Maritime satellite communication services poised for consolidation, industry sources say
April 08, 2010
By Charles Rice in Washington; Sarah Cohen in New York; Pamela Barbaglia and Mariana Valle in London
With over 150 service providers around the world and price points falling rapidly, the maritime satellite communications services sector is in prime position for consolidation, said several industry sources. CapRock, Marlink, KVH Industries, MTN and Globe Wireless are likely to be the most active, two executives agreed. Not only are prices falling because of an overpopulated field, but the number of customers has fallen off, the third executive said. Commercial ocean traffic “container ships“ has dropped 20%. That means fewer people buying the necessary data, voice, and video bandwidth, said the executive, adding that container ships have formed a significant portion of the market for maritime MSS.
“Satellites are very expensive to launch, so maritime providers tend to lease capacity from operators like Inmarsat and Iridium,” said Richard Valera, an analyst at Needham & Co. “It makes sense, therefore, that maritime satellite companies aggregate capacity through M&A,” continued Valera.
“In order to become solid players, companies must have global presence and signal capacity, and this need to scale is driving consolidation,” Joshua Levinberg, executive VP for corporate business development and strategy at Gilat, said. “The fact is that without substantial scale it is very difficult to become profitable. You can’t be global without over USD 100m in revenues to attract the big customers, and to give them the confidence that you’ll be around in five or10 years,” he said.
Consolidation is really only likely to happen at the upper echelon, said a second executive. The largest service providers in the maritime space are CapRock, Marlink, KVH Industries, MTN and Globe Wireless, and those firms should be the most active on the M&A front, two executives agreed.
Many of the remaining companies are "mom and pop shops," said a third executive, and too small at present to be significant players. But M&A also could occur among those firms, added the first executive.
CapRock Communications and Marlink Group are likely consolidators, said one industry executive. Both companies are backed by sponsors: CapRock by ABRY Partners and Marlink by Apax Partners through Vizada. There are synergies to be had, said the executive, and sponsors spend money to make money.
Valera also named Globecomm Systems in Hauppauge, New York as a company making acquisitions in the maritime satellite space. In March, Globecomm announced the purchase of Carrier to Carrier Telecom for USD 15m. Last year, it bought Telaurus for USD 6.5m and Mach6 for USD 6m. Globecomm’s CEO David Hershberg said the company likes the maritime satellite space because it has no competition from terrestrial networks like cable and phone networks. “You’ve got to have satellite in maritime no matter what. So we’ve made a real pitch for maritime deals.”
“It still seeks maritime and other types of satellite services providers for the relative predictability of the services space compared to satellite equipment,” continued Hershberg.
“Globecomm is better reflecting consolidation trends in the industry than KVH Industries or larger entities such as MTN or Globe Wireless,” said Chris Quilty, senior vice president of equity research at Raymond James & Associates. “Globecomm has showed signs of going deeper into the maritime space and widen its technology portfolio through M&A,” he said.
“KVH has a global coverage of 95% of all shipping routes in the world and has already developed its own technology through a 10-year exclusive partnership with ViaSat,” he added. However, not everybody expects a flurry of M&A in the maritime satellite space. Hamed Khorsand, an analyst at BWS Financial, noted that the credit markets are opening and the need for M&A waning.
See more articles about Joshua Levinberg
By Charles Rice in Washington; Sarah Cohen in New York; Pamela Barbaglia and Mariana Valle in London
With over 150 service providers around the world and price points falling rapidly, the maritime satellite communications services sector is in prime position for consolidation, said several industry sources. CapRock, Marlink, KVH Industries, MTN and Globe Wireless are likely to be the most active, two executives agreed. Not only are prices falling because of an overpopulated field, but the number of customers has fallen off, the third executive said. Commercial ocean traffic “container ships“ has dropped 20%. That means fewer people buying the necessary data, voice, and video bandwidth, said the executive, adding that container ships have formed a significant portion of the market for maritime MSS.
“Satellites are very expensive to launch, so maritime providers tend to lease capacity from operators like Inmarsat and Iridium,” said Richard Valera, an analyst at Needham & Co. “It makes sense, therefore, that maritime satellite companies aggregate capacity through M&A,” continued Valera.
“In order to become solid players, companies must have global presence and signal capacity, and this need to scale is driving consolidation,” Joshua Levinberg, executive VP for corporate business development and strategy at Gilat, said. “The fact is that without substantial scale it is very difficult to become profitable. You can’t be global without over USD 100m in revenues to attract the big customers, and to give them the confidence that you’ll be around in five or10 years,” he said.
Consolidation is really only likely to happen at the upper echelon, said a second executive. The largest service providers in the maritime space are CapRock, Marlink, KVH Industries, MTN and Globe Wireless, and those firms should be the most active on the M&A front, two executives agreed.
Many of the remaining companies are "mom and pop shops," said a third executive, and too small at present to be significant players. But M&A also could occur among those firms, added the first executive.
CapRock Communications and Marlink Group are likely consolidators, said one industry executive. Both companies are backed by sponsors: CapRock by ABRY Partners and Marlink by Apax Partners through Vizada. There are synergies to be had, said the executive, and sponsors spend money to make money.
Valera also named Globecomm Systems in Hauppauge, New York as a company making acquisitions in the maritime satellite space. In March, Globecomm announced the purchase of Carrier to Carrier Telecom for USD 15m. Last year, it bought Telaurus for USD 6.5m and Mach6 for USD 6m. Globecomm’s CEO David Hershberg said the company likes the maritime satellite space because it has no competition from terrestrial networks like cable and phone networks. “You’ve got to have satellite in maritime no matter what. So we’ve made a real pitch for maritime deals.”
“It still seeks maritime and other types of satellite services providers for the relative predictability of the services space compared to satellite equipment,” continued Hershberg.
“Globecomm is better reflecting consolidation trends in the industry than KVH Industries or larger entities such as MTN or Globe Wireless,” said Chris Quilty, senior vice president of equity research at Raymond James & Associates. “Globecomm has showed signs of going deeper into the maritime space and widen its technology portfolio through M&A,” he said.
“KVH has a global coverage of 95% of all shipping routes in the world and has already developed its own technology through a 10-year exclusive partnership with ViaSat,” he added. However, not everybody expects a flurry of M&A in the maritime satellite space. Hamed Khorsand, an analyst at BWS Financial, noted that the credit markets are opening and the need for M&A waning.
See more articles about Joshua Levinberg