about handsets, the trend to voice displaying data is one all players agree is inevitable.
The Inmarsat module contract is the first satphone work for EMS Satcom, which designs and builds mobile satellite receivers, transmitters and antennas for ships, planes and ground stations.
The division used to be known as Cal Corp. before it was bought by EMS in 1993.
It accounts for about $80 million a year of EMS’ revenue, with the bulk of its 330 employees
Gary Hebb, the division’s vice-president and general manager, said the Inmarsat module will let users send and receive text messages.
The tricky part is that it will include a GPS receiver/transmitter and Bluetooth. All have to work without interfering with each other in a package that will cost less than current handsets. “To be able to design a product for these sorts of volumes is important to us,” he said. “What we learn we hope to transfer to other areas of our business, where we work in lower volumes.”
For the short term, then, satphones are returning to being the star product of the satellite provider business. However, it will be volumes of data streaming up and down that will fill most of the birds circling above.