Inmarsat boss warns there are too many players in satellite market

For an avid cricket fan, Rajeev Suri’s choice of extended metaphor is unexpected. Inmarsat, the British satellite company he took the helm of earlier this year, is on the lookout for “dance partners”, rather than a batting partner.

“We have become a very attractive dance partner,” Suri says on a video call from outside his home in London, “there is no surprise we would have a lot of interest from other dancers.”

Suri, 53, was drafted into Inmarsat in March this year, just over a year after it was taken private by a consortium of buyout funds. His task is to turn a company that complained of being overlooked on the stock market into the belle of the ball.

Business has been ugly for Inmarsat, however. The collapse of travel has hammered demand for its satellite broadband services from shipping operators and airlines. Sales decreased by $106m (£77m) to $1.23bn last year. At the same time competition from newer, cheaper technology such as Elon Musk’s Starlink network, has been rocketing.

But Suri remains bullish. Quarterly sales are up 24pc on last year and Inmarsat’s own technological updates are on the horizon.

The former Nokia man spent 25 years with the Finnish telecoms company, rising to become chief executive in 2014. Suri was born in India, raised in Kuwait and is a Singaporean citizen, although he says: “I have always had one leg in London. It is my favourite city in the world”.

Prior to becoming chief executive, Suri worked for Nokia across India and Singapore and later secured a role running its networks joint venture, Nokia Siemens Networks, where the soft-spoken executive led a decisive turnaround and cultural shift, via 17,000 job cuts.

“We did some good things, we did some things that we could have done better,” Suri admits. “Ultimately, we consolidated the industry almost single-handedly.”

Inmarsat’s private equity owners, Apax Partners and Warburg Pincus, are hoping Suri can deliver another turnaround. After facing a court battle in December 2019 against hedge funds to buy Inmarsat and then a pandemic, now they are looking for results.

Since starting in March, Suri has been busy. “I concluded that despite our strengths, the market was changing at an unprecedented rate, new technologies were coming into the mix, new customer demands were emerging. We had to up our game.”

Suri has started out by reshuffling Inmarsat’s executive team with new hires and promotions, while cutting some unproductive side projects.

He has also revealed two new ventures. One, dubbed Orchestra, has attracted comparisons to Musk’s Starlink or OneWeb, the satellite network backed by the UK Government.

Both these networks use hundreds or even thousands of satellites to provide global internet connectivity from satellites around 500km high.

Suri dismisses the idea they are rivals. Inmarsat’s new network will add around 150 to 175 low-orbit satellites, but these will be strictly focused on its aerospace, maritime and government clients. Orchestra will combine Inmarsat’s other offerings, which includes 14 satellites in “geostationary” orbit 22,000 miles high.

It will also add terrestrial 5G to “hotspots”. This might be a busy port or airport. An aircraft linked to Inmarsat would be able to use its low-orbit satellites to boost data speeds, before swapping to 5G on landing.

The initial research will cost $100m, although it is not clear how much the overall satellite launches will cost.

Inmarsat is also planning to revamp its existing network with new launches this year, in a new system called “Elera”, to provide connections to self-driving vehicles and drones..

This, Suri believes, should stop it from treading on the toes of Elon Musk, who is marketing the Starlink network to consumers as an alternative form of home broadband.

Still, Suri says the satellite business is going to need mergers to size up to future threats such as Musk and China’s growing satellite industry.

“I think that the industry will need consolidation,” he says, “a lot of new money is flooding into the sector. A lot of players are willing to invest tens of billions.

“We talk about Starlink, LEO [low-earth orbit] constellations, China is developing a giant constellation as part of its Belt and Road initiative. There are too many players and a fragmented market.”

Rivals such as Luxembourg’s SES have also talked up the prospect of industry mergers, but with little action. French operator Eutelsat, meanwhile, paid $550m to invest in OneWeb. Other players such as Viasat and Telesat are also building low-orbit networks to tackle the threat of Starlink.

Suri declines to name who his preferred “dance partner” might be, but adds “people talk to each other… back in our Nokia days … we spoke to everyone”.

Inmarsat, founded in 1979 as part of a UN communications network, was privatised in the 1990s and floated in 2005. It had previous flirtations with merger rivals, including a £3.2bn offer from US rival EchoStar in 2018, which collapsed after it was rejected Inmarsat’s board.

Since being taken private, Inmarsat’s new satellite gambit coincides with burgeoning space ambitions from the UK. The Government invested in OneWeb after it collapsed into bankruptcy.

The deal shocked the UK satellite industry. A substantial part of OneWeb’s operations are in the US. It also came after the Government backed out of developing a rival system to GPS which would have pumped billions of pounds into the sector.

Suri is measured on the Government’s decision to rescue OneWeb. “It’s a call the Government made. That’s fine.”

The Government is still mulling what to do about GPS. It was kicked out of Europe’s Galileo project and mothballed its own efforts. A consultation on a UK sovereign “sat nav” system, which would provide back-up to GPS, has dragged on for months.

Suri says he expects Britain to back a “sovereign navigation system, I think the UK needs it down the line”, although plans are still in flux.

But insiders in the space industry are keen to stress the growing ambitions posed by China, which is developing its own earth-spanning constellations as well as missiles that can destroy satellites.

The loss of GPS would cost the UK £1bn per day, according to a government report. A UK-wide project to develop an alternative would, of course, be lucrative to the sector.

Suri, for his own part, has the battle scars of dealing with China. Nokia, and its rival Ericsson, saw their market shares collapse as Beijing built up a domestic telecoms industry. Huawei, despite being heavily sanctioned in the West, has remained powerful in Asia.

“China decided to diminish the role of foreign vendors massively. The latest tenders are 4pc or 5pc for foreigners,” he says.

With an emerging threat from China and a looming challenge of low-earth orbit constellations grabbing the headlines, Inmarsat’s future appears to be coupled up with one of its current rivals. Suri just needs to find someone ready to tango. Telegraph