07.12.12
Posted in Regulatory, Spectrum at 2:09 am by timfarrar
As others have pointed out recently, the supposed spectrum crunch is really more of an infrastructure crunch, because if wireless data traffic is going to grow by 10 or 20 times, how can 20% more spectrum possibly solve that problem?
Its therefore pretty instructive to look at the CTIA’s own figures, which curiously enough simply trumpet the cumulative capex invested by US wireless operators since the 1980s. When you think about it, that’s a bizarre statistic, since cumulative capex will always go up each year, however much wireless operators invest in their networks. Of course, if you actually look at the annual capex you see a very different picture, and indeed in absolute terms network investment has fallen quite sharply since 2004, and only rebounded partially in 2010 and 2011, despite much trumpeted LTE rollouts by Verizon, AT&T and others.
As a percentage of revenues, capex has fallen even further, and has roughly halved in the last decade. At this point, if I was using the tortured logic (and ludicrously hyped sound bites) of spectrum crisis adherents, I should probably conclude that on current trends we will run out of capex by the end of the decade, as capex falls to zero percent of revenues. On the other hand, if I was arguing the carriers’ point of view, I could conclude that because the GDP contribution of the wireless industry increased from $92B in 2004 to $146.2B per year by mid 2011, while capex fell from 27% to 15% of revenues, each 1% decline in capex as a percentage of revenues should be expected to increase GDP by $4.3B. As a result, if wireless carriers stopped all capex completely, it would increase GDP by $65B!
More rationally, while reductions in operator capex in recent years may have been good for their investors in the short term (and indeed carriers would perhaps view it as necessary because their revenue growth has slowed), these figures clearly demonstrate that there is considerable scope to address growth in data usage (assuming the traffic is valuable enough that customers will pay more for it) simply by modestly increasing capex to a level that would fall well within historical norms. Indeed, even though annual capex in 2011 only increased (in absolute dollars) by 1.7% over 2010, operators added over 30,000 cell sites, an all time record, which increased the total number of cellsites in the US by 12%. Given that the FCC’s own (discredited) model suggested that the purported spectrum “deficit” would vanish with this rate of cellsite growth, it seems we are already well on the way to mitigating any potential spectrum crisis.
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06.28.12
Posted in Regulatory, Spectrum at 9:32 am by timfarrar
Verizon’s agreement with T-Mobile earlier this week for a swap of AWS holdings to give both sides more contiguous spectrum within the AWS-1 band, raises a host of interesting possibilities for future transactions in the wireless space. UBS is speculating today that AT&T will dispose of its remaining AWS holdings, but it seems more plausible that AT&T could actually swap its remaining AWS spectrum (most of which is in the A-block or C-block and would naturally pair up with Verizon’s holdings in Los Angeles, Chicago, Dallas, Miami, Minneapolis and numerous other markets) for Verizon’s 700MHz B block holdings.
Although AT&T has more AWS spectrum (~1B MHzPOPs) than Verizon has in the 700MHz B block (just under 600M MHzPOPs), as I’ve noted before Verizon overpaid in the 700MHz auction to prevent AT&T from buying all of the B block, and so Verizon spent $2B on its B block spectrum whereas AT&T’s remaining AWS holdings only cost between $500M and $600M (and using the SpectrumCo transaction as a benchmark, would only be valued at around $700M today). By exiting its 700MHz B block holdings via a swap, Verizon would avoid having to take a loss on this expensive spectrum purchase, but it would be interesting to see whether money actually changed hands in such a transaction with AT&T (given that both companies have an incentive to talk up the value of spectrum, not least to make spectrum acquisitions more expensive for their rivals).
Of course, if such a swap proves infeasible (perhaps because of the significant discrepancy in price per MHzPOP) then it still seems unlikely that AT&T would announce a sale of AWS spectrum without some quid pro quo acquisition, either of Verizon’s B block, or more likely in conjunction with the purchase of DISH’s holdings (after terrestrial use of the AWS-4 block is approved by the FCC). In either case, I assume that a deal wouldn’t come until after the November 2012 presidential election.
Looking further afield, it now also seems less certain that the FCC will free up the PCS H block (which would require DISH’s uplinks to move up by 5MHz to 2005-2025MHz) when it gives DISH the go-ahead for terrestrial use of the DBSD/TerreStar AWS-4 spectrum band. As a result, Sprint might also find itself looking at swaps with smaller players such as MetroPCS and Leap to gain wider channels for its PCS G block LTE network (by using existing F block spectrum). In those circumstances, Leap and MetroPCS could potentially be paid money for a spectrum swap without necessarily giving up any capacity, assuming that Sprint gave them alternative PCS holdings in the lower part of the band instead, and this could prove interesting given the financial pressures that smaller carriers are under.
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06.19.12
Posted in Aeronautical, Inmarsat, Operators, Services at 8:19 pm by timfarrar
That pretty much sums up the situation with inflight cellphone calls in the rest of the world, after OnAir’s CEO indicated that only 10% of OnAir’s inflight GSM traffic is now coming from voice calls. Just how disastrous a statistic that is can be discerned from the fact that Inmarsat’s total wholesale aero passenger connectivity revenue is only around $2M per year, from 160 planes equipped with cellular connectivity, or around $12K per plane per year (in fact the number might even be lower if Inmarsat is including the far larger number of long haul planes equipped with traditional seatback phones in its $2M total).
Grossing up to retail revenues, that means passengers are spending perhaps $30K to $40K per plane per year on cellular services, and so if only 10% of OnAir’s “traffic” (which I assume is measured in revenue terms) is derived from voice calls, then that is about $10 per plane per day in voice usage. Put another way, I estimate that on average there may be as few as 2 voice calls per plane per day!
For (a truly scary) comparison, take a look at OnAir’s estimates back in 2007, that Ryanair passengers would spend EUR300K per plane per year on voice calling, or 100 times more than the current level of usage.
Of course that shouldn’t really be a surprise, because the original providers of inflight phones in the US (Verizon Airfone and Claircom) both went out of business and Inmarsat’s revenues from seatback phones were about 2% of their original projection in the early 1990s. More recently, Ryanair also stopped providing inflight cellular services. Obviously the lack of privacy and the level of background noise make it pretty hard to conduct business on a cellphone call inflight, while the cost has generally been prohibitive for leisure users, and neither of those factors has changed in any meaningful way with the introduction of cellphone instead of seatback connectivity. As a result, its no wonder that business travelers much prefer email and SMS to voice calls, and some airlines have even decided to ban voice calling themselves, despite it being legal outside the US.
It therefore seems pretty ironic that we’ve had letterwriting campaigns to the FAA and FCC, a ban proposed in Congress and even a lobbying group set up by OnAir and AeroMobile, trying to argue that voice calls on planes are a bad or a good thing (depending on your point of view), when the reality is that almost no-one actually wants to do it anyway. However, just as with the title of this article, once people become convinced that there is no middle ground to the debate, logic tends to fly out of the window. In those circumstances, its no wonder that members of Congress are eager to get involved.
UPDATE (9/5): The FAA’s own consultation document on legalizing cellphone use onboard aircraft has now been published and gives some interesting specifics on the usage levels seen in other countries. In particular, the Brazilian regulator indicated that TAM was only seeing about 0.3 voice calls per flight leg, and the consensus of most respondent countries was “that there was relatively low use of cell phone voice communication on airplanes”.
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06.18.12
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 7:52 pm by timfarrar
Earlier today AT&T announced details of its new proposal with SiriusXM to resolve disagreements over how to deploy mobile broadband in the WCS band. AT&T is the largest holder of WCS spectrum, with about 4B MHzPOPs of spectrum, and NextWave is the second biggest holder. However, there is a difference in usability within the WCS spectrum between the C&D blocks (unpaired 5MHz blocks) that are immediately adjacent to the 2320-2345MHz satellite radio (DARS) band (and so have a much higher risk of causing interference with satellite radio receivers) and the A&B blocks (each a paired 2x5MHz channel) which are further away from the DARS band.
AT&T and Sirius’s proposal would sharpen this difference by prohibiting mobile use of the C&D blocks, while further liberalizing use of the A&B blocks. As a result, AT&T would then have between 10MHz and 20MHz of usable A&B block spectrum over roughly half the country. The result of this proposal would likely make NextWave’s life more difficult (because nearly half of its WCS holdings are in the C&D blocks), thereby potentially giving AT&T a chance to pick up additional A&B block WCS spectrum.
However, what is particularly intriguing about the details of AT&T’s submission is the proposal that it should be allowed more flexibility to deploy FDD technologies such as LTE, with downlinks in both halves of the WCS A and B blocks. In other words, AT&T would gain yet more downlink spectrum, in addition to the Qualcomm 700MHz spectrum that it acquired last year “to allow support of asymmetrical data bandwidth allocation”. Of course, the obvious unanswered question is where would the uplink spectrum to be paired (under the proposed FDD configuration) with both the Qualcomm and WCS A&B block spectrum come from?
What AT&T needs is a clean block of paired spectrum for an LTE Advanced deployment so that the Qualcomm and WCS spectrum can be used as carrier-aggregated downlinks. When it proposed the Qualcomm transaction, the scenario that AT&T advanced was to use the AWS band to serve this purpose, but of course that is now off the table with the collapse of the T-Mobile takeover. As I’ve noted before, the Qualcomm transaction alone therefore provides a pretty compelling reason for AT&T to be interested in buying DISH.
However, another fascinating possibility is that perhaps Moelis’s assertion last week that LightSquared’s spectrum would still be worth a considerable amount of money if used on an unpaired basis (i.e. as uplink only spectrum) might be grounded in something more than wishful thinking. Indeed Moelis cites the potential for at least some of LightSquared’s spectrum (the 1670-75MHz block leased from Crown Castle) to be paired with other spectrum blocks through carrier aggregation “similar to AT&T’s planned usage of Qualcomm’s 700MHz spectrum” and I’m told that this possibility has been explored with AT&T in recent months.
Of course, GPS interference concerns in LightSquared’s satellite band would still need to be resolved, and LightSquared would still need to pay for leasing spectrum from Inmarsat (according to Moelis’s figures the lease payment if the full L-band band is usable has now been increased to $145M p.a. from April 2014 under the revised agreement struck with Inmarsat in April). Even then, uplink spectrum is generally worth much less than downlink spectrum, both because there is a need for additional downlink spectrum due to traffic asymmetries and, as LightSquared found out to its cost, interference concerns can be more problematic in downlink spectrum.
As a result this severely undercuts Moelis’s argument that LightSquared should be able to attribute the same valuation to its spectrum whether it is used for uplinks or downlinks (not to mention the use of comparisons based on recent sales within the well established and widely deployed AWS-1 band). However, this possibility does at least raise the question of whether AT&T’s acquisition plans (which are intended to give it enough spectrum for the next five years) include options other than buying both DISH and Verizon’s 700MHz B block spectrum.
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06.05.12
Posted in Aeronautical, Broadband, Inmarsat, Maritime, Operators, Services, VSAT at 12:45 pm by timfarrar
Without any hint of the PR blitz that I had expected, Intelsat has quietly updated its website to confirm my blog post in March, that it is about to order at least two new satellites, IS-29 and IS-33 to provide high capacity spot beam Ku-band service in the North Atlantic and Indian Ocean regions. These satellites will be in-service in 2015 and 2016 respectively, and are intended to “provide four to five times more capacity per satellite than our traditional fleet” with total throughput “in the range of 25-60 Gbps” (this appears to be a total not a per satellite figure – I would guess the throughput per satellite is around 12Gbps, roughly the same per satellite as Inmarsat’s GX, including its high capacity overlay beams).
UPDATE (June 7): Intelsat has now put out a press release and added more data to its website including a fact sheet, which states specifically that the throughput of 25-60 Gbps is per satellite. Obviously this figure is a wide range but it is clearly much greater than the Global Xpress per satellite capacity. I understand that one reason for Intelsat’s lack of publicity is the quiet period associated with its proposed IPO, but Intelsat definitely considers this a very important development and has been trumpeting it privately to distributors at its recent partner conference.
Intelsat is planning to integrate these new satellites into its existing maritime coverage as shown below (indeed there is less high capacity oceanic coverage than I expected, presumably because it will take time before Intelsat’s existing capacity fills up) and it appears that Intelsat will now be looking to compete head-to-head with Inmarsat’s Global Xpress as well as Viasat (both of which Intelsat appears to be referring to with its comment that “Unlike many new satellite operators, Intelsat is not constrained to Ka-band“)
What we haven’t yet seen are the details of Intelsat’s launch partners. It is clear that one partner is Panasonic, but the more important question is who Intelsat might have managed to secure in the maritime market. Inmarsat’s recent list of XpressLink distribution partners was notable for the absence of Vizada and most other major maritime VSAT providers, so if one or more of these maritime players now makes a substantial commitment to Intelsat, it will be another important sign that the transition to Ka-band in the maritime and aeronautical sectors is far from a foregone conclusion.
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05.24.12
Posted in Financials, LightSquared, Operators, Regulatory, Spectrum at 3:12 pm by timfarrar
In my last post, I noted the skepticism of some observers about whether Charlie Ergen was really behind Sound Point buying $350M of LightSquared’s first lien debt, despite one potentially logical technical solution that could combine LightSquared’s spectrum (as uplinks) with the TerreStar and DBSD spectrum (if that was all converted to downlinks). Indeed LightSquared itself proposed to the FCC last week that the 2GHz spectrum could be used for its downlinks as one of the options for a spectrum swap and suggested in its comments in the DISH AWS-4 proceeding that the FCC should redesignate DISH’s 2GHz uplinks as downlink spectrum.
However, it now appears that many of the debtholders (and perhaps even Harbinger/LightSquared) seem to have concluded that it is not Charlie Ergen backing Sound Point, but the funding for the purchase of Carl Icahn’s stake instead came from yet another billionaire, Carlos Slim of Telmex and America Movil. Of course, Ergen and Slim are allies in DISH Mexico (Telmex provides billing services and sells the DISH Mexico service) and its been suggested to me that Ergen may have proposed Slim should use Sound Point, so that people would inevitably jump wrongly to the conclusion that Ergen was behind the LightSquared investment.
America Movil has recently announced that it is acquiring Simple Mobile, a unit of T-Mobile USA, as well as bidding for an increased stake in KPN of the Netherlands, and it is plausible to conclude that it might ultimately want to go beyond its current MVNO strategy in the US, by investing in a facilities-based network. In that context the two logical candidates at this point in time would be T-Mobile USA (whose parent Deutsche Telekom is still open to a “merger or asset sharing deal”) and DISH. Its therefore interesting to note that T-Mobile is suddenly now trying to derail DISH’s plans in the AWS-4 proceeding.
Acquisition of a LightSquared stake might provide Slim with another bargaining chip in any negotiations to invest in a US carrier, especially if he could wait patiently for LightSquared’s regulatory issues to be resolved, because he doesn’t necessarily need his own facilities based network immediately. However, he might also be able to bring a lot of pressure to bear on LightSquared, because as I pointed out back in December 2010, the decision of the Mexican government to build and launch the MEXSAT L-band satellites gives them an effective veto right over LightSquared’s ability to use much of its L-band spectrum.
All in all, its fascinating to watch quite how many billionaires seem to be attracted to LightSquared like moths to a lightbulb. Some, like Carl Icahn and Andrew Beal, have already left the scene, while one has lost his billions trying to make something of it. Meanwhile, the rest of us can only wait to see if this rumor turns out to be true, and if so what plan Slim might have in mind.
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05.10.12
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 6:50 pm by timfarrar
What a bizarre day in the world of LightSquared, where it appears nothing is ever as it seems! First of all, a comment yesterday on my last blog post gave some hints as to a completely different way to think about why Charlie Ergen might be interested in acquiring LightSquared’s spectrum, despite the current roadblock imposed by GPS interference concerns. Specifically, why couldn’t LightSquared’s L-band MSS spectrum be repurposed as uplink-only spectrum and then paired with the DISH 2GHz spectrum, which could all be converted to downlinks (a proposal already made in the FCC’s 2GHz NOI)? Then Ergen would have access to a total of up to 80MHz of spectrum which could be authorized for terrestrial use (four 10MHz uplink blocks in the L-band and two 20MHz downlink blocks in the 2GHz band).
As I pointed out in my reply to that comment, there are certainly some GPS interference concerns expressed by the NTIA over handsets operating in the portion of the L-band uplink closest to GPS (1627.5-1637.5MHz) and presumably these concerns would be considerably greater for uplink use of the 1545-1555MHz block because it is even closer to GPS. It would also be very hard to develop handset filters which could comply with the onerous ATC out of band emissions limits above 1559MHz (something that is easier to address for downlink use on a tower, where physical size and power requirements are less of a constraint), presenting further issues for uplink use of the 1545-1555MHz block. However, even if these two bands were dropped from the initial deployment plan and only three of the four bands were used eventually, DISH could still benefit hugely from having access to 40MHz of downlink spectrum instead of 20MHz. Indeed DISH might even be able to sell off or lease some of this spectrum to another operator and still build a network.
This guesswork seemed to be supported by LightSquared’s April 25 letter to the FCC, asking for the L-band to be addressed within the 2GHz NOI, so that “cross-band” solutions could be considered. The counter-argument is that any such change would obviously delay the process of authorizing and then building out DISH’s network considerably (most likely by 1-2 years), and therefore might not be acceptable to either DISH or to the FCC Chairman (assuming he is focused on maximizing the speed with which the 2GHz spectrum is brought into terrestrial use).
However, later in the day, news emerged that Harbinger and the debtholders have agreed on a change to the First Lien Debt Agreement, adding DISH specifically to the list of Disqualified Parties who are not allowed to purchase the debt (this section previously just referred generically to strategic purchasers). That would suggest Harbinger are not interested in some form of accommodation with DISH along the lines of the above “cross-band” spectrum pairing.
Even more bizarrely, I have had people insisting to me that it is definitely not DISH who is the purchaser, and Ergen is not formally denying an interest simply because he wants the LightSquared debtholders to be even more confused about his intentions, while he moves ahead with his plans in the 2GHz band. It was indicated to me that various people have already been spreading misinformation, for example when the WSJ was told that Falcone had agreed to step down (which I’m told he hadn’t), and when the New York Post was told that Falcone had not been presented with an economic proposal by the debtholders (which I’m told he had). According to this version of events, the New York Post story that “Ergen bought the debt” is similarly misleading and may even have been encouraged by Falcone and his advisors in order to persuade investors that there is strategic value in the spectrum. Of course that version of the story might just be wrong as well.
At this point what we do know is that Sound Point has a deep pocketed backer who is trying to acquire a significant amount of the LightSquared debt. If it’s not Ergen, then it is very hard to understand who would have a strategic interest in the spectrum at anything close to the price they are paying. We don’t know the intentions of the buyer, but it seems that they are probably not friendly towards Harbinger and would presumably therefore seek to force LightSquared into bankruptcy on Monday when the waiver expires. Whether they will gain support from other debtholders in doing that remains unclear, but it does seem that Falcone’s threat of a voluntary bankruptcy may not be give him as much power to dictate the outcome of this week’s negotiations as first thought. Most people certainly seem to think that another extension of the negotiations beyond next Monday is fairly unlikely and a resolution one way or another will be reached by then.
As a result we seem set for another few days of briefing and counter-briefing, in a situation where almost no-one knows who is telling the truth and who is bluffing. With $1.6B of debt and billions more in equity at stake, it really is going to be a game of high stakes poker this weekend.
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05.08.12
Posted in Financials, LightSquared, Operators, Spectrum, TerreStar at 1:39 pm by timfarrar
Last year most attention was focused on the October 2010 bankruptcy of TerreStar Networks, which owned the 2GHz satellite assets that Charlie Ergen purchased last June for $1.4B. Much less attention was paid to its parent, TerreStar Corporation, which filed for bankruptcy in February 2011 and owned the 8MHz of spectrum in the 1.4GHz band that was leased to LightSquared in September 2009.
The reorganization plan for TerreStar Corp contemplated that this lease (under which TerreStar receives $2M per month) would remain in place, and the company would be handed over to its preferred shareholders, led by Highland Capital, Solus and Harbinger. However, this plan now seems to be on the verge of unraveling after Harbinger dumped its Series B preferred shares (which had a face value of more than $100M) earlier this year (keeping only the worthless subordinated Series E shares), presumably so Harbinger could repay its $400M UBS loan at the end of January.
These shares were picked up West Face, but Harbinger then promptly stopped making the monthly payments on the 1.4GHz lease, with TerreStar Corp’s March 2012 results now showing $2M of accounts receivable due from LightSquared, whereas in previous months this revenue has been booked as it is received.
Now TerreStar Corp has been forced to postpone the confirmation hearing (originally set for April 11) and hire counsel to help figure out what options remain for the 1.4GHz spectrum. Most observers appear to agree that the Harbinger lease was above the market value for this spectrum, and Harbinger appears to have been unable to find anyone interested in taking over the lease when it attempted to monetize the spectrum in January this year. It remains unclear what recourse TerreStar Corp might have to sue LightSquared to recover the lease payments, given that LightSquared Inc, which controls the lease and is the parent of LightSquared LP (where most/all of the cash is held) appears to have few resources of its own.
So now the question is what happens next for TerreStar Corporation? Will the 1.4GHz spectrum be offered for open sale? Do Solus, Highland and West Face really want to own this spectrum? How will a valuation (and a potential cramdown of Elektrobit, which is an unsecured creditor of TerreStar Corp) be agreed without the lease? Whatever happens, this certainly looks like yet another mess that Falcone has got his one time partners at Solus into.
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05.07.12
Posted in Financials, ICO/DBSD, LightSquared, Operators, Regulatory, Spectrum, TerreStar at 5:47 pm by timfarrar
Since news emerged yesterday that Carl Icahn had sold his $250M of LightSquared’s first lien debt at around 60 cents on the dollar there has been feverish speculation about whether someone else is backing Sound Point Capital, the small investment firm that bought the debt. Today that led to the price of LightSquared’s debt being bid up to almost 70 cents on the dollar, as investors wonder if a strategic player is interested in the company.
Attention has focused on Charlie Ergen, because of his record of doing the same with DBSD and TerreStar last year, with the Reuters article which broke news of the sale indicating that Ergen was previously an investment banking client of Sound Point’s principal. Notably, in both cases Ergen acquired debt of the companies before bankruptcy and then bought the assets out of bankruptcy, with the debt investors ultimately getting paid back at par. Ergen was even asked on today’s DISH results call if he was “interested” in LightSquared’s spectrum, but deflected the question by responding that DISH has all the spectrum they “need”.
Icahn was not regarded as a spectrum expert, and it was with some justification that Harbinger argued 10 days ago that “they doubt Icahn would get better results from DC”. In contrast, Ergen has an intimate knowledge of the regulatory issues and currently appears to be far more in the FCC’s good books than Falcone (exemplified by Ergen’s ability to secure a meeting with the FCC Chairman on January 4, when Falcone was relegated to only meeting with officials on the same day). Indeed LightSquared’s investors would very likely welcome the involvement of Ergen with open arms, and would certainly trust Ergen far more than Falcone to negotiate a way out of their current dilemma, despite Falcone’s claims in his comments to an earlier blog post of mine that:
Everyone knows Ergen is not going to build out a network. No one trusts him, including the FCC. They are not going to put their eggs in that basket because they know he will make them look foolish. It is inevitable. This guy, as smart as he is, will never build the network. He is using it as bait so one of the big guys step up and attempt to pay him for a dwindling subscriber base. Dish and Ergen are on the downward slope of a steep hill and he knows that, hence his aggressive acquisition tactics over the last 12 months…. stay tuned….
Of course we don’t yet know who, if anyone, is behind the purchase of Icahn’s holdings. Even if it is Ergen, then he could have a range of motivations, ranging from a defensive move to ensure LightSquared doesn’t disrupt the current FCC proceeding to authorize terrestrial use of the DBSD/TerreStar 2GHz spectrum, to a desire to help the FCC out of a hole, all the way to seeing a long term opportunity to make the L-band spectrum useful for terrestrial service. Indeed several of these factors could be in play simultaneously.
UPDATE: The New York Post is now reporting that Ergen was the buyer and he picked up another $100M of debt last week in addition to Icahn’s $250M holding.
However, one important consideration to bear in mind when drawing parallels with DBSD and TerreStar is that in those cases the spectrum was owned free and clear (whereas LightSquared has an expensive lease contract with Inmarsat, albeit one that is currently on hold) and (in the absence of a spectrum swap) the GPS interference problems in the L-band mean it will be many years before even a portion of the band (likely at most 20MHz) is usable. Both those factors will significantly depress the value of LightSquared’s spectrum relative to DBSD and TerreStar (where Ergen paid $1.4B-$1.5B for 20MHz of spectrum from each company) and make it much harder to justify paying anything close to the $1.6B par value of LightSquared’s debt simply to acquire LightSquared’s spectrum assets.
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04.30.12
Posted in Broadband, Globalstar, Handheld, Inmarsat, Iridium, LDR, Maritime, Operators, Services, Thuraya at 8:49 am by timfarrar
I noted back in November that the MSS industry was seeing a dramatic deceleration in revenue growth, but 2012 is already bringing even more challenges across the sector. As I predicted last month, Inmarsat’s price rises are causing a substantial backlash in the shipping industry, with the latest Digital Ship magazine including a devastating letter from AMMITEC (the Association for IT Managers in the Greek Maritime Industry), asserting that:
The handling of the pricing restructuring shows a blatant disregard for the long-term loyalty and trust that, up until a couple of years ago, the majority of the shipping world has had in Inmarsat and its maritime offerings.
Inmarsat’s (not terribly reassuring) response indicates that:
Inmarsat is listening to our customers. We recognise that some of these price changes will be difficult for smaller vessels, and so we will be introducing a small boat package to which they can transition.
However, to the best of my knowledge, this “Small Vessel Pricing Plan”, which Inmarsat told its distribution partners a couple of weeks ago was “in the final stages of development”, has not been announced before the pricing changes come into force tomorrow, and I’ve even heard suggestions that Inmarsat doesn’t actually intend to implement this plan unless it really does suffer from a significant number of customer defections.
Of course, Inmarsat is not alone in experiencing some self-inflicted wounds at the moment. Last Friday brought news that Iridium is implementing a “complete recall” of its new Iridium Extreme handset, while on March 30, Thuraya told its distributors that it had been unable to reach a manufacturing agreement with Comtech for its high speed MarineNet Pro maritime terminal (intended to compete with Inmarsat’s FleetBB) and so the terminal would not be in the market until “the end of the year”. As announced on its Q4 results call, Globalstar ran out of SPOT and simplex devices for a period of time in the first quarter after changing its manufacturer, and will shortly learn the results of its arbitration with Thales Alenia over its satellite contract.
Let’s just hope that all of this mess doesn’t harm the reputation of MSS providers for providing reliable service when its really needed, and in particular doesn’t make it even more difficult for the MSS sector to boost revenue growth in this challenging competitive environment.
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