Ambitious network won’t see light of day
FOR several years Inmarsat was the unsung darling of the FTSE 100. During the financial crisis it became a safe haven for investors seeking shelter from riskier stocks, a high-tech defensive with few competitors. Better still, its biggest shareholder Harbinger Capital, the US investment fund, propped up the shares by making clear its intention to launch a takeover bid for the entire firm.
These advantages started to disappear in late 2010 once Harbinger said it was no longer interested in making an offer. It needed the cash to build LightSquared, a super-fast wireless broadband network in the US. The project was as ambitious as its name suggested.
Harbinger sugared the pill by offering Inmarsat $350m to reconfigure its spectrum in the US and Canada. Then, from January this year, it was supposed to pay $115m a year to Inmarsat to lease spectrum in a deal that would have proved extremely lucrative for Inmarsat shareholders. Analysts reckoned the cash was worth up to 200p a share.
Alas LightSquared will never see the light of day, after US regulators ruled the network would interfere with the navigation systems used by aeroplanes and ships. It is a complete non-starter. Yesterday, Inmarsat said it had not received a payment of $56.52m from LightSquared and, in reality, it is unlikely to get anything in the future.
That will mean investors focus on the other areas of its business, and the picture is not rosy. Its main clients – the shipping industry and armed forces – are retrenching while competitors are making inroads. No wonder its shares, now relegated to the FTSE 250, have fallen 42 per cent since their peak in June 2010.
david.crow@cityam.com