Handset Prices Expected To Drop

LONDON —


Mobile satellite telephone providers Inmarsat and Iridium agree that Inmarsat’s entry into the market for satellite handsets will quickly reduce average handset prices worldwide.

Inmarsat
expects to carve out a 10 percent share of the global market for hand-held satellite telephones by 2010 following the introduction, late this year, of a sub-$500 Inmarsat handset with global coverage from three Inmarsat 4 satellites.

At that price




Inmarsat will be far less expensive than the competition,




Andy Sukawaty, the company’s chief executive, said here March 18. “I can guarantee you we will be hitting this market hard,” he said.

But one of London-based Inmarsat’s biggest competitors, Iridium Satellite, plans to drop its prices just as soon as Inmarsat fields a global service, Iridium Chief Executive Matt Desch said.

“We will be bringing down prices,” Desch said. “We have charged the rates we have because we can. But this is a high-margin business and we have flexibility.”

Bethesda, Md.-based Iridium has been operating on the assumption that competitor Globalstar will be crippled for the next two years because of its satellites’ degrading voice service. Globalstar expects its second-generation satellite constellation to enter




service sometime in 2010.

With Globalstar less of a factor, Iridium has been able to keep its handset prices high. But the arrival of Inmarsat will change that, Desch said.

Iridium expects to sign a contract in mid-2009 for construction of a second-generation constellation of low-orbiting satellites to be launched starting in 2013. The company estimates it will cost $2.7 billion to build and launch this




system.

Desch
also said Iridium has received higher-than-expected interest from government agencies in placing small Earth observation or other payloads on the Iridium satellites. This secondary-payload opportunity could generate between $800 million and $1.1 billion in revenue




for Iridium over a decade, with some of that




being paid up front to help finance the construction of the next Iridium constellation, Desch said.

Iridium expects to be able to cover




$1.1 billion of the




second-generation system’s cost




from its own operating cash flow, leaving between $500 million and $800 million to be raised via




outside financing.