More positional play pre-Global Xpress

While a few lone voices in the satellite communications community seem determined to spend the majority of their time bemoaning the evolution of systems and services, others are preparing and positioning for it.

A case in point is the renewed interest by Cobham in Thrane and Thrane. Despite some rather obscurely-worded press releases (thanks IR department!), the nuts of this seems to be that Cobham, having been rebuffed earlier this year, has decided that its earlier offer of DKr420 per share is still good enough, now that now several institutional investors have helped it build its stake to 25%.

The news (and the press release) is somewhat passive-aggressive. Cobham says it normally only buys targets on the basis of 100% agreements, but in this case seems prepared to wait for Thrane’s management to come around. It has substantially sweetened the deal by promising to move its SeaTel marine antenna business to Thrane’s Lyngbo facility, while leaving the incumbent management in place, minus its chairman who resigned on 26 March.

In terms of stake requirement, Cobham has another 25% or so to go before it gets to the level it needs, but the company has said that it would be happy to start at that level and work towards 100% over time.

The offer has four weeks to run and comments made by Thrane management to the FT suggest that it too, is happy to wait to see if a white knight emerges. It’s clearly a risk, since Cobham, while describing its offer as final, says it reserves the right to increase it if a third party comes into play.

For Cobham, the logic of acquiring Thrane is undisputable. Itself a specialised manufacturer of C and Ku-band satellite terminals, Thrane’s expertise in the L-band space makes it a natural fit to position Cobham as the a leading supplier of next-generation services to the maritime industry.

Cobham has already made its first move, securing a $40 million contract as the first maritime partner for Inmarsat’s Global Xpress Ka-band broadband service, scheduled for availability by 2015. Before that date arrives – and even after it does, Cobham will be able to service XpressLink, the stepping stone to Global Xpress by bringing the businesses together.

Once Global Xpress gets into gear, it could be the major supplier of ground equipment, a prospect that must be as clear to Thrane’s management and investors as it is to those of Cobham.

Inmarsat gets it in the neck (and elsewhere) over price rises

Maritime communications giant Inmarsat is the target for a stinging letter of rebuke from the Association of Maritime Managers in Information Technology and Communications (Ammitec), which lists a series of ‘serious objections’ to Inmarsat’s intention to raise its prices from May 1, 2012.

The letter, published during the recent DigitalShip Cyprus conference leaves no room for doubt as to the group’s gripes about Inmarsat’s plans and its feeling that the London-listed company is ‘abusing its position’ as a ‘monopoly’ operator of safety services.

This first refers to Inmarsat’s intention to lift the price of telex communications via Inmarsat-C by 15%, though it neglects to differentiate between the telex service and free GMDSS distress transmissions. Ammitec promises to take the matter to Inmarsat’s regulator IMSO and says the issue should be referred to the IMO Comsar sub-committee.

The group’s real beef however is the planned price increase on Existing and Evolved (E&E) services, notably Inmarsat Fleet, launched in 2002. By raising prices, Inmarsat, it says, is effectively putting this service beyond economic use and forcing users to migrate to the newer FleetBroadband service.

Just as invidious, it says are the planned price rises to the much newer FleetBroadband pay as you go service, which it calls ‘unsupportable’ in a broadly similar argument to that around E&E – that Inmarsat is forcing the pace of change rather than letting the industry evolve at its own speed. Many shipping companies, it says bought FBB on release (when the price was low) and they are clearly disgruntled that Inmarsat is raising prices when costs are high elsewhere and earnings low.

What the letter doesn’t mention is that the prices for FBB plans and packages are not rising – only the pay as you go option, which many people thought was under-priced on release – so owners paying for a managed plan won’t feel any pain.

The letter’s wrath seems to have run its course by the end of page 2 and Ammitec, while noting Inmarsat’s ‘blatant disregard for long-term loyalty’ says it would welcome the chance to discuss the issues with Inmarsat as well as with ‘the wider maritime community’.

All gripping stuff but it does beg a few questions not mentioned by the competitors that have seized on it as proof that Inmarsat is punch-drunk and reeling.

First, according to the programme, Inmarsat Maritime President Frank Coles was present at Cyprus so why no debate there and then?

Second, surely IT buyers don’t imagine that prices only go up when times are good? If so they should check with their colleagues in the chartering department on the price of bunkers lately.

And at the risk of brickbats and worse I have to say, that given my 16 years of reporting on shipping, I have found the concept of ‘long-term loyalty’ to be a rare commodity in maritime communications. Price is king and churn is a fact of life that keeps the sell-side on its toes. As the letter itself notes, if customers were to stay with the E&E services then Inmarsat would get a huge payday, so they will probably move to FleetBroadband – a service which is comparatively cheaper than either Inmarsat-B or Fleet.

Finally it is simply inaccurate to call Inmarsat a monopoly. With the exception of the IMO-mandated GMDSS service, Inmarsat has more viable competition now than at any time in its history.

In a highly commercial market like shipping, Inmarsat must understand the risk it is taking by raising prices now. For the most part, owners, managers and their IT departments are able to vote with their feet. Whether they choose to do that over the next 12 months or so will demonstrate how serious they are about taking the fight from Cyprus to 99 City Road.

Imtech signs up as first Global Xpress VAR

Systems integrator Imtech has signed up as the first GX re-seller, marking the start of Inmarsat’s delivery plans for its ambitious global Ka-band VSAT service. More on this to come, but just to note an early lead in the satcoms bingo stakes to Frank Coles for use of ‘game-changing’.

See full release below:

IMTECH MARINE SIGNS M.O.U. WITH INMARSAT TO BECOME GLOBAL XPRESS™ RESELLER

March 30, 2012 – Inmarsat (LSE:ISAT.L), the leading provider of global mobile satellite communications services, announced today that it has signed a Memorandum of Understanding with Imtech Marine to become the first Value Added Reseller of Global Xpress™.

Global Xpress will be the first global Ka-band network, offering the shipping industry true broadband speeds and reliability: up to 50Mbps through a 60-100cm antenna. Inmarsat will make XpressLink available to Imtech Marine to offer a bridge to GX with a bundled package of Ku-band VSAT and L-band FleetBroadband.

“Global Xpress will be a world-first in maritime communications, and we are delighted that Imtech will be a frontrunner in offering this solution to the maritime market,” said Eric van den Adel, Managing Director of Imtech Marine. “We already enjoy a strong working relationship with Inmarsat, and this MOU is a significant step in bringing our two companies closer. The combination of Inmarsat Ka- and L-band with Imtech Marine’s remote monitoring solutions and our extensive network of 88 offices in 25 countries will deliver real benefits to our customers.”

“The combination of game-changing solutions with the global distribution and support capability of Imtech Marine delivers a compelling proposition for customers,” said Frank Coles, President, Inmarsat Maritime. “Imtech Marine is one of the industry’s leading installation and support groups. We look forward to welcoming them as the first Value-Added Reseller for Global Xpress.”

Imtech Marine is a leading systems integrator and full-service provider of maritime technical solutions. The company, in particular through its Radio Holland brand, has extensive experience of Inmarsat FleetBroadband, VSAT and integrated maritime services.

You know it when you see it – how innovation is back on the agenda

Lloyd’s List’s Liz McCarthy was one of the few journalists to give the CMA session on best operational and financial practices a fair crack of the whip. Despite the fact that the organisers had changed the session title, the running order, and the idea behind it, there was still plenty to absorb.

If owners are content to moan about high bunker prices, then presumably the evidence that BP Shipping had saved $1.5m on bunkers by combining satellite communications with Virtual Arrival principles will fall on deaf ears.

There are other areas, too where owners and managers need to work smarter, not least in increasing the volume of ship to shore data while also managing the paperwork burden. More technology onboard ship comes with risks too, but if properly managed by an owner who takes responsibility for ship crew and cargo, then there is no reason these bugs cannot be ironed out of the system.

Liz quotes Inmarsat Maritime president Frank Coles as saying that:

“it was possible to save as much as $100,000 a year per ship by using efficient communication, and with unlimited internet access available for $100 per day or $3,000 per month, the cost of rolling out wifi on ships was easily recuperated.

His company’s clients had reported significant savings across their businesses; $32,000 per year crew-related cost savings, information technology efficiency saving $20,000 per year and route optimisation saving $30,000.

At a time when owners are looking for viable options to shave money off their total fuel consumption — as prices continue to hover at record levels in the $700 per tonne range — numbers like this start to look extremely attractive.”

But there are reasons for caution too. As Liz’s article continued:

“The internet was a cause for concern regarding navigational safety, panellists at the conference believed, with at least one example already of a collision created after a crew member on the bridge was browsing the web rather than looking where the vessel was heading, Mr Coles said.

He added that some of Inmarsat’s shipowning clients stated specifically that they did not want wireless internet connection on the bridge, to ensure due diligence while performing navigational duties.

Just as trucking companies would not want drivers text messaging while on the road or airlines allow pilots to surf the net while flying a plane, area restrictions could support internet use in shipping.

Other services being looked into are whether the internet can be switched off when the ship approaches coastal areas, such as 30 miles offshore, to ensure all crew are alert and not distracted by phones or computers.”

Read Liz’s article in full here (http://www.lloydslist.com/ll/sector/ship-operations/article394589.ece) – LL sub needed – sorry, I don’t make the rules.

Something is happening here…

…but you don’t know what it is.

Shipping feels a bit like that at the moment. Uncertanty is about the only thing that can be relied upon. To get the ball rolling, here’s a piece I wrote earlier this month for my regular BIMCO column.

What will the future of shipping look like?

It’s a bit of a loaded question, but I think the answer is, from the outside at least, pretty much the same as it does now. This side of the looking glass, there is a lot of focus on this question right now, a result of the mire into which the industry has dug itself. It’s prompting plenty of naval gazing, not to mention a glut of articles and brochures as we ponder the future from the perspective of the bottom of the well.

Before going further it’s probably worth asking another question – what is actually changing, for the better or otherwise? Poor supply/demand balance isn’t normally considered to be change, rather a well-known cyclical effect. This time however, it could be structural.

Pre-2008 many people in the industry subscribed to the argument that shipping was taking part in a ‘super-cycle’ of economic growth which meant that the old economic models were obsolete and only opportunity lay ahead of us.

The resounding crash that followed was a potent reminder that predicting the end of history is a dangerous business. Since then the industry has had plenty of time to rue the day when it became possible to order as many ships as one could afford, even if the yard that would construct them had not yet itself been built.

That is the fundamental change and one that the industry has still not got to grips with. It threatens to overshadow any future recovery in ship demand and undermine the process of maintaining shipyard capacity as a healthy long term business rather than a means of speculation.

It begs a further question – can the shipping industry ever show commercial restraint? To all intents and purposes the answer must be no – and no change there. Coming too late to market and being unable to take advantage of an opportunity is different from saying ‘you know, I think I’ll leave the LNG market to someone else – those guys need a clear run at it, plus those ships are pricy…’

Shipping thrives on the vision to spot opportunity and inefficiency in the market. Shipping people see something they think everyone else has missed, they keep it to themselves, they get themselves into a position to benefit. There is plenty of benevolence going on at many companies but it does not happen in the commercial department or on the chartering desk. Shipping would have to develop an alternative to the zero sum game for that to change.

This also asks whether the banks that are exiting the market – some very quietly, some very  quickly, will ever come back in. It has been a feature of this financial crisis and earnings slump that banks have not wanted ships on their books at a time when overcapacity here has coincided with a wider economic downturn.

This suggests that a change has taken place – that banks are prepared to let shipping companies fail rather than be the backer of last resort – and that owners will have to seek consolidation rather than depend on a relationship where the faces and names have changed.

Neither does the promised ‘third way’ of new money looking to take shipping exposure, from private equity and hedge funds, look like riding to the rescue any time soon. More deals fail than succeed and if owners want a new best friend they are likely to find one at Chinese banks rather than in a boutique finance house.

Could the industry self-regulate? I think it has already started. Despite having a dedicated regulator, the upper half of the industry at least has begun to recognise that the lowest common denominator means the same thing if one is talking about regulation or about commercial incentive.

The moves to get ahead of new environmental regulation, the massive increase in vetting, self-reporting, transparency, data-sharing and white-listing are concrete examples of how the industry can work together effectively on themes of common interest.

This in turn has driven an increase in safety and quality culture far beyond what might have seemed possible in the 1980s or even the 1990s. There are other drivers of course, but there is no doubt that the industry recognises that quality and safety are investments that pay back. If they don’t, then one’s customers might be too risky to trade with. What needs to keep happening – and here is a looked-for change – is that port, flag and coastal states enforce quality and safety rules and regulations consistently and firmly.

Unless there is a premium on good quality and a penalty on poor performance that hits where it hurts, there will always be means and opportunity to work around the issues. I would go further and say that some obviously bogus flag states and ‘recognised organisations’ should be named shamed and shut down but I’ll pause before I raise any ire.

The other driver is of course regulation and here I think we can say that things have changed and will keep changing. The need is for constant vigilance though because post-2008 there appears to be a desire to regulate everything in public life or business, whether it moves or not.

This is particularly true in Europe where some important and far-sighted work is matched with some that feels more like the tail wagging the dog. Around the world, the patchwork approach seems to be taking hold. For pollution controls in particular, there seem to be international, national, regional and even locality-based rules coming in, which don’t just raise the bar, but double the number of bars to clear.

One final thought. Shipping they will tell you, is a people business and as such it’s been home to many a swashbuckler and larger than life personality, taking daring risks for huge rewards. The crash unseated some of these and badly shook the nerve and profile of others and I wonder if it also created a situation whereby the industry of the 21^st century and beyond will be dominated instead by more conservative corporate values, expressed with less passion and with more temperance.

In some ways it would be a shame. More than just the media relies on the apposite sound bite or conjunction of foot and mouth for some entertainment. But perhaps the passing of the last tycoons, swept off their feet by forces apparently beyond their control, is the price to pay for living with constant change.