- Maritime 4G partnership with RigNet feels brunt of coronavirus disruption, with reduced traffic slowing investment returns.
Maritime connectivity provider RigNet confirmed delays in its partnership with T‑Mobile US caused by coronavirus.
During its latest earnings call, for the quarter to 30 September 2020 (Q3 FY20) Chief Executive Steven Pickett highlighted issues emerging in the ongoing pandemic and how they are affecting estimated pay‑back times laid out when the T‑Mobile US deal was signed in mid‑2019.
In July last year, T‑Mobile US partnered with RigNet to expand LTE coverage to a portion of the Gulf of Mexico off the coast of Louisiana, Mississippi, and Texas, citing an opportunity to bring voice and data services to connectivity-hungry “offshore workers, vessels, and critical infrastructure”. To support the 4G network, the operator provided 600MHz resource while RigNet supplied 700MHz and microwave backhaul capacity (Deutsche Telekomwatch, #85). Under the deal, RigNet receives payments from T‑Mobile US for each site it activates, with the latter then taking 100% of the revenue from the services provided until the initial outlay is reimbursed. After this, the arrangement moves to a 50:50 revenue‑share model.
Pickett indicated that he could no longer predict when T‑Mobile US’ capital investment will be reimbursed. The Gulf, ordinarily busy with cruise liners and commercial ships, has been quieter since the pandemic began, meaning service revenue expectations have not been met.
“Given what’s happened with the pandemic and given what’s happened in terms of the cruise line industry that moves through the area where the network resides, I think there is some uncertainty around what the roaming traffic is going to be and when it turns back on.”
In 2019, pre‑coronavirus, RigNet Chief Financial Officer Lee Ahlstrom forecast that this initial outlay would be covered off “sometime in 2020” (Deutsche Telekomwatch, #86).
Pickett assured analysts that the service was “working well” and “customers were enjoying it” prior to the industry shutdown.
Ahlstrom added that RigNet’s bottom line continues to be supported by monthly service fees from T‑Mobile US for the sites that have been activated.
RigNet posted net losses of $5.5m (£4.1m/€4.6m) for Q3 FY20, which Pickett pinned on COVID‑19’s negative impact on the global economy, and the “energy industry in particular”.