2 Companies Compete for a $1.3B Market
The satellite communications business, Cramer said Friday, is a $1.3 billion market that is expected to grow by 10 percent over the next five years. Yet the "Mad Money" host found there are just two players in the space: Iridium and Inmarsat.
London-based Inmarsat is roughly double the size of Iridium , Cramer said. Due to some complex funding issues, Inmarsat is also more complicated. It happens to be more expensive than Iridium, too.
Iridium's story, on the other hand, is easier to understand, Cramer said. It is the only company that offers real-time voice and data communications anywhere in the world. Given only 10 percent of the earth's surface has wireless or wireline coverage, Cramer said Iridium is the ultimate play on the mobile Internet tsunami.
Based in Bethesda, Md., Iridium has 66 satellites in low-earth orbit. Compared to Inmarsat's geo-stationary satellites, Iridium's low orbit satellites are easier to manage and re-program. In the past eight years, Iridium has tripled its market share. Today, it has more than 413,000 customers. The company expects total billable subscriber growth of 20 percent and total service growth of up to 13 percent in 2011. These numbers could soon increase, though, as the company seeks regulatory approval from China, India and Russia.
In the next two years, Iridium expects to capture a third of all satellite handset sales. The company had sold its phones and services at a premium to Inmarsat, but to take share, plans to sell two different phones. One of the phones will be more expensive while the other will cost less.
Being as Iridium's existing network of satellites is becoming obsolete, the company will spend $2.1 billion to send 81 new satellites into orbit. The French export credit agency has committed to cover 95 percent of the costs. The first launch is scheduled for 2015 and when complete, the new network will double its subscriber capacity and support higher data speeds.
Overall, Cramer thinks Iridium is the better way to play the satellite communications business. Surprisingly, its stock trades at a 35 percent discount to Inmarsat, even though Iridium is growing sales more quickly. Both stocks are speculative, but Cramer said it's worth giving Iridium a look.
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