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Inmarsat Q1 dented by US government cuts

Mobile satellite service provider Inmarsat saw first quarter earnings dwindle due to the impact of President Obama's US budget cuts, which hit margins at its Solutions business.

Mobile satellite service provider Inmarsat saw first quarter earnings dwindle due to the impact of President Obama's US budget cuts, which hit margins at its Solutions business.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 2.2% to $154.2m as revenues and under-pressure margins in Solutions were further compressed by US budgetary pressure.

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However, the group said it was making "rapid progress" with its massive Global Xpress programme and that deployment plans for its new satellite launch "remain firmly on track", which should mean the first satellite deployment before the year-end, with the completion of global coverage in 2014.

Flat revenues at the Solutions arm of $189.5m in the three months to March 30th meant that, despite a 3.7% rise in mobile satellite services (MSS) to $184.6m, total revenues climbed only 2.4% to $310.8m.

Chief Executive Officer Rupert Pearce said the Solutions segment had seen results in line with expectations from three of its four business units.

"However in our US government business unit, we have seen a sudden and pronounced deterioration in both demand and profitability, in each case principally related to US budget cuts. This has led to further margin compression in the Solutions business in the first quarter and we expect the current adverse market conditions for our US government retail activities to continue for the time being."

The company has aimed to mitigate this by cutting costs for the US government business unit and by implementing other cost controls across the group.

The wholesale maritime MSS business continues to thrive, with revenues up 8.7% and Inmarsat maintained momentum in subscriber additions for new services.

Pearce said the results provided for "continued confidence in our outlook for full year revenues at the wholesale level".

Shares in Inmarsat were down 6.7% at 699p at 10:00 on the morning of the announcement.

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