Last week I attended the Iridium Partner Conference held in (a rather wet) Phoenix, AZ at the Hyatt Regency Scottsdale. Ironically that was the very same hotel where the first demonstrations of the Iridium phone were made back in May 1998. 2010 is certainly shaping up to be just as significant for the MSS industry as was 1998, with the launch of the new TerreStar Genus phone just a few months away. We will then find out whether the new entrants are going to be able to mount a credible challenge to existing MSS operators, or whether they will experience an underwhelming customer response as Iridium and Globalstar did a decade ago. Our new profile of TerreStar has just been released, and discusses all these issues, including five year subscriber and revenue forecasts, along with an assessment of the value that might be realizable for ATC spectrum in the next few years.
At the conference itself, Iridium clarified that they intend to contract for the new NEXT constellation in mid-2010, and to ensure that they are fully funded at the same time. That would presumably involve a combination of bank loans guaranteed by export credit agencies and additional capital markets funding, totaling something between $1B and $1.2B – we would guess that they might need to raise of order $200M to $300M in high yield debt or convertible bonds in addition to the guaranteed bank loans. Interestingly, Iridium now regards advance funding from hosted payloads as “icing on the cake”, rather than as an essential component of its NEXT funding, allowing it more flexibility to consider projects which would provide an ongoing stream of revenues as opposed to just an upfront data purchase. Clearly the expectation is that by taking a “big bang” approach to its funding, Iridium will not only be able to persuade their distribution partners and customers that they will be around for the foreseeable future, but also that Iridium will close some of the EBITDA multiple discount on which their shares are trading compared to Inmarsat.