GX projections keep Inmarsat bandwagon rolling along
Last week’s Inmarsat Investor Day has received reasonably positive reviews from analysts and observers, with the headlines taken by the deal with CISCO to build the ‘enablement platform’ for GX (which may or may not include shopping via satellite) and the group’s optimistic take on Global Xpress as the platform of choice for future mobile satellite communications.
It could afford to be optimistic given that the first announcement of the day was that third quarter trading was in line with 2Q and that maritime had provided strong growth despite the impact of the price rises earlier this year and the downturn in the market.
Adding another 2,100 FleetBroadband units in the third quarter was above the net additions for previous quarters said ceo Rupert Pearce and he added that maritime revenues were helped by traction from XpressLink, its Ku-band VSAT ‘bridge’ which was developing a ‘positive grip’ on the sector.
Inmarsat chose some optimistic forecasts too of VSAT growth on which to base its prediction that the wholesale market for VSAT bandwidth was worth about $1.9bn in 2010 and is growing at 7% per year. By 2019, its fifth year of service, GX would be generating at least $500m in wholesale revenues, according to Inmarsat GX MD Leo Mondale.
There was plenty of opportunity to talk down the opposition too – especially as they had in many places, got their retaliation in first. Mondale described Ku-band VSAT as ‘a patchwork of differing quality beams’, with peak performance that would be lower than GX and only available in a few locations.
Yes, new capacity was coming onstream but this was augmenting the patchwork rather than providing global seamless coverage designed for mobility that GX promised. If others described XpressLink as an inelegant solution then Ku VSAT was an even more ugly duckling with as many as 25 ground stations to GX’s three.
Intelsat EPIC got a similar kicking, not least for the vague assertions of what satellites would be launched and when but for its patchy ability to cover the north Atlantic, overlaying Ka on a Ku system that was ‘cobbled together’ over a period of years.
Mondale asserted that adaptive coding and modulation would take care of any Ka rain fade issues and there would be a ‘negligible difference’ between the two – availability would be more of a question for EPIC to answer.
The decider, Mondale said, was that 20% of cumulative GX plan revenues to 2019 were already booked in, which gives Inmarsat a solid footing to proceed. This includes XpressLink customers with a free upgrade to GX of course but it can’t hurt that its biggest customer, the US military is abandoning Ku band for Ka-band.
It does however, reinforce the assertion made by Marlink recently that it might be hard for mainstream maritime users to get on these high capacity beams so in reality, GX throughput for maritime users would be better than L-Band but not the leap that they might be expecting.
Some analysts thought that $500m GX revenue estimate an ambitious number – how much would Inmarsat take away from competitors and how much would come from growing the market in general, they wondered. Mondale naturally, went for growth, pointing out that a continuation of the recent compound annual growth rate in VSAT would take the total market’s value closer to $3.5bn by 2019.
That seems to sum up the ‘think big-build-big’ attitude inside 99 City Road at present. And it runs from the very biggest picture – the satellites themselves – down to Inmarsat’s relationships with the DPs and the end users. In an upcoming post we’ll look at what the messages of the Investor Day mean for partners and customers too but meantime, one analyst wondered, how soon would GX start eating FB revenues?
Mondale said the company was ‘agnostic’ as to what element of cannibalisation took place between GX and FB but even though it would be a small component ‘at the price for Ka services, migration is an opportunity not a threat – it’s upside not downside.’
Sounds simple, but if that growth prediction at the top of the page comes at a cost of much higher user charges, then the pressure really is on Inmarsat’s maritime business to deliver and keep delivering.