Tip of The Iceberg For
Maritime Satcom?
July 30, 2020 by Brad Grady | NSR
It is easy to find dramatic
pictures of icebergs floating around the world’s
oceans – themselves chunks from some larger ice
shelf, their mass mostly underwater, unseen.
However, both the above water and underwater
parts of these icebergs are subjected to
environmental pressures – pieces falling off are
a response to those external factors. Similarly,
SpeedCast and GEE both had problems before
COVID-19 hit, and their bankruptcy filings
should really come as no surprise. As the
mobility satcom market experiences an
unprecedented disruption, these already stressed
businesses made hard choices around their future
– internal fractions in the iceberg of Maritime
SATCOM Connectivity. What is less certain, and
what should worry everyone, is what these events
mean for the larger mobility SATCOM markets,
particularly the maritime SATCOM sector. What
other external factors can we observe, and more
importantly, how should we think about what lies
beneath the surface?
Looking at perhaps a
‘simple benchmark’ to start to answer that
question of the health of the other providers is
the number of ‘connectivity contracts’ that have
been announced lately, compared to years past.
While an imperfect metric due to differences in
deal sizes (number of vessels/revenue), changes
in publication of announcement preferences,
etc., it does give at least some barometer in
which we can start to look at the structure of
the market. In short, if connectivity contracts
are only the tip of an iceberg we call the
“Maritime SATCOM Markets,” any changes above the
surface are probably signs of instability both
below the water line, and indicative of some
changing environmental conditions causing a
shrinking iceberg.
According to data NSR
tracks from announcements in the public domain,
on average from 2016 to 2019 we recorded
annually around 30 – 40 public connectivity
contracts for Maritime End-users. Specifically,
Quarter 3 (this quarter) is typically when we
should expect to see a peak of announcements.
Again, this doesn’t account for the ‘volume’
behind these announcements, just a reflection of
the number of press releases service providers
issue.
So, how is 2020 shaping up?
Well, the Q1+Q2 announcements have totaled
around 12 – down from the historical average of
18 announcements for the first half of the year.
While we have already recorded 4 announcements
in Q3, Q4 is historically the ‘slowest quarter’,
so we would need to exceed the Q3 announcements
from 2016 to really see a significant recovery
in ‘year to date announcements’ by the end of
Q3. Again, this doesn’t reflect the amount of
‘actual vessels’ being equipped in these
announcements or what percentage these
announcements represent in terms of ‘total
connected vessels’ – but, problems on the
iceberg above the surface are no doubt going to
work their way through the entire market.
Announcements are the
‘above the waterline’ factors for our Maritime
SATCOM iceberg. Already, As NSR mentioned in its
April 2020 Maritime SATCOM Markets, 8th Edition
report, the overall market is in a period of
hardship. From 2019 through 2021 the market is
expected to decline by around $230M, or roughly
an 8% decline. In a market that between 2015 to
2019 posted about 10% year over year increases…
any decline in topline figures is a ‘big deal’.
Largely concentrated in the Passenger Maritime
and Energy Sectors (both of which SpeedCast and
GEE have significant presence), and it isn’t a
significant surprise that already stressed
businesses are falling on harder times than
their peers. However, it does start a
conversation around the mid-term viability of
current players in the maritime (and larger
mobility) SATCOM markets.
Overall, the market is in a
period of transition from MSS connectivity to
VSAT. With 2019 adding almost 3,500 new VSAT
vessels compared to 2018, and 2020 still poised
to add more VSAT vessels amongst all the
challenges the market faces, concentrated
challenges in passenger and energy markets are
only a part of the overall Maritime SATCOM
market. While physically installing hardware and
supply chain issues are likely to continue well
into 2021, the market is already on a
“VSAT-focused” path. However, that transition
will fuel the longer-term health of the market.
Without access to robust connectivity, ‘digital
transformation’ is a non-starter. In short,
while we are seeing every indicator that our
iceberg is shrinking, future conditions all
point towards better external factors to enable
growth.
Bottom Line
While this week marked the
first ‘large ship’ cruise voyage (TUI’s Mein
Schiff 2 on a Hamburg-to-Hamburg trip with 1,200
guests aboard), for the satellite connectivity
sector everyone is asking – how long does it
mean to be ‘in it for the long haul’? Two of the
major mobility players have declared bankruptcy,
SpeedCast and Global Eagle Entertainment, and
while both of those companies already had
challenges in the pre-COVID-19 economy, it does
start to ask the question of how long can the
‘well positioned’ players survive? As conditions
on the ground continue to change, cruise sailing
dates continue to get pushed back, and other
macroeconomic conditions impose challenges for
Energy and Commercial Maritime Markets – is it
just ‘matter of time’ before others face their
own set of challenges? Just how much should we
read into these ‘tip of the iceberg’ factors?
