First-quarter results provided sanctuary from the barrage of woes in the battle of Inmarsat (ISAT) and investors enjoyed a brief moment of calm. That was not to last. The International Maritime Organisation has fired a sizeable hole in the company by approving ship safety technology made by two competitors – a move that will further hamper management’s efforts to keep Inmarsat afloat.
For years, the satellite telecoms giant has monopolised the maritime safety systems market as it owned the only technology approved by international regulators. Although the group didn’t actually make any money from its Global Maritime Distress & Safety System, approved safety systems are a legal requirement, meaning Inmarsat has enjoyed a presence in every large vessel worldwide. This allowed the group to cross-sell other voice and data services.
But that’s not to say its maritime business has been plain sailing: revenues only tipped back to growth in the final three months of 2017 after eight consecutive quarters of declines, on a year-on-year basis. Yet recently management had been more positive about the division’s growth prospects, due to the strong demand for its newest broadband service, Fleet Xpress.
But now the barriers to entry have been lowered for the group’s competitors, Iridium and BeiDou Navigation Satellite System. The former – a US-based company – is expected to begin fitting its safety systems into new vessels from 2020, meaning Inmarsat will have to start competing for contracts. Analysts are worried that this will also hamper the group’s efforts to ramp up its Fleet Xpress sales. It’s particularly bad news because maritime is Inmarsat’s most important business, contributing 40 per cent of revenues and 61 per cent of adjusted cash profits last year.
