Profile: Keeping A Steady Course

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  Space News Business

Profile: Keeping A Steady Course

By MISSY FREDERICK
Space News Staff Writer
posted: 15 May 2006
10:19 am ET


PRIVATE stylefile:c:!temp!~pr000006c40001001a98c5000.STY Profile: Morten Tengs

CEO, Telenor Satellite Services

M orten Tengs plans to make more of a ripple than a splash in his new job. Tengs took over Feb. 1, after his predecessor, Tore Hilde, announced Jan. 9 that he was leaving the company because of “differences of opinion relating to [Telenor Satellite Service’s]operations,” according to a Telenor statement.

Though the company has not discussed Hilde’s departure further, Tengs said he intends to stick with Telenor’s existing strategy: to focus on the solutions market, where the company acts as a single provider of broadband and on-demand satellite communications for businesses around the world using regional Very Small Aperture Terminal (VSAT) services, mobile broadband telecommunications for maritime users and Internet Protocol (IP) services via satellite.

Telenor Satellite Services’ Sealink subdivision provides broadband for maritime communications, and its Taide Network provides IP over satellite in Europe, the Middle East and Africa.

The Rockville, Md.-based subsidiary of satellite operator Telenor ASA of Norway was born when Telenor acquired Comsat Mobile Communications from Lockheed Martin in January 2002. The company now derives approximately 40 percent of its $380 million in annual revenue from U.S. customers, with the remainder coming from Europe, the Middle East and Asia.

Tengs spoke recently about his new role with Space News staff writer Missy Frederick.

Do you plan to take the company in a different direction?

It’s natural when you get a new CEO for people to think: “Will this be a major shift?” My answer is that I don’t think it will be a major shift. Of course, there will be changes, and every company should change course. But we will stay very focused on what we’re doing; we’re very committed to being the No. 1 supplier of satellite-based communications solutions to all market segments.

So big changes, I can’t foresee, at least in the short term. Maybe that answer will be different in six months. I think maybe we must learn to say no; we can’t do everything for everyone everywhere; we don’t have the resources for it.

To whom would you be saying ‘no’?

At this stage, I can’t be specific. But we need to be focused on the geographical areas we want to put the most resources into; for example, the Americas and some parts of Europe. We can’t put the same amount of resources into other areas. We can’t spend too thinly in all segments and all portions of the globe.

So does that mean you don’t see the same kind of opportunities for growth in the Middle East or in Asia?

The Asian market is certainly very interesting. I would have to look more closely into the Middle Eastern market. The Asian market is very complicated. It’s a cultural thing; you need to understand people, to speak their language, so to speak. It takes time to build up relationships and get a good business relationship going there.

In Asia right now, we have a number of service providers throughout the region that offer our services. We’ve also strengthened our market presence for Broadband Global Area Network (BGAN) with our strategic business agreement with Addvalue Technologies of Singapore. And we have a strong maritime-focused presence via our Marlink retail organization, which has offices in Singapore and Tokyo.

What kind of year is 2006 going to be?

We’re in the process of finalizing a strategy and getting it approved by the board. Hopefully we will sort of reposition ourselves in a way that puts us in a good place to meet future challenges. Hopefully we will have maybe not gotten, but at least identified, some acquisitions within the market.

Our management team also needs to come up with a retail strategy. Most of our sales today are wholesale, but we have had a strategy where we acquire retailers not only selling our traditional retail portfolio but also the total company product portfolio. Before we start buying more retailers, we have to have a strategy on how we want to treat them; whether we want to hold them at arm’s length and sort of manage them through a local board or do we want to take up some synergies between retailers?

All those things will have to be in place before we acquire more retailers. We should have this ready in a few weeks.

What is the significance of your recently announced partnership with B P to provide global communications for them?

I think it’s a good thing for us. Though it doesn’t speak for much in terms of revenue and profit, it can be a big deal for us for making inroads into the sort of solutions we want to provide. We can use this leverage from providing these kinds of solutions to go to the next set of clients and do similar kinds of things. That’s sort of the segment where we will see the most growth in the future — in turnkey solutions where we support the whole communications needs of the customer. In order to obtain the top line of revenue and profit growth, we have to be in the more advanced customer solutions. We’re doing it today on a smaller scale, but we need to target more resources and show more growth in this area.

Which areas deserve more of an investment than what you are making?

The Americas, in short. We think we’ve analyzed where we see the market picking up, and we see the Americas, particularly the U.S. market, as one of the most attractive markets. In the customized market we have quite a weak position, so there’s a logic behind both organic growth and also growth by acquisitions in this area. We’re also looking at certain areas of the European market.

So what is the acquisition strategy?

It is a growth strategy. I’m not telling you specifics on how we want to do it and with whom, but that’s a way to get growth, and we believe especially within a customized solutions market, it’s tough to get rapid growth when just growing organically. We need to take steps in the [acquisitions] direction. The satellite business is not that different from any other business. We just like to believe that it is, but it is not.

How big will the BGAN market be for Telenor?

Right now it’s very small, and in beta testing. Once it is ready, we see a keen upswing in customers migrating to it.

We also need to decide whether we think it’s good for people to migrate to BGAN or stay on the old service. For us, the old service is more profitable. But it will also be important to get a market share of that product and be able to offer it as an option. It’s quite a difficult situation because we’d obviously prefer our customers stay on the Mobile Satellite Services on-demand service, but we need to be in the BGAN game.

How quickly do you think BGAN will catch on?

A lot of customers in the industries we serve are slow to change. Looking at the maritime industry, for example, they take a technology and ride that horse until it drops out of the race. We have goals for the amount of market share we want to get, and I can’t imagine that we can’t have at least the market share we have now, which is about 22 percent.

We see major interest from the government, as well as the media market, and other opportunities may exist in emergency response and humanitarian organizations that have the need for immediate communications.

We have customers in the European market; in broadcasting, such as the Korean broadcasting system; and a lot of business with Reuters.

I personally don’t think the amount crossing over right away will be very high. People tend to take more time than we think in certain markets. It takes time to get people over to a new technology. But again, that’s really not a problem for us.

Basically, we feel 2006 will be a strong introductory year with increasing sales, especially during the second half of the year as users become more aware of the service in the Americas and as its popularity grows with traditional market users throughout Europe, Asia and Africa. However, the Inmarsat services, along with our customized, dedicated and shared-access broadband service, will continue to be the foundation of our business.

How are things looking in the aeronautical and maritime services market?

Maritime today is one of our most important sectors. We have this huge distribution network, and it is the backbone of our business. We have about 45 percent of the Inmarsat aeronautical on-demand service for both telephony and data, and of course there will be an aeronautical version of BGAN known as swift broadband. And I’m sure we’ll be part of that mix as well. We have a larger market share of air, but the maritime market is huge.