World's first satellite company prepares for competition

Inmarsat will break new ground for the second time in April, as it migrates from being an intergovernmental organization to a public company. Its original unique makeup as an international cooperative allowed it essentially to create the mobile satellite market and serve asa distress and safety organization for maritime and other industries.

Today, though, that structure is only an inhibitor to growth. "It's a very arcane, restrictive financial structure," said Hugh Shaffer, project manager of corporate restructuring for Inmarsat. "The institutional arrangements restrain Inmarsat from being a truly effective competitor."

Since Inmarsat was founded in 1979, a number of private companies have begun work on commercial satellite systems, including Iridium, which recently launched, and Globalstar. Inmarsat found it wasn't agile enough to respond to market demands and compete with those companies.

For example, the organization was moving toward a system such as Iridium's that would allow it to offer smaller subscriber units. Such a system would require a large investment, but under the current Inmarsat setup, the organization cannot raise money outside the signatories.

In addition, members can invest money only in proportion to how much they use the network. In this case, some members that didn't use much of the network wanted to invest more but couldn't, and some of the big users were unwilling to invest their shares.

"In the last few years, we've found it increasingly difficult to come to agreement," Shaffer said. Inmarsat had to create a separate affiliate company, ICO, to accomplish its goal of creating a more current system capable of operating with smaller subscriber units.

This past September, however, members were able to reach a significant agreement-to privatize. In April, the signatories will become shareholders, and they will welcome strategic investors. Signatories will be able to trade shares to each other as well as outsiders.

In 2001, the company plans to make an initial public offering. Inmarsat will also set up a separate intergovernmental body to ensure that the public company meets its public service obligations, including its maritime distress and safety service.

While privatization sounds like good news for Inmarsat, the road through privatization can be treacherous, and passing time only allows competitors stronger footholds. Inmarsat's biggest disadvantage is its user terminals-still the size of laptops. But its advantage lies in an existing data service that offers 64 kb/s, but with very large subscriber equipment, Shaffer said. Iridium's only current data offering is short message services.

Inmarsat has been developing a project it calls Horizons that focuses on data services and smaller terminals. It also has a project in the works that will shrink the size of terminals for users located in the efficient spot beams of the current satellites. But even if positive decisions are made immediately after the makeup of the company changes, Horizons would not be in service until 2002.

"That could be three years too late," said Tom Nolle, president of Cimi Corp. Despite big risks, a solid plan such as Horizons could attract serious investors and make privatization easier, said Nolle. "That's the kind of thing the current financial climate loves."

Iridium, for example, has been attractive to the financial community because despite its large risks, it has the potential to be extremely successful, Nolle said.

METAWAVE EXPANDS SPOTLIGHT Metawave's SpotLight 2000 CDMA/AMPS smart antenna system is now compatible with Motorola's SC 9600 base stations. The SpotLight 2000 is also available with Lucent's Series II and Motorola HD II base stations.

GEOWORKS SUPPORTS ADS Geoworks is encouraging carriers to offer free information services to customers supported by advertising. Using Geoworks' Premion Information Services, operators can now deliver advertising messages to customer handsets, which can pay for the content services.

September 1998 Members agree to privatize

April 1999 Signatories become shareholders and will be required to give other shareholders right of first refusal before selling shares

2000 Shareholders can trade shares freely

2001 Inmarsat plans to make an initial public offering