Speedcast’s Beylier on M&A ‘speeding ticket,’ Carnival contract issue, uneven bandwidth availability and IoT
P.J. Beylier. Credit: Speedcast and WTA
PARIS — Satellite services provider Speedcast has had a rough few months. The delayed rebound of the energy markets and a technical glitch in the ramp-up of its large Carnival Cruise contract, among other issues, caused a 65% drop in its stock price since late June: http://bit.ly/2ZqQbxF
Chief Executive P.J. Beylier survived a board shakeup that resulted in the departure of its chief financial officer and is now charged with turning a showcase M&A company into one focused on organic growth.
Beylier addressed these issues Sept. 10 during Euroconsult’s World Satellite Business Week. Here are excerpts from his remarks.
Why remain a publicly traded company?
“We have been publicly listed for five years. The first four years have been fantastic. The past 12 months have been painful. Other companies in this sector have gone through that. We’re not the only one.
“We decided five years ago to list. At that time it was opportunistic more than anything else. I think it has been good for us. With respect to the last 12 months, when you look at what happened, the situation with energy where we are expecting it to start recovering, there is an overreaction and the snowball effect of the public markets.
“Some of the pain was self-inflicted. We made some mistakes. Now we are very focused on organic growth, getting our systems and processes where they need to be. We’ve grown a lot, very quickly, integrating all the different companies. We’re getting a speeding ticket. Now we’re focusing on furthering integration. But we are excited and convinced about the power of the platform that we have been building over the last five years.
“The company is solid and we have capabilities that are second to none in the industry and we are in a very strong position to generate organic growth above what the market will achieve in the coming next ew years. We’re very focused on that and going through the pain but that is part of the experience.”
Speedcast provided a record 3.174 Gbps of throughput to the Carnival Horizon ship during the ship’s inauguration in 2018. But it was provided by several satellites while the ship was in New York harbor and is not reflective of average bandwidth available. Credit: Carnival
What happened with the Carnival Cruise contract that caused costs to rise?
“It’s an issue we will all be facing as an industry. We are a little bit ahead of the pack. To bring the level of bandwidth that our customers need, and the price points they expect, we need to go beyond what we have done in the past in the type of capacity we are using.
“We need the ability to go through a maximum number of options. On a cruise ship, we need to be able to use C-band, Ku-band and Ka-band. To do that we are using tri-band antennas, and there are some teething issues with that. They work on some Ka-band satellites but not as well on others.
“As we are fixing some of these communications it has led us to use higher-cost Ku-band capacity instead of the Ka- band we wanted to use. But we’re getting there.”
Despite all the new capacity coming into the market, you have difficulty duplicating the 1-Gbps-level bandwidth in the Caribbean or the Mediterranean during the trans-Atlantic passage?
Today we are serving ships with 4,000 to 8,000 people aboard, and 400-500 Mbps is becoming common. That is far from enough, because when I say 400-500 mbps this is adding both directions — so maybe 200 Mbps down.
We think this 500 Mbps will become a gigabit, or a gigabit and a half, and 2 gbps potentially. Today we are facing some limits to that. We have delivered 3.2 gigabit to one cruise ship, but this was using different satellites and to a place where we could use different satellites. [New York City harbor]
We are going to be faced with a situation where we can deliver a gigabit to a ship in the Caribbean, but we cannot deliver that 1 gigabit when that ship crosses the Atlantic to go to the Mediterranean. So there are regions where we have access to significant capacity, and there is more coming, and there are regions where we are lacking capacity.
So yes, there is a lot of capacity coming. But it’s not a homogenous picture. there are differences from region to region and frequency to frequency.
When you say a lack of capacity, do you mean there is no capacity available or that it’s too expensive?
Both. Over the crossing we have issues with the amount of capacity available and we have a price issue.
Do you see a long-term need to continue to use C-, Ku- and Ka-band, plus L-band?
We still use a lot of C-band and we would like to continue to use C-band. We have customers who want 99.97% availability for critical applications and we can achieve that only with C-band spectrum. L-band works as well but it’s not the same amount of bandwidth.
I could see customers dividing applications, with noncritical applications going to Ku and Ka and the more critical ones staying with C-band. We are very agnostic in terms of spectrum. For customers who need a lot of spectrum we need Ku-band and probably Ka-band as well to get to that price point.
So I think you will continue to see us using those three spectrums, L-band as a backup as a troubleshooting when things are down.
Our mission is not to fill assets in the sky. It is to satisfy the customer. We are dealing more and more with hybrid networks, with LTE, and in dozens of key ports, big wireless radio hubs so that when the ship is in port, where they may not be able to use the satellite, depending on the regulation, they have connectivity.
You reported having 20,000 IoT devices under contract. Is that a growth area?
We are seeing growth in IoT, meaning narrowband applications. For years we have been talking about more and more megabits, but there is a significant opportunity in IoT for narrowband to connect a growing number of objects.
What is the ARPU for your IoT business?
Let’s assume it is around $10 per month per device.
What’s your latest thinking about whether new flat-panel antennas will be a growth driver for your markets?
In cruise, flat panel is not key, nor is it for energy and offshore. But it could be interesting for commercial shipping and yachts with 60-cm antennas. Current antennas are complex to install, configure and maintain. The idea of an antenna that you throw on the ship with no maintenance because there are no mechanical parts is a game changer.
The same is true for land mobility. Having a small, low-cost antenna that we can install on various assets that move around with a decent amount of bandwidth Government, NGOs and the UN could use this too. That could be very interesting.