04.22.13

Inmarsat throws its weight around…

Posted in Globalstar, Handheld, Inmarsat, Iridium, KVH, Maritime, Operators, Services, VSAT at 9:22 am by timfarrar

Its interesting to note that Inmarsat has been competing much more aggressively against key competitors in the last few months. First, I’m told that Inmarsat offered a bounty to Telemar to capture Anglo Eastern, a key Iridium Open Port customer with 350 ships, from Globe Wireless, in the fourth quarter of 2012.

Then Inmarsat announced in March that Nordic Tankers, one of KVH’s earliest headline customers, was migrating to XpressLink “for enhanced reliability”. Apparently the pricing on that deal is well below the standard list price for XpressLink, but Inmarsat was very keen to demonstrate its ability to take customers away from KVH.

Now (perhaps showing a little pique at losing the recent tender for the AT&T Genus replacement contract) Inmarsat is going after Globalstar, with new North American ISatPhone Pro regional voice plans which will start on May 1, and match Globalstar’s recently announced Orbit and Galaxy plans (though without Globalstar’s “double time minutes” promotional offer). Inmarsat is once again offering a huge bounty to service providers for these new signups, equivalent to multiple months of service revenue.

All of these developments suggest that Inmarsat is determined to seek topline growth in its L-band business and is no longer reluctant (as in the past) to explicitly target its competitors with selective pricing, even though this runs counter to Inmarsat’s recent tendency to increase list prices. Of course, it is less clear whether the new deals will be profitable for Inmarsat, given the incentives needed to achieve these sales.

But with Inmarsat’s investors focused intently on whether the wholesale L-band Inmarsat Global business has returned to growth, and apparently willing to overlook the recent significant contraction in margins within Inmarsat’s Solutions business unit (blamed on a transfer of margin from retail to wholesale operations), that might not matter for now. However, if Inmarsat wants to make more acquisitions (and it is hard to see in the long term who else might end up operating LightSquared’s satellites), then regulators might wonder whether industry consolidation could give Inmarsat even more market power.

6 Comments »

  1. ORBITRAX said,

    April 25, 2013 at 7:14 pm

    EBAY-SatphoneStore.Com offers GSP-1700 for $499 with Unlimited Airtime, Unlimited Data for $39.99 month w/ Free Activation/Free Shipping. Historically, many of Globalstar North American customers were in Alaska and Canada. Markets that the ISATPHONE Pro will not compete well in on Service. Last check,Globalstar still had about 45MM in Qualcomm Phone and Modem inventory. Every phone sold is money in the pocket.

  2. timfarrar said,

    April 25, 2013 at 7:46 pm

    But Inmarsat are competing by paying dealers a much bigger incentive. I’m told Globalstar’s dealer incentive is a Best Buy gift card. Inmarsat are offering 5 times more, in cash. So it depends if you think dealers sell based on the best service (and handset) for the customer or the best incentive for themselves. If the latter then it’s easy for them to point to Globalstar’s recent history/finances as an excuse for why Inmarsat is a “better” option.

  3. ORBITRAX said,

    April 27, 2013 at 8:24 am

    As mentioned above. You can give a dealer a big incentive, but when the phone simply won’t make a phone call or connection due to the Extreme Northern Latitudes where the subscriber is located. You have to be a really good salesman to convince them to continue paying their monthly bill. It is like saying a Globalstar dealer, if incentivized enough, can sell Globalstar phones to Antarctic explorers.

    Globalstar eventually built the Wasilla Gateway due to the amount of traffic in Alaska.

    It will be interesting to see how well Globalstar can move the SPOT Phone to it’s SPOT user base. Data Tethering to the phone for email and basic browsing and an affordable data rate may be compelling.

  4. timfarrar said,

    April 27, 2013 at 9:19 am

    What “SPOT” functionality does the “SPOT phone” include? I’ve not seen any evidence of built in tracking functionality, emergency alerting, etc.

    If its just a regular phone then your question should be rephrased as “how many people buying a $99 tracking device want a $499 phone as well/instead?”. The main point of SPOT, inReach etc is that there is a market for tracking at a lower price point than a phone, amongst people who don’t need voice.

    That’s not to say there aren’t some phone users in the leisure market who would prefer to buy from REI rather than a specialist or online reseller. But demand in the leisure market is highly price sensitive so the question is how many people are prepared to pay $499 for satellite communications. And does Globalstar increase or decrease its addressable market for the phone if specialist resellers decide they don’t want to (or can’t) compete with REI?

  5. Owners speak – and you might not like everything they have to say | Maritime Insight said,

    May 1, 2013 at 10:44 am

    [...] seems surprising when airtime suppliers are pricing so aggressively to win business from each other, but it might make sense if suppliers could provide a service that [...]

  6. Not the end of history: some ruminations on maritime communications | Maritime Insight said,

    June 12, 2013 at 2:54 am

    [...] crossed paths before, notably discussing his End of History blog and when he posted again about Inmarsat‘s moves in maritime, the time seemed right to have a proper chat with the man for his views [...]

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