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Inmarsat falls on US worries as brokers downgrade

Inmarsat has been buoyed by takeover talk in recent times, but the satellite operator is now coming back down to earth.

Its shares have lost 16.2p to 487.3p, making it the biggest faller in the FTSE 100 after downgrades from Morgan Stanley and Citigroup, following recent rises on suggestions it would make a good fit for private equity.

Morgan Stanley has moved from equal weight to underweight, more on commercial than corporate action concerns, in particular developments at its US partner Light Squared. It said:

We are more bearish on LightSquared following [a Federal Communications Commission] statement calling for more testing on whether LightSquared’s proposed network interferes with GPS devices. This probably pushes a final FCC decision into 2012, and possibly not until after the 2012 Presidential election and beyond the end of Chairman Genachowski’s term at the FCC.

We believe LightSquared is dependent on FCC approval in order to secure necessary funding, which puts at risk the sustainability of LightSquared payments to Inmarsat for 2012 and 2013. Valuation ex LightSquared payments is demanding following recent outperformance, and we expect second half results to highlight challenges in the core business.

Meanwhile Citi moved from buy to hold, saying:

Over the last month, Inmarsat is up more than 30% in a down market. Given the strong recovery over a short time-frame and the potential lack of further positive earnings catalysts near term, we downgrade the stock to hold. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds