British satellite provider Inmarsat said its LightSquared spectrum sharing agreement boosted revenue in the third quarter as its core shipping business was hit by a shift to lower-revenue broadband terminals.
The company, which provides communications to ships, aircraft and the military, reported a 18.4 percent rise in third-quarter earnings to $224.4 million in its global business on 22 percent higher revenue of $245.2 million.
Chairman and Chief Executive Andrew Sukawaty said revenue from LightSquared in North America offset a slowdown in its maritime services revenues.
Inmarsat recognized $56.4 million of revenue in the quarter from its U.S. partner LightSquared. The U.S. company, owned by Harbinger Capital partners fund, is sharing Inmarsat's spectrum to develop a mobile phone service using airwaves previously reserved for satellites.
Inmarsat's shipping customers have been moving to broadband terminals, which initially generate lower revenue, faster than the company expected, resulting in the group abandoning its forecast for 2-4 percent annual revenue growth for its core business in the summer. [ID:nL3E7J41BO]
Sailors are using the broadband services to send emails and update Facebook rather than making higher revenue telephone calls.
While third-quarter MSS (maritime services) results were in line with our expectations, as previously stated, we are unlikely to see consistent evidence of a return to MSS revenue growth until next year, Sukawaty said.
The group would restate it longer-term MSS growth forecast, which previously stood at 5-7 percent, at the end of the year, he said.
Total active customer terminals rose 12.5 percent year-on-year, the company said, and it launched a new hybrid service to compete with VSAT services at the top-end of its customer base.
The hybrid offer, called Xpresslink, also offered an upgrade path to its next generation Global Xpress maritime Ka-band service, due to start operations in 2014, Sukawaty said.
While our core has its challenges there's no change in our view for the rest of the year, he said on a call with reporters on Wednesday.
The seeds for our future growth has been developing well.
Shares in the group, which plunged to a near-three-year low after the group abandoned its growth forecast in the summer, were 2.4 percent higher at 458 pence by 0858 GMT (4:58 a.m. EDT), outperforming a 04 percent higher FTSE 100 index.
Investec analyst Morten Singleton, who has Inmarsat as one of his top sector picks, says the numbers were slightly ahead in both the revenue and profitability metrics.
(Inmarsat) is out there retaining market share in the maritime business in readiness for the new services which should help reinvigorate some strong revenue growth for the maritime sector, he said.
Finance Director Rick Medlock said the contribution from LightSquared would be slightly less in the fourth quarter and the first quarter of 2012, but would climb after that.
Analysts expected the company to report third-quarter earnings of $209.5 million, according to a Thomson Reuters I/B/E/S poll.
(Reporting by Paul Sandle. Editing by Jane Merriman)