Inmarsat’s Frank Coles on value, competition and fiery pitchforks

To say that Inmarsat is in the spotlight at present is an understatement. Successive waves of vested commercial interest, personal opinions and a dose of righteous Greek indignation have been washing around its feet after the communications giant announced a wave of price rises effective May 1.

I took the opportunity to talk to president of Inmarsat Maritime, Frank Coles at the recent CMA Shipping 2012 event to get a clearer picture of the changes and the results will appear here in three parts. The first discusses his theme at the conference – value versus cost, while subsequent pieces will look at VSAT strategy and the taking the fight to the competition.

In fact the prices rises – like the indignation, rabble-rousing and fiery pitchforks – are not quite what they seem. The changes stem in part from a reorganisation in January this year which saw new business units formed to focus on increasing the company’s sales and marketing efforts and in targeting its competitors’ business.

Coles says the big picture is to get closer to its customers, though channel marketing, through DPs and their SPs will remain the source of the majority of revenues.

“I realise that when partners see Inmarsat calling on a customer they get nervous but over 80% of our business is still indirect and in maritime we have no desire to change that. The channel has the relationship and the regional knowledge that we don’t have,” he says.

Coles says he wants to make a break with the past by focussing not on churn (where customers hopped between DPs and SPs chasing lower rates) but on growth. And though he accepts the market timing could be better, he says Inmarsat will be able to take back customers with a better proposition by persuading them to think more about value than simply cost.

“Owners are focussing on the wrong thing when they talk just about cutting costs. At $30 a day with Inmarsat you can send 3-400MB of data and for $50 a day you can send 2-3GB. For $100 a day you get unlimited amounts of data, whether you use that data for weather routeing or fuel optimisation of virtual arrival and save yourself multiple tonnes of bunkers which cost you $750 a tonne.”

It’s a well-worn adage that cutting costs by itself doesn’t save a business money and he says the majority of Inmarsat customers are at the point where they should be realising a return on their investment in satcoms system rather than seeing it as an obstacle to profitability.

“New FleetBroadband customers are spending around $30-50 a day – more than that if you include voice and crew calling so it’s not hard to account for that in reasonable usage. Utilising the umbilical cord between ship and shore and the right tools to save money, means you can get back the investment in the communications in one day.”

Supporting his case is the evidence that the industry has followed a natural bandwidth migration path, from B to Fleet to FB, a journey that will ultimately lead to Inmarsat Ka-band VSAT. Arguments about the value of its services, versus its public service GMDSS remit and the fact that it must also operate at a profit, have been around for years but he says there are Fleet customers spending thousands of dollars a month who could save straight away by moving to FB.

If that is the case I wonder then why has he hiked the price of Fleetbroadband? Like every other punter and interested party I have read one wave after another of supposed outrage at the price increases on FBB. Turns out they are right in one sense only.

“There is no price hike. We have increased the price on pay as you go because it offers no value to anyone including ourselves. We have reduced the price of every bundle of every package of data up to 15 gigabytes. It’s a much more efficient model for us and it puts us in tune with the market.”

Prices have risen for Existing and Evolved services, (Inmarsat-B & Fleet) because of the smaller numbers of people using them despite the infrastructure that must be maintained to support them, but he says the changes here and to FB were discussed with channel partners for some time.

“The net result is that it shouldn’t be any more expensive for shipowners who are using our services day to day. Lots of customers are sitting on FB and only using it as a backup but I believe you should pay for convenience.”