The International Maritime Organization has certified Iridium Communications Inc to provide global maritime distress safety systems services, breaking a monopoly held by Inmarsat PLC (LON:ISAT).
Shares in Inmarsat fell 8.4% in morning trading in London following the decision.
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Iridium (NASDAQ:IRDM) said the IMO’s Maritime Safety Committee (MSC) stipulated that the Iridium network meets all the criteria needed to provide mobile satellite services in the global maritime distress safety systems services (GMDSS).
“This is a significant achievement that ends a decades-long satellite industry monopoly in which only one company was authorized to provide satellite GMDSS service and for the first time will bring competition and truly global coverage, to mariners sailing any of the world’s oceans,” Iridium’s statement said.
“This is a historic moment for the maritime industry and an honour for Iridium to be the second ever recognized provider for GMDSS services,” said Bryan Hartin, executive vice president, Iridium.
“This is the dawn of a new era for mariner safety. We’ll bring a new choice and upgraded capabilities for mariners along with our truly global coverage that will for the first time extend the reach of satellite-based GMDSS to even the most remote waterways,” he pledged.
In a stock market statement issued by Inmarsat, the London-listed firm acknowledged the introduction of a GMDSS service by Iridium but noted it was subject to Iridium passing a number of stringent performance tests.
“The Iridium GMDSS solution is consequently expected to be made available in the early 2020s. The IMO further approved the request of BeiDou Navigation Satellite System (BDS), a Chinese satellite navigation system, for evaluation of its GMDSS proposal by the IMO's Navigation, Communications and Search and Rescue (NCSR) sub-committee,” Inmarsat’s statement added.
Ronald Spithout, the president of Inmarsat Marine, was in a magnanimous mood, offering his congratulations to Iridium and BeiDou.
"Together, we must strive to maintain and enhance the exceptionally high standards required by the IMO and demanded by the maritime industry as the lifeline for seafarers at sea," he said.
Impact will not be felt for some time
RBC Capital reckons the impact of the IMO ruling will not be felt for some time.
“We believe it is unlikely that ship owners will rip out existing Inmarsat terminals (to replace with Iridium). All the evidence on ship owner/manager terminal replacement across the industry suggests very slow adoption. We expect Iridium will target new ships entering service from 2020,” it said.
“GMDSS does not generate any revenues for Inmarsat, as the service is free to use and the hardware/terminals are provided by third parties; however, all large ship owners are compelled to have GMDSS systems on board, which means Inmarsat is onboard every large commercial ship. This means a ship owner has a choice – either to use the (GMDSS approved) Inmarsat terminal for voice and data or to install an extra satellite system for voice and data (leaving the Inmarsat system for emergencies only). Clearly, losing the monopoly lowers the barrier to entry for Iridium long term,” it said.