Inmarsat Says Maritime Customers Not Jumping Ship Over Rate Hikes

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PARIS — Mobile satellite services provider Inmarsat said it has secured a 10 percent share of the hand-held satellite telephone market, with 65,000 active subscribers as of June 30, and has seen no negative impact to its core maritime customer base from the company’s decision to raise prices on certain services.

London-based Inmarsat specifically refuted allegations by competitors Iridium Communications and KVH Industries that Inmarsat customers are quitting the service because of price hikes and because a new Inmarsat L- and Ku-band product is not winning market favor.

In an Aug. 3 report on its financial performance through June 30, Inmarsat also said it has secured what appears to be an unusual insurance policy for its coming three Global Xpress Ka-band mobile communications satellites, and the large AlphaSat L-band spacecraft.

Global Xpress, which is designed to give Inmarsat a high-speed service to complement its lower-speed L-band products, is scheduled for launch starting in mid-2013. AlphaSat, which Inmarsat will use to back up its existing L-band spacecraft, also is scheduled for launch in 2013.

Inmarsat has secured insurance for the launch of the Global Xpress and AlphaSat satellites in policies that include the satellites’ first year of operations, a standard satellite insurance package. But Inmarsat also has purchased a policy that covers the satellites’ in-orbit health for a further four years, the company said.

While the premium rates to insure satellites in orbit has been trending down in the past couple of years, satellite fleet operators have long asked insurers to consider policies that extended the in-orbit policies beyond a single year.

Insurance underwriters have responded that they cannot offer longer-term policies because of the threat that a satellite may suffer a partial in-orbit failure in a given year, an event that typically results in the failed system being excluded from subsequent annual policies.

Inmarsat spokesman Christopher McLaughlin confirmed Aug. 9 that the company had purchased a multiyear policy that covered up to five years for the Global Xpress satellites.

Inmarsat in the past couple of years has broadened its business scope to head off two separate threats to its business. The first threat is from McLean, Va.-based Iridium, Globalstar of Covington, La., and Thuraya of Dubai, United Arab Emirates, all of which have produced satellite telephone handsets as a core product and have taken land-mobile communications business away from Inmarsat.

Inmarsat’s IsatPhone Pro was introduced in 2010 as a lower-cost alternative with the goal of taking a 10 percent market share. Inmarsat Chief Executive Rupert Pearce, in an Aug. 3 conference call, said that with 65,000 IsatPhone Pro handsets now sold and active, the 10 percent goal had been reached.

“We have successfully reinserted ourselves into the satellite-phone sector,” Pearce said in an Aug. 3 conference call.

The second threat, to Inmarsat’s key maritime market, has come in part from Iridium but also from companies selling Ku-band satellite antennas, called VSATs, that offer far higher throughput than Inmarsat’s L-band satellite network, for lower per-megabit cost.

The $1.2 billion, three-satellite Global Xpress program was Inmarsat’s first response. To encourage customers to move to Inmarsat before Global Xpress is operational, Inmarsat introduced a product called XpressLink.

Taking advantage of its mid-2011 purchase of maritime VSAT provider ShipEquip, Inmarsat is offering customers a package including a Ku-band VSAT antenna plus a separate, smaller antenna for Inmarsat’s Fleet Broadband L-band maritime service. These customers then will be outfitted with Global Xpress hardware when that system is operational.

To nudge customers into the new product line, Inmarsat has been increasing the prices of some of its older-generation Inmarsat B and Fleet products. Inmarsat has also changed its Fleet Broadband pricing policy to discourage ship owners from installing the Inmarsat product and a VSAT antenna, and then using the Inmarsat service only as a backup for emergencies.

The new pricing means these customers will pay a fee for Fleet Broadband even if they never use it.

Inmarsat competitors have used the price increases to try to lure Inmarsat maritime customers. Whether they have succeeded is a matter of debate.

Iridium Chief Executive Matt Desch, in an Aug. 2 conference call, cited Inmarsat as one the main reasons Iridium’s maritime business is growing. “Inmarsat’s helping a lot with their price changes, they’re competing with their customers and there’s a little confusion as to their strategy.”

Middletown, R.I.-based KVH Industries, which has made substantial inroads in the maritime VSAT market, said Inmarsat’s XpressLink service has not stopped KVH’s progress with its TracPhone V-series of products. KVH said July 27 it had shipped 2,500 of its maritime VSAT systems using Ku-band satellite capacity leased from a half-dozen fleet operators.

KVH is offering, starting later this year, a new product using C-band capacity leased from Intelsat of Luxembourg and Washington. It features a 90-kilogram antenna to provide dual Ku-/C-band links with a global footprint.

In a July 27 conference call, KVH Chief Executive Martin Kits van Heyningen said Inmarsat’s XpressLink includes a 1.7-meter-diameter, 180-kilogram global VSAT Ku-band antenna, plus a 60-centimeter Fleet Broadband antenna, both connected to a refrigerator-sized assembly installed below the deck.

Its size and cost, Kits van Heyningen said, make it “not an elegant solution” — one “that doesn’t seem to be getting a lot of traction in the market right now.”

Pearce rejected both the Iridium and KVH assessments.

“We are not seeing a material erosion of any kind in the maritime market,” Pearce said in the Aug. 3 conference call, noting that more than 30,000 Fleet Broadband terminals have now been installed, including nearly 2,300 installed in the three months ending June 30. “The VSAT incursion, which was never particularly material, has slowed considerably.”

Pearce specifically said KVH’s C-band product would likely run into regulatory issues when used less than 200 nautical miles from shore in some regions. McLaughlin said Pearce was referring to the fact that C-band transmissions in some regions encounter interference from terrestrial wireless operators’ broadcasts.