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Shares in Inmarsat trade 13% lower, back around April’s 7.5yr lows, on overnight news that, as of 2020, it will no longer have the global monopoly on international onboard maritime distress communication, mandatory for ships exceeding 300 gross tonnage. This comes after the UN’s IMO (International Maritime Organization) finally signed off on Iridium Communications’ own Global Maritime Distress Safety Systems (GMDSS) service following a 5yr fight for approval (three longer than Iridium had expected). This had pitted the newer US government backed version against the near 30yr old UK-backed service, and, at times, had become rather heated.
Back in March, Inmarsat was awaiting approval of Fleet Safety, a new service incorporating FleetBroadband and a Maritime Safety Terminal (MST), on track for Global Maritime Distress and Safety System (GMDSS) recognition at the May 2018 meeting of IMO’s Maritime Safety Committee. An IMO subcommittee had already said it surpassed requirements. No update on this yet, however.
No comment from the company this morning, but it has always maintained that competing GMDSS services would put lives at risk. This is another blow for the company, hot on the heels of 41% shareholders rejecting the board’s remuneration proposal, something that may prove rather prescient in light of the potential impact of a monopoly loss on its business model. Especially as 40% of revenues and 55% of FY 17 EBITDA come from its Maritime division (41%/62.6% in Q1). Near-term guidance may well be in-tact; the medium/long-term outlook may, however, require reappraisal.
A new and improved product/service to bolster your current monopoly is one thing. This new version facing actual competition is very much another.
Mike van Dulken, Head of Research, 22 May 2018
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