As Harris Makes Waves in the Cruise Ship Bandwidth Business, Rival MTN Downplays the Damage

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PARIS — Maritime satellite communications provider MTN on Oct. 29 sought to minimize its loss of two big cruise-line customers to rival Harris Corp. by stressing MTN’s tailored services offering to customers, including cellular backhaul and terrestrial broadband.

Miramar, Fla.-based MTN Satellite Communications further said it continues to retain customers among divisions of the two cruise-line brands — Carnival Corp. and Royal Caribbean — that have turned to Harris.

The cruise-line contracts position Harris in a high-growth commercial sector that contrasts with the sluggish growth in the company’s larger military business.

Melbourne, Fla.-based Harris’ win of a five-year contract to provide 103 Carnival ships with C- and Ku-band communications services follows a 2012 contract with Royal Caribbean to outfit 33 ships.

“This [request for proposal] went on for some time,” Harris Chief Executive William M. Brown said in an Oct. 29 conference call with investors, referring to the bidding competition for the Carnival contract. “It was price-competitive. They were looking for the ability to bring other communications technologies, not just VSAT, onto the boats.”

VSATs, or very small aperture terminals, are the shipboard units that connect with communications satellites to deliver bandwidth to customers. Historically a mainly terrestrial business, VSAT sales to maritime customers have been increasing rapidly in recent months as traditional satellite fleet operators with C- and Ku-band capacity design special beams to appeal to the growing maritime market.

Consultancy Northern Sky Research estimates that there were fewer than 3,000 ships equipped with satellite gear intended for passengers in 2012, a figure that will reach 4,000 in 2016 and surpass 8,000 vessels in 2020.

Harris and MTN are both inaugural customers for Luxembourg- and Washington-based Intelsat’s new Epic high-throughput satellites, now in development, which are designed to offer much greater throughput speeds than have been available from C- and Ku-band satellites.

Harris Chief Financial Officer Gary L. McArthur said during the conference call that the Carnival contract win will be handled within Harris’ existing global teleport and satellite-transponder purchases and will not require additional capital spending.

“We have good coverage in the regions where the ships will be sailing,” McArthur said. “We’re pretty sure we’re going to be able to leverage the infrastructure that’s already in place.”

In response to SpaceNews inquiries, MTN issued a statement on Oct. 29 saying it is focusing its services offer “on changing the way communications are delivered at sea. We do not need actually to provide [customers] their communications pipe. We are the best fit for customers who recognize that adding more VSAT bandwidth will not deliver a connectivity experience at sea that is akin to land. MTN’s growth is based on the value-added services only we can deliver.”

The company also said it continues to work for divisions of the two cruise liners that have swung part of their business to Harris. In early October MTN announced a contract extension with Pullmantur Cruises, a Royal Caribbean affiliate.

Brown said he was not certain what the back-to-back Carnival and Royal Caribbean wins added up to in terms of total market share. Northern Sky Research said there are more than 30 cruise ship companies, all of which have adopted or are likely to adopt satellite communications.

Harris on Oct. 29 reported lower revenue for the three months ending Sept. 30 but maintained its forecast that for the full year the revenue drop would be no more than between 1 and 3 percent compared to its fiscal year 2013.

The company said lower U.S. Department of Defense orders and a slower-than-expected development of its 10-year contracts with the U.S. National Oceanic and Atmospheric Administration (NOAA) are causing the decline.

A decline in revenue last year led Harris to undertake a corporate restructure and cost-reduction program that is costing the company $127 million and expected to yield $68 million in annual savings.

Harris is under two 10-year contracts with NOAA, with a total value of up to $1 billion, to design, build and install the ground infrastructure for the GOES-R meteorological satellite.

The company reported that since its first-quarter accounts closed, it has won a $65 million contract for the U.S. Air Force Satellite Control Network to support communications traffic to and from more than 150 U.S. Defense Department satellites at 10 locations worldwide.

On Oct. 21, Harris delivered the first four satellite communications terminals under its 10-year Modernization of Enterprise Terminals (MET) contract with the U.S. Army, a contract that began in 2009 and has been valued at up to $600 million.

Two of the four terminals were large X- and Ka-band stationary facilities, and the two others were transportable. The antennas are designed to work with both the heritage Defense Satellite Communications System and its successor, the Wideband Global Satcom constellation, which is now being fielded.

Harris said it expects to be delivering one MET terminal per month over the next four years.