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Inmarsat buys Globe Wireless and agrees Astrium GX deal Featured

Evert Dudok, Astrium, and Rupert Pearce, Inmarsat Evert Dudok, Astrium, and Rupert Pearce, Inmarsat

Christmas has come a week early for Inmarsat as the company has announced that it is to acquire distribution partner Globe Wireless for $45 million, while also confirming the signing of a deal to make its largest maritime partner Astrium Services a distributor for Global Xpress.

The deal with Astrium is the conclusion of long-running negotiations between the pair, and takes the form of what the companies describe as “a strategic distribution partnership agreement” which will see Global Xpress made available to Astrium Services’ partner and customer base.

Astrium Services will deliver Global Xpress (GX) Ka-band services through its worldwide distribution channels, covering vertical markets including maritime as well as the government and defence sector, initially in Europe.

The companies say that “in due course” the Astrium Services Global Xpress offering will encompass all service types – packaged services, bandwidth capacity, as well as commercial and military Ka-band.

“This agreement is the natural continuity of a long-standing partnership between Astrium Services and Inmarsat,” Evert Dudok, CEO of Astrium Services said.

“Astrium Services has been Inmarsat’s number one distribution partner since we acquired Vizada in December 2011. We are eager to continue this strong relationship by bringing the benefits of Global Xpress to our customers using our satcom expertise.”

One interesting aspect of the deal is the fact that Astrium has not been given the same ‘Value Added Reseller’ (VAR) status as other previously announced GX providers, which include companies like Imtech Marine Navarino, NSSLGlobal SingTel and Telemar – suggesting that the contents of the ‘Strategic Distribution Partnership’ differ somewhat from what was included in the standard VAR contracts.

When asked by Digital Ship about the difference in nomenclature being applied in this instance, an Inmarsat spokesperson said that  “the agreement with Astrium covers a number of business units and we anticipate that, in due course, it will encompass all service types.  For this reason, it is described as a ‘strategic’ agreement.”

Astrium’s position as something akin to a wholesaler, reaching the market through its own network of associated partners and resellers, is thought to have complicated GX talks somewhat. A standard distribution deal similar to those agreed with the current list of confirmed GX VARs would mean that Astrium would be able to garner a margin for itself only by having its partners sell GX services at a price above the other VARs – clearly an undesirable business model.

The parties had shaken hands on a Memorandum of Understanding covering a number of elements in a possible deal at the end of 2012, with an 'MOU on a Strategic Distribution Partnership Agreement for Global Xpress' struck at the Inmarsat partner conference in Budapest, Hungary, on December 5.

Negotiations seemed to be progressing steadily over the course of the year, with Tore Morten Olsen, managing director of Astrium Services Business Communications’ maritime division, telling Digital Ship in May that there had been “significant advancements in the negotiations since the earlier MoU agreement.”

“Many elements have been closed, and some still remain. As we are negotiating a strategic partnership agreement which goes beyond current VAR agreements, there are more elements to close as well,” he said.

In June, Mr Dudok had also indicated that a deal was close, responding to a question posed at a press briefing at the Paris Air Show by indicating that Astrium was set to agree to contract to purchase a specific amount of Global Xpress service capacity, saying that “we are Inmarsat’s largest reseller and we are going to commit to use a certain amount of Global Xpress.”

However, it seems that in the months since that comment there may have been a change of heart around the negotiating table with regard to the contents of the MoU, as this capacity purchase arrangement has not been included in the final deal.

On this point, Inmarsat told Digital Ship that “the Agreement is consistent with most other VAR appointments in not having any pre-purchase commitment.”

However, the company added that, beyond the removal of a bulk capacity purchase commitment, “the elements of the overall agreement outlined today remain consistent with our MoU.”

Instead, it would appear that Astrium Services will offer the GX service from Inmarsat as a partner, selling direct to the maritime market via the Marlink brand and indirectly via its own service partners rather than bulk buying capacity and selling its own packages from that pool.

Inmarsat was asked if, with the removal of the bulk capacity purchase element of the deal, a margin for Astrium had been built into the agreement on a per unit basis, or whether there might be a bulk discount applied if a certain number of ships/contracts/capacity etc is signed. However the company declined to comment and said that it “does not disclose the commercial details of its agreements.”

Rupert Pearce, CEO of Inmarsat, said that the company was “delighted that Astrium has committed to continue its long and valued partnership with Inmarsat into the Global Xpress era.”

“Global Xpress is going to change the game in mobile satellite connectivity and we are delighted that Astrium Services is joining us in bringing the benefits of the world’s first high speed global broadband service to its impressive portfolio of customers,” he said.

“Astrium serves an unparalleled range of market segments and, together with their powerful network of service providers, will help make Global Xpress the preferred choice for end-users in those segments, extending and deepening our global business partnership.”

One distribution partner that will most certainly be selling GX when it comes available is Globe Wireless, which is set to join previous satcom distributors like Stratos and Ship Equip as part of the Inmarsat family.

Inmarsat expects to complete the acquisition of Globe Wireless in January 2014, subject to certain regulatory and other approvals, for a total consideration of US$45 million and will fund the acquisition from available liquidity.

In the twelve months ended June 30, 2013, Globe Wireless generated revenues of US$91 million and currently has an installed customer base of over 6,000 ships.

Among those customers approximately 150 have VSAT installed, with the company having begun offering Ku-band services in May 2008 and having announced its 100th VSAT installation in mid-2011.

Inmarsat CEO Rupert Pearce called the move a “highly compelling transaction for Inmarsat”, which he says should deliver a range of strategic benefits associated with the acquisition. These included the opportunity to swiftly deliver improved financial performance through synergies and an improved ability to deliver its products to customers.

“Adding the Globe Wireless team will immediately bring material benefits, enabling a faster roll-out of XL (XpressLink), FleetBroadband and transition to GX in due course,” he said.

“We are also acquiring a skilled and established solutions development team that has been responsible for a market-leading portfolio of value added services.”

“Accessing this portfolio offers a truly exciting cross-selling opportunity for our channel partners and ourselves, across the entire Inmarsat installed maritime base. This is a transaction that both accelerates our longer term strategic aims and can deliver meaningful contribution in the short term.”

Frank Coles, president of Inmarsat Maritime, should know better than anyone what kind of capabilities the new acquisition has to offer, having been CEO of Globe Wireless before joining Inmarsat in 2011.

“Globe Wireless has created a suite of products and value added services that are unequalled in the market today, and by combining this with our FB and GX services, we believe we can further enhance our position as the leading provider of services to the maritime customer,” he said.

“We will be making these capabilities immediately available to our channel partners via our global network and wholesale support environment, strongly enhancing the Inmarsat Maritime proposition into the market.”

“Our purchase of Globe Wireless also removes the need for partners to invest the time, funds and other resources in duplicative R&D.”

The possibility of Inmarsat adding its own range of value added services to its airtime packages for products like FleetBroadband could be of concern to some of the company’s partners, who often rely on their own value-adds to differentiate themselves and compete against other distribution partners offering Inmarsat services.

When asked by Digital Ship about this potential impact on its distribution channel, a spokesperson said that Inmarsat would make the VAS available to the entire channel with the aim of improving the options available to the end user.

“Our strategy is to enhance the value added services we offer to ship owners, making it simpler for them to select and install solutions that deliver the greatest operational efficiency and cost effectiveness,” the company said.

“We will achieve this by offering a market leading suite of value added services to our channel partners. These will be designed to complement our channel partners own services and to be delivered in the timeliest manner, ensuring that our channel can respond swiftly to customer requirements.”

“Inmarsat’s stated strategy is to focus on opportunities that deliver value to our channel and the acquisition of Globe Wireless does precisely that. It brings a wealth of benefits, including additional engineering resources, installation capabilities, value added services and products, all of which will be deployed to the advantage of our channel.”

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