[Satellite TODAY 08-02-13] Inmarsat has signed a key new deal with RigNet which will see the company distribute Inmarsat’s Global Xpress (GX) and L-band services to the energy sector and Inmarsat sell its retail energy business to RigNet in a deal worth $25 million. The sale will include Inmarsat’s microwave and WiMAX networks in the U.S. Gulf of Mexico serving drillers, producers and energy vessel owners; its VSAT interests in Russia, the United Kingdom, the United States and Canada; its telecommunications systems integration business operating worldwide; and its retail L-band energy satcoms business. In 2012, the operations subject to the sale had total revenues of $81 million. 

Explaining why Inmarsat decided to sell this business, Inmarsat’s CEO, Rupert Pearce told SatelliteTODAY.com, “Inmarsat has always made it clear that, strategically, we are committed to a primarily indirect distribution model. It made perfect sense, when the opportunity arose, to do a deal of this sort. For both of us, this represents a significant opportunity to grow our market share in energy.”

Tim Farrar, president, TMF Associates, told SatelliteTODAY.com that the deal also made sense for Inmarsat. “Inmarsat has struggled in oil and gas for a while, with falling revenue in the solutions business as competitors took market share. Inmarsat also de-emphasized energy at its GX investor day last year. So Inmarsat had to make a move and RigNet is trying to maintain its strong growth and get into HTS to match Harris Caprock’s deal with Intelsat. I had speculated previously that Inmarsat might buy RigNet, but I suspect they were too expensive. This is a good alternative for both companies,” he says.

While Farrar sees the oil and gas market being a potentially tough one for Inmarsat, this deal definitely helps. “This deal has significantly improved their prospects of getting meaningful GX revenues from the energy sector, which had been downplayed at the GX investor day last October,” he added. “The strategy makes absolute sense for Inmarsat, but I continue to be skeptical that they will achieve the $500 million revenue target by 2019.”

RigNet, provides managed remote communication services in more than 30 countries on six continents, covering more than 1,100 oil and gas related sites ranging from drilling rigs to production facilities and energy vessels. Pearce believes the wide-ranging deal the company has signed with RigNet makes a lot of sense from both sides.

“RigNet is one of two major players in the energy VSAT market and an excellent partner for Inmarsat in the sector. They have a large oil and gas VSAT customer base, which is backed up by the capabilities, resources and experience to support take-up of Global Xpress, as well as our L-band services. The deal makes strong commercial sense for RigNet too and is a powerful addition to their market position, adding scale and complimentary capabilities. An agreement that offers strategic benefits for both parties is the ideal outcome for an agreement of this sort. The deal came out of our ongoing conversations with RigNet. The benefits of such an agreement were clear from the outset and the deal emerged as part of these regular discussions,” Pearce said.

Inmarsat, which will introduce Global Xpress services in 2014, hopes its new satellites will give it a competitive advantage in the oil and gas space. Pearce is hopeful. “GX brings simplicity that hasn’t been there before,” he said. “An oil and gas company knows, for example, that with GX it can use the same terminal with the same set-up in any location, anywhere. Combine this with Inmarsat’s reputation for reliability, downlink speeds up to 50 Mbps, terminals that will be quicker to install and less costly to maintain and the advantages for oil and gas companies begin to stack-up. The net result is greater capabilities and a lower overall cost of ownership.”