They did what they had to do

Inmarsat has succeeded in growing maritime data revenues in the first half of 2012, thanks to the elimination of volume discounts on its E&E services and the price rise on pay-as-you-go FleetBroadband services implemented earlier this year.

The company reported ‘strong take up’ of its FleetBroadband service with 4,305 terminals added in the first half, of which 2,295 were added during the second quarter. By the end of the half year Inmarsat says it had more than 30,000 active FBB terminals.

The company noted that migration from older maritime services continued to have a negative impact on its rate of maritime sector revenue growth but it believes that this effect is now more than offset by ‘usage increases we have seen from our FleetBroadband subscribers and by the impact of the price changes we have implemented’.

Maritime voice revenues were down year on year, largely as a result of price reductions implemented in April 2011 and continued voice to email substitution.

Growth in its Inmarsat Solutions division was primarily driven by new VSAT service revenues resulting from the acquisition of ShipEquip in April 2011 and by growth in its government business unit.

Inmarsat says interest in its VSAT/FBB XpressLink service ‘continued to gain momentum’ following the appointment of distribution partners. This ‘highly competitive alternative to traditional VSAT’ should gain ‘meaningful market traction during 2012’ it said.

Standard & Poor’s noted in an analysis released the previous day the potential for a ratings downgrade based on ‘a material hike in planned investments and shareholder returns’, combined with a view that ‘meaningful core MSS growth may take some time to be restored’, despite also recognising that the expenditure on the I-5 satellite programme is ‘fully funded’.

However, S&P bestowed a ‘satisfactory’ business risk profile, ‘reflecting Inmarsat’s leadership in the global MSS industry, which is based on its market-leading positions in the maritime (voice and data) and land (data) sectors’.

Of interest to the swarm of competitors attempting to take market share from the incumbent, S&P noted the group’s ‘strong in-orbit and ground infrastructure, which constitute a high barrier to entry for competition’.

Inmarsat was accruing positive benefits from vertical integration, it continued, and was posting relatively resilient operating results despite ‘periods of economic crisis [and] pressures on key customer segments’.

Offsetting this positive assessment is ‘inherent revenue volatility linked to the nature of the satellite mobile services provided’ as well as the generally much shorter contracts than in the fixed satellite services (FSS) sector. With admirable understatement, the ratings agency also noted the ‘high operational risk associated with the launch and operation of geostationary satellites’.

S&P anticipates that reported consolidated revenue will improve in 2013 albeit in low-single digits, as traffic related to the group’s new products continues to build.

The results saw Inmarsat shares rise the most in more than three years as the group beat analyst estimates, according to Bloomberg news.