Why a complicated business needs a simple plan

When Frank Coles, Inmarsat Maritime CEO stood up at the satellite communications provider’s recent investor day, he had probably the toughest task and in some ways the simplest too.

Tough because the maritime sector, the mainstay of Inmarsat’s revenues, is in a terrible place financially, a situation that has persisted now for going on four years. Is it getting better? Well Capesize spot rates are a bit better right now but container carriers are pulling out and slowing capacity as fast as they can and OSG, one of the bellwethers of the tanker market is teetering close to Chapter 11.

Tough too, because it’s also the area where Inmarsat appears to be feeling the greatest pressure of competition. But as was noted last time, some of the flak it is attracting is misrepresenting not just the mood of the market but also, what might be called like for like services.

In L-band Inmarsat is continuing to ship FleetBroadband at a strong pace. In its VSAT business, ShipEquip, contracts have at last started to come and Coles said “somewhere between forty and fifty per cent of all VSAT sold in the commercial maritime market are XpressLink. Our backlog is growing. We now have over two hundred and twenty six installed, [of which] over a hundred where a customer who was currently on a Ship Equip SEVSAT asked if they could recommit to XpressLink.”

Customers include tanker behemoth Frontline, new customer MISC and owner Torm, itself something of a survivor, which is moving off C-band and onto XpressLink, Coles said.

The acquisition of Ship Equip in 2011 brought Inmarsat a customer base of just over 1,100 VSAT installations, a figure somewhere in the region of 20% of the commercial installed base of 5,200 out of a total addressable market of 20,000 ships.

The simpler part was to explain how the VSAT business fits into the maritime strategy and for this Coles again repeated the point made earlier this year, that despite its cost and complexity, he didn’t expect the majority of the maritime market to jump ship anytime soon.

“Why then do we think that we will not see a large churn out of FleetBroadband or a cannibalisation of our market? There are a number of reasons and the first one is that in today’s market, with the launch of Global Xpress we will obviously be promoting the conversion of our customers on VSAT out of the current Ku service onto our Ka service,” he said. “A large number of our customers will not want that level of service or not want to pay the additional cost and will be not be aiming for all of those services.”

FleetBroadband easily covers the requirements of the lower and the medium end of the data market (as, it must be said, does Iridium Pilot). At the higher end come the VLA and unlimited plans in FleetBroadband and on top of that XpressLink, which provides more data hungry owners with an on-ramp to Global Xpress.

But will Global Xpress, as Coles suggested change what VSAT actually means?  The plan might be “to give the customer what he thought he was buying back in 2008” but even so he told one analyst Inmarsat “doesn’t expect everybody to switch tomorrow, it just won’t happen. We’re not looking at global service until the first quarter of 2015 so we expect at this point a smooth transition”.

But what about the throughput? Coles called it speedy but wasn’t specific – was Inmarsat rowing back from the levels that accompanied the GX announcements, I wondered, fighting off the feeling that I was somehow doing Jim Dodez’s job for him.

“In the maritime market we will do six to seven metre and one metre antennas and [we’re] not saying anything about pricing. And the same with the speeds. It is possible to get up to 50mb per second and in some cases more, but it will be according to how much you pay and what level of service you want.  So it’s a little early for us to actually describe the plans.”

Not perhaps the most convincing of answers but I think the market – buyers, sellers, analysts and users alike – can make up their own minds what that means. To me it suggests that this is not a revolution but another stage of evolution, with a choice of services and price plans – though for many owners, and for some years not much changes. Not a very complicated concept after all.