Speedcast to Sell Maritime Customer Contracts to Inmarsat for $13.6M
Speedcast is selling its Inmarsat maritime reseller business to Inmarsat for $13.6 million, the companies announced Monday. This includes Fleet Xpress, FleetBroadband, and FleetOne, all Inmarsat managed services that Speedcast was reselling to customers in the commercial maritime business segment. This agreement covers both Speedcast’s L-band maritime contracts which use Inmarsat connectivity, and the full Inmarsat Fleet Xpress portfolio from Speedcast.
The agreement marks a significant step for Speedcast as it looks to emerge from Chapter 11 bankruptcy proceedings. The deal is subject to court approval. Inmarsat is Speedcast second-leading creditor, after Intelsat.
According to the court filing, Speedcast serves approximately 2,644 vessels with the Inmarsat Services, comprising approximately 36% of revenue in its Commercial Maritime vertical. In 2019, Speedcast made $41.3 million in revenue, $7.1 million in profit from reselling these Inmarsat services. Speedcast said in the filing it made the decision to exit the Inmarsat reseller business because “of the contractual arrangements with Inmarsat and the substantial capital investment that would be required to continue operating this business going forward.”
Speedcast also said in the filing that retaining the Inmarsat reselling business will likely impose a burden of a negative cashflow impact for the fiscal years 2020-2023 of approximately $53. million. Speedcast said the future profitability of the business is speculative and contingent upon adding new customers and meeting certain levels of customer renewals to avoid penalties between Speedcast and Inmarsat, and Speedcast doesn’t anticipate these targets will be met.
According to the filing, Speedcast held discussions with third parties about a sale, but no third parties submitted proposals. In addition, Inmarsat said it would not likely be willing to create new supply arrangements for a third party purchaser. Because the services being sold are supplied by Inmarsat, any third party sale would have required Inmarsat’s consent.
Speedcast will continue to deliver managed services to its commercial maritime sector clients with primary Very Small Aperture Terminal [VSAT] and other non-Inmarsat Mobile Satellite Services (MSS) onboard, and will maintain its Inmarsat Distribution Partner status for MSS backup services. The operator will also continue to deliver Inmarsat Land MSS services to its enterprise customers as part of the company’s land portfolio.
Andre Eerland, vice president of Commercial Maritime at Speedcast commented in a news release: “This agreement enables Speedcast to further strengthen our focus in the commercial maritime sector, delivering our leading global VSAT services, together with global L-band back-up capabilities. We pride ourselves on providing a flexible, high quality service that meets market demands and addresses the challenges of maritime connectivity. Taking this step allows us to consolidate our core connectivity services, which are scalable across all market needs, while remaining at the forefront of the maritime industry.”