comsys

2nd edition

page 2

1. Summary This Executive Summary is based on the 2nd Edition of the COMSYS Maritime VSAT Report published in June 2010. It includes extracts from the full, multi-client study conducted by COMSYS during the first part of 2010 - more details of the report can be found in Section 5 at the end of this document. VSAT services are now firmly established in the maritime communications market, dominating high-value segments like oil & gas, cruise, ferries and offshore supply. The past few years have seen operators move into deep-sea fishing, leisure and, most of all, the commercial dry bulk, tanker and container markets. All over the world navies, coastguards and other government vessels have also been expanding their use of VSAT in the quest for cost-effective service that also brings faster transmission speeds and more bandwidth. Between 2005 and 2009, maritime VSAT services posted an impressive compound annual growth of almost 30 per cent in the number of vessels served. Revenues from the pure maritime market grew by 15 per cent in 2009 and across all segments reached almost $800 million. iDirect’s business currently covers a wide array of the corporate and broadband networking market, but the foundation of the company’s success was laid in just a few key high-value market segments. Operators in the Oil & Gas and Maritime markets were the first to recognise the advantages in the iDirect platform’s combination of architecture, features and cost structure and the company quickly became the de facto standard in these segments as first the major operators adopted the product and then customers began to ask for it by name. Today, the majority of the most successful service providers in the high-value stabilised antenna VSAT market make use of iDirect as their primary platform. The maritime VSAT segment is one which iDirect dominates with almost half of all current vessel and rig installations and 60 per cent of all new installations in 2009 – a share that has rapidly increased since the product was first introduced to the market in 2001.

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

04 05 06 07 08 09

Vess

els

in S

ervi

ce

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900Vessels Revenues

Figure 1 - Maritime VSAT Site & Revenue Growth,

2004-2009

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

03 04 05 06 07 08 09

Stab

ilise

d VS

AT In

stal

latio

ns

Other

SCPC

iDirect

Figure 2 - Annual Stabilised VSAT Installations by

Technology

page 3

2. Market Information For many years, communications at sea effectively meant Inmarsat’s L-band service which grew from its creation in 1979 to serve more than 211,000 maritime installations by the end of 2009. However, Inmarsat’s limited L-band spectrum has meant that the service the company offers is billed by bandwidth use, whether this is per minute for voice calls or per Mbyte for data services. By the mid-1990s it had become clear that growth in communications generally was causing certain segments of the offshore and maritime markets to look to other alternatives in a bid to raise the data rates that could be supported at a more affordable cost. It was the offshore stabilised oil & gas exploration rigs that provided the initial demand, but this quickly grew into other high value segments of the maritime market where communications was often a big potential profit driver, in particular, cruise and ferry vessels. Although most accept that growth in the high value segments has slowed now to single digits, the next level of the market in the various sub-sectors comprising commercial, fishing, leisure and military, have all begun to show their potential.

Maritime Segmentation The maritime market is highly fragmented and the more it is studied, the more diverse it becomes. In order to bring some organisation to our analysis in the report, we have segmented it as follows:

Oil & Gas Rigs and Platforms – operating offshore and floating as opposed to fixed.

High End Commercial – oil & gas offshore service vessels, ferries and cruise lines.

Commercial shipping lines – container ships, freighters, dry bulk carriers and tankers.

Fishing – trawlers and fish factory ships.

Government and Military - navies, coastguards, research and support vessels.

Leisure or “White Boat” – broadly divided into Small, Super and Mega-Yachts.

Inland Waterway Vessels – river cruise and other commercial vessels. The economic downturn from the end of 2008 onwards badly affected the commercial maritime industry, but whilst some obviously predictable effects occurred, such as the lay-up of an estimated 12 per cent of the world’s container fleet, new builds, which are years in the planning, will continue to flow out of the shipbuilding yards for some time to come. In a gross irony, with the commercial maritime business facing the worst downturn since the disastrous collapse in the mid-1970s, deliveries of new vessels are expected to hit a new record of 12 per cent of the global fleet in 2010. Nevertheless, the maritime VSAT business continued to grow robustly between 2008 and 2009 – exceeding our Most Likely Forecasts and only just missing our Optimistic expectations, despite the trying conditions. Additionally, maritime VSAT operators report that data usage roughly doubled on vessels with VSATs during 2009 with some commercial ships consuming up to 40 GB of data in a month.

Maritime VSAT Purchase Drivers Broadband connectivity is rarely seen as a mission critical need for the broad base of most commercial customers, but there is an increasing realisation that its implementation is inevitable. In 2007 and early 2008 as the shipping boom reached its height the overwhelmingly dominant market driver was crew welfare which had moved from being “nice to have” to important or even critical in some instances. Crew recruitment and retention had emerged as a major problem for the fleet operators and broadband service was seen as an effective way to combat the problem. In part, this need for connectivity is driven simply by the fact that we have all grown used to being in contact almost all of the time and ships’

page 4

crews are no different. In some ways, the need for connectivity is even greater as a result of the isolation that a crew member experiences when spending weeks or even months at sea. Following the decline in world trade and the consequent slowdown in maritime freight, priorities have definitely changed within the broad sphere of the shipping fleet market. Crew welfare has become far less of a critical issue, especially for the lower cost fleet operators. However, to place the change in perspective, at the height of the shipping boom in 2007/8 perhaps eight out of ten decisions to implement VSAT on board ship were driven primarily by crew welfare requirements. Today, the proportion is probably nearer to half, so the change has been significant, but crew welfare remains the single largest driver to purchase a VSAT service. This is, of course, a generalisation and operators specialising in different segments and different regions see a wide variety of application demand from their prospective customers. European fleet owners, for example, remain far more focused on crew welfare than do those in Asia. The growth of other application demands has come from three main sources which we classify as administrative, operational and regulatory. These applications have all been talked about for many years as areas of business process improvement, but most usually need a persistent, cost-effective broadband connection. This led many to suggest that they would help drive the adoption of VSAT in the marine environment, but truthfully have rarely been the true cause of a decision in favour of VSAT. However, today these requirements combined, seem to be catalysing a growing understanding in the maritime industry that broadband might be more than beneficial, it might actually be a necessity. The three main areas of demand are as follows:

Administrative – There is a need to manage the increasingly complex IT systems that are being installed on vessels. Crew are rarely trained in IT and there seems little prospect that an IT Officer will be a common occurrence on ships in the foreseeable future. Owners are also looking to more closely manage their fleets – specifying sailing speed for example, in order to ensure that fuel efficiency is maximised and a ship arrives at a busy port on time and is able to unload and load quickly. Another source of demand comes from basic corporate applications – such as ERP systems, payroll, supplies and staff reports.

Operational – For years the idea of real-time monitoring, remote diagnostics, preventative maintenance, engine service, repair scheduling, advanced parts ordering, bridge system control and other applications of this type have been promoted by specialist software providers, satellite service providers and consultants. Until recently, traction in the form of real interest from ship owners was minimal, but there is now growing evidence that some key owners are beginning to see that cost savings can be made.

Regulatory – As ports become more crowded, security measures become stricter and environmental concerns grow, the need to report manifests in advance of arrival, provide evidence that the ship is compliant with respect to various regulations, maintain onboard safety systems and keep crew trained is growing. Port authorities, national governments and international organisations are setting standards and mandatory requirements which are growing in terms of the amount of data and the frequency with which they have to be updated.

Operators inform us that, in combination, these types of value added applications are influencing between 40 and 50 per cent of decisions to acquire broadband connectivity for a vessel. As applications increase, data rates rise and volumes grow it seems to us that VSAT will become far more of an intuitive decision than it is today as vessel owners tighten controls over use. There is an overwhelming feeling within those operators that provide maritime VSAT services that fleet operators are beginning to see broadband on their ships as inevitable.

page 5

VSAT Technology At the same time, VSAT operators have been on a quest for efficiency, more flexibility and greater functionality in order to drive down prices and improve quality of service. This has driven a move away from the initial use of clear channel SCPC and towards access architectures that are able to support shared bandwidth. Spread spectrum and demand assigned technologies are used both in TDMA and other access schemes, but the overwhelming trend has been towards native TDMA systems and its onwards march into the segment can be seen clearly in Figure 3. Prior to 2003, over 80 per cent of all deployments were SCPC versus less than one third today. iDirect’s re-birth saw the company target operators specializing in the stabilised VSAT market above any other and maritime and oil & gas VSAT operators moved almost wholesale to the platform. In some instances the service provider chose to swap out its entire installed base – MTN is the best example – whilst others offered the TDMA service as an option to their existing customers.

0%

20%

40%

60%

80%

100%

05 06 07 08 09

Acc

ess

Sch

eme

Shar

e of

Ves

sels

in S

ervi

ce SCPC

DVB-RCS

DAMA

CDMA

TDMA

Figure 3 - Access Schemes in Service in the Maritime VSAT

Segment, 05-09

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

04 05 06 07 08 09

Vess

els

in S

ervi

ce

Other TDMA

Hughes

STM

ViaSat

ComtechVipersat

SCPC

iDirect

0%

20%

40%

60%

80%

100%

04 05 06 07 08 09

Figure 4 - Maritime VSAT Modem Installation Shares, 04-09

page 6

iDirect’s sales and marketing efforts were so effective that the company’s name started to become known even within the customer base and users began to ask specifically for an iDirect service from operators. This forced several service providers who had either chosen a competing technology or had sat on the fence, to adopt the platform as well. With a system very well suited to small networks supporting high bandwidth services and multiple uplinks, iDirect maintained its momentum by continually adding new features and functionality that the maritime and O&G niches demanded, further strengthening the product’s hold with new and established operators alike. Comtech, which probably accounts for the majority of SCPC modems deployed historically, has established a good position with a few operators with its Vipersat add-on. Elektrikom uses the platform exclusively and Marlink (Vizada) is in the process of a wholesale conversion of its SCPC customers which account for the largest proportion of its installations alongside its iDirect-based Wavecall service. While Hughes, Gilat and others concentrated their sales and marketing in other areas of the VSAT market, ViaSat and STM (Nera at the time) were brought into the maritime segment by aggressive new operators targeting lower cost broadband connections, especially within the leisure segment. Sea Tel’s abortive attempt to move into services with its Wavecall LinkStar-based offer, in combination with a few partners, was eventually taken over by Telenor (now Vizada) and many of the subscribers were converted to iDirect. Eutelsat, which had been pursuing its own maritime service using some ViaSat equipment as well as SCPC, moved some of the Wavecall customers on to its own D-Star service which uses LinkStar. The company has since moved wholesale to the iDirect platform for its larger commercial service which it runs in partnership with SpeedCast and its mostly leisure-based D-Star installed base has stagnated.

The oil & gas and maritime segments became key pillars in iDirect’s early route to success and largely typified the operator community’s acceptance of its value proposition. Consequently, the company has been involved in the most successful service providers in these segments as well as the more innovative, entrepreneurial, smaller operators. It worked closely with Intelsat while the space segment operator was developing its maritime broadband infrastructure and has gone on to add many features to its Evolution platform that have become absolute requirements for the maritime VSAT business. The company was the first out with ABS (Automatic Beam Switching) and GNMS (Global Network Management) and has effectively forced the other vendors to follow. Of around 90 operators with VSATs on vessels,

more than half use iDirect as their primary platform in contrast to STM which is used by five operators and Comtech’s Vipersat which is favoured by seven. This is likely to be a crucial factor in any future consolidation – something that many believe is inevitable in the light of the extreme fragmentation of the market. Consolidators will be attracted to the easy integration and potential synergies of combining multiple iDirect platforms, but this will also put pressure on iDirect to ensure that its system and support structures will smoothly facilitate this.

SCPC28.3%

iDirect46.9%

Comtech Vipersat

6.5%

ViaSat5.5%

STM6.0%

Hughes1.5%

Other TDMA5.3%

Figure 5 - Modem/Technology Deployment in the Maritime VSAT

Segment, 2009

page 7

Operator Performance The maritime VSAT market is led by just a few key operators. These companies divide broadly into two – those that have built a service offering around the offshore oil & gas market and those that are entirely focused on ships. The former – CapRock, and Schlumberger being the best examples – branched out into vessels other than rigs as they supplied service to the oil & gas support structure. Dive support, seismic survey, supply ships and shuttle tankers are all examples of types of seagoing vessels that the O&G communications operators class as oil & gas. There are some companies which have offshore installations, but no vessels of this type however – the best example being RigNet.

Those companies that specialise in the pure maritime segment – Vizada, MTN/SeaMobile and Ship Equip for example – have generally done so for many years and have built quite sizeable businesses that cross over with the O&G suppliers. They have picked up maritime customers from the O&G industry and, in some instances, attempted to diversify into serving rigs. At the same time, most of the largest O&G VSAT operators have begun to diversify into the maritime segment. Of the top 15 maritime VSAT operators ranked by the number of vessels in service, only four do not use iDirect as part of their service and 10 of the top 15 have adopted iDirect’s system as their primary, if not sole, platform. These operators include the leaders in almost all of the major market segments:

Oil & Gas – CapRock and Schlumberger

Cruise – MTN/SeaMobile

Fishing – Ship Equip

Commercial – Ship Equip, Eutelsat & SpeedCast, Intelsat and others

Mega-Yachts – MTN/ SeaMobile and OmniAccess

Vizada15.3%MTN

7.1%

Schlumberger5.2%

CapRock4.7%

Eutelsat2.8%

Intelsat3.1%

Telemar2.7%

Ship Equip10.1%

Others34.0%

NSSL 2.8%

Radio Holland2.8%

Elektrikom4.5%

KVH4.9%

Figure 6 - Oil & Gas and Maritime Stabilised Antenna VSAT Service

Provider Market Share, Vessels in Service 2009

Operator Primary/Sole Secondary Rank

Vizada SCPC iDirect #1

Ship Equip iDirect #2

MTN iDirect #3

Schlumberger iDirect SCPC #4

KVH ViaSat #5

CapRock iDirect SCPC #6

Elektrikom Comtech #7

Intelsat iDirect #8

Eutelsat iDirect ViaSat #9

NSSL STM #10

Radio Holland iDirect #11

Telemar STM iDirect #12

DTS iDirect #13

Mach6 iDirect SCPC #14

Orange Business Services iDirect SCPC #15

Others iDirect Other

Table 1 - Ranked Operator VSAT Platform Choice

page 8

The intense specialisation that operators reserved for the maritime market meant that for many years sales were strong, but relatively low in volume. Revenues and margins were also premium and contributed to a strong performance by almost all of the companies associated with stabilised VSAT services. As a highly specialised segment of the technology, barriers to entry into the High End Commercial markets were considered significant for other operators because the various niches are both demanding and require a great deal of inside knowledge to be successful. In the shipping world, initial customers included cruise lines and ferries, all of which needed crew and passenger calling as well as shipboard logistics. Both Vizada and MTN – the dominant operators in these segments in Europe and North America respectively – have gone on to develop many more sophisticated value added services to maintain both their value and their margins. Services have expanded into internet cafes, WiFi networks, newspaper delivery, television, telemedicine support and, most recently, onboard cellular connectivity with GSM roaming. By the early 2000s, Vizada in particular began to target the larger, less specialised segments of the market in its search for growth. MTN chose to stay focused at the higher end, maintaining its margins with more value added service offerings and by diversifying into the military, oil & gas and mega-yacht sub-segments. These different strategies saw Vizada leap ahead in terms of the number of vessels under contract, a lead it has maintained ever since. However, an increasing number of resellers then began to enter the business on their own account, in some cases using iDirect’s VNO model and in others setting up their own hub station or teleport. Until this time, almost all services had been based on SCPC technology and this remained the largest proportion of the installed base until 2008 when TDMA systems finally eclipsed SCPC as the dominant access scheme in use. TDMA had already become the favoured option for new installations from 2006 onwards as satellite capacity grew in cost and efficiency became ever more important. It was largely iDirect’s combination of SCPC-like speeds, granular QoS, lower cost equipment and bandwidth efficiency which brought the greatest impact and many new and some of the longer established operators now base their service on the Evolution platform. In the pure maritime VSAT business, there is no question that some of the largest operators listed in Table 1 would not have shown up at all less than seven years ago. Ship Equip has achieved extraordinary growth in just four years alongside its partner NewWave Broadband and Elektrikom, Radio Holland, Mach6 (now part of Globecomm) Telemar and NSSL (who share some facilities) and Milano Teleport have entered the market over the past few years and grown fast. All have done so with an exclusive maritime focus and have been based in Europe. KVH has grown its initial North American business internationally while DTS has successfully focused on the short term O&G workboat business in the Gulf of Mexico. They have been joined by several other companies, all of whom have largely led with strategies based on lower service pricing using a combination of smaller antennas and more contention of the bandwidth. In Asia, SpeedCast and SingTel are the local companies that have made most of the running. SpeedCast has grown very fast, but it has also had to contend with much greater competition from the European operators, particularly Ship Equip, who have established offices in the region and aggressively targeted Asian fleet owners.

page 9

3. The iDirect Platform

Platform Features iDirect’s VSAT product was designed as an IP networking system with an extremely flexible platform architecture. The company emphasises the ability of its inbound and outbound channels to be lit up anywhere across five different transponders and five different satellites, allowing an operator to grow its capacity when it needs it with whatever bandwidth is available and in different frequencies if business demands it. By contrast, a DVB-based system requires contiguous bandwidth and needs to grow in this fashion as well, thus demanding premium service from a spacecraft operator. With the Evolution and iNFINITI system options, iDirect is able to offer high-efficiency contiguous forward channels with DVB-S2/ACM as well as smaller, tailored outbound channels if required by an operator.

iDirect Evolution In 2008 iDirect introduced its third generation platform – Evolution. This added DVB-S2 ACM bandwidth efficiencies to the outbound channel. Alongside the new outroute came a new, lower cost remote terminal – the X3 – and the company has since launched the X5 and e8350 remotes that are backwards compatible with the iNFINITI platform. Evolution retains all of the solid hallmarks that have made iDirect such a strong player in the high-value segment of the market and the flexibility of its 5IF hub continues to outpace every other alternative. Evolution was an important release for the company because, as its customers had grown their installed base, the need for greater bandwidth efficiency had grown disproportionately as a result of rising space segment costs and issues of even finding capacity at all in some instances. By mid-2009 over 10,000 Evolution remotes were shipped, running in over 80 different networks with customers reporting the system to be extremely stable and performing as iDirect had promised it would. The Evolution system brought both new features as well as an enhancement of existing functionality:

Hub Options: iDirect offers four main hub options: a non-redundant Mini-Hub limited to a maximum of 30 remotes in a network; a 4 slot chassis that can support up to 4IF connections which replaced the previous private hub model adding better redundancy and expansion capabilities (the Industrial 4IF is a ruggedized version of this product); a 20 slot iSCPC concentrator that only supports M1D1 iSCPC cards; and, the full 20 slot 5IF chassis that can operate with five different transponders on five different satellites in different frequencies and that incorporates full automated redundancy in a 1:n configuration.

VNO Model: The iDirect platform is able to support what iDirect refers to as a "Virtual Network". A Virtual Network Operator (VNO) literally buys the capacity of a channel card in the hub chassis of a Host Network Operator (HNO). This allows VNOs to offer highly competitive broadband IP service, without a significant upfront investment. This capability illustrates why iDirect’s system has been so well received – it is not simply, as some think, the fact that the system offers a low cost hub. An operator is able to start a service and select from a range of hub products, unmatched by any other vendor, and cost-effectively support independent networks of between 15 and several thousand sites. The additional VNO capability can be employed either as an expansion option – many operators extend their service to different satellites uplinked from a different continent this way – or as a standalone business model in its own right. Expansion onto other satellites, different frequencies or simply another transponder is possible by adding another two cards (one each for inbound and outbound carriers) into the 5IF chassis, although it is not unusual for an operator to simply buy another 5IF chassis for an important customer.

Adaptive Coding and Modulation (ACM): The need for this level of bandwidth management is heightened with the introduction of Adaptive Coding and Modulation (ACM) in the Evolution

page 10

platform. ACM offers the ability for the hub to step modcods up and down to suit changing weather patterns and maintain availability, allowing the elimination of a costly link margin buffer of capacity which has to be calculated based on worst case conditions. The benefits of ACM are widely known and can bring up to 50 per cent efficiencies whilst increasing availability, but the downside is that any customer will find their link speed degrades as attenuation builds and the system compensates with more robust FEC and modulation. In some cases, priority services might then suffer while less demanding (and lower priced) sites are favoured by better weather. As a consequence, iDirect has integrated its ACM feature with GQoS, allowing operators to set an Extended Information Rate (EIR) that guarantees throughput under virtually any weather condition, taking bandwidth from less disadvantaged links and redistributing it to higher rate services. This allows an operator to provide a higher quality service to those customers prepared to pay for it, but it can also be used to ensure that all sites within a network receive the same level of service, however bad the prevailing conditions are at just a few of the locations. GQoS also generates reports which allow an operator to record how much network resource a customer required to achieve a set EIR and bill accordingly.

Key Features for Mobility iDirect’s early adopters were found mostly in the specialised segments of the VSAT market, two of which are the subject of our report of stabilised VSAT services – Oil & Gas and Maritime. The platform’s base architecture lent itself to being deployed as a multi-regional, multi-beam infrastructure either as a wholly-owned hardware platform or in a virtual form, with operators expanding their coverage by taking space in hubs already established in other regions and tying these facilities back into their own network management system – the VNO concept. Consequently, it was these operators that fed back requests for features and functionality who set in place some of the directions that iDirect has subsequently developed for the Evolution system.

Automatic Beam Switching: ABS is a feature that iDirect pioneered which is now being copied by others. Evolution remote terminals on moving vessels can be programmed to sense when satellites need to be changed and automatically switch to another beam either on the same or a different spacecraft. This allows operators to stitch together global or multi-regional coverage for a vessel without the need for intervention from anybody onboard.

Global NMS: GNMS ties into the ABS system because it brings the ability to manage and maintain consistent IP addressing and management of a unique remote as it moves between networks. As a vessel moves between a beam on one satellite to coverage on another at a different orbital location, IP and other management information is automatically transferred between hubs at different locations. This allows for uninterrupted sessions and minimal, if any, disruption to services and applications.

Open AMIP: The iDirect system works with all of the major manufacturers’ stabilised antennas, but in order to standardize the interface between the VSAT and the antenna control unit (ACU), iDirect has developed an open-source standard called OpenAMIP. This has been adopted by several antenna manufacturers who are integrating it as part of their antenna system. All ACU’s that have adopted the OpenAMIP standard are guaranteed to work with iDirect’s Automatic Beam Switching feature.

Group QoS – Advanced Bandwidth Allocation: Group QoS (GQoS) is another differentiating feature that iDirect highlights. This is a complex tool for an iDirect network operator that, in essence, allows traffic types to be prioritised, based on a variety of different parameters, within the allocated bandwidth. iDirect developed Group QoS so that a higher level of granularity can be imposed on an operator’s network to enable the most efficient use of the available bandwidth. GQoS can provide different users, terminals and applications with specific QoS levels in a hierarchical structure across the entire system. iDirect believes that GQoS brings substantially greater levels of management functionality and enables both

page 11

more efficiency in the use of the available bandwidth and a significant increase in a network operator’s ability to support complex applications, customer deployments and service profiles. With respect to QoS as applied to voice traffic, the company holds that competing VSAT systems only prioritise voice bits over data bits as they are transmitted by a remote terminal, whereas the iDirect system can specifically siphon data capacity from one remote to feed voice capacity requirements at a completely different remote.

SatManage: is a network management tool that has particular application for maritime VSAT service providers. The system’s advanced suite of automation and integration capabilities enables more detailed, trackable SLAs for end users. The Location Tracker module is used by an operator’s network operations centre as well as shipowners themselves to track vessels in real time and have immediate access to current and historical data, including network performance metrics. This can also include external data, such as weather information and satellite footprint details.

page 12

4. Conclusion The number of stabilised VSAT systems in operation is not large given the overall number of vessels that could potentially take a service. Inmarsat has over 210,000 active maritime terminals versus fewer than 10,000 stabilised VSATs. However, maritime VSAT service revenues are now 50 per cent higher than Inmarsat’s own (wholesale) revenues. Equally, growth rates for VSAT are broadly twice the rate as for MSS services. At the customer end, a more diversified set of purchase drivers that are coming from within the maritime industry as well as being imposed on it by regulators and ship system vendors, appear to be bringing a realisation that broadband at sea is inevitable. VSAT services have continued to penetrate strongly into the wider commercial shipping market, almost always replacing MSS L-band services as a vessel’s primary connection. The total number of vessels in service rose by 55 per cent between 2007 and 2009, despite extremely trying economic conditions for the maritime industry at all levels. With reported average usage and data rates doubling in 2009 alone, it is clear that ship-owners will continue to find that VSAT technology is the only long term solution to the requirement to have broadband on-board a vessel.

Over the course of the full multi-client study on which this executive summary is based, COMSYS conducted 130 separate interviews with service providers, equipment manufacturers, satellite operators, resellers and experts in the maritime market. In almost every single instance, where an opinion was given, the view has been that a conservative estimate on the number of commercial vessels adopting a stabilised VSAT service over the next five years is most likely to be between 10,000 and 20,000. This generic estimate would include the Fishing and High-End Commercial markets, but not take into account the Military and Leisure segments. Our analysis effectively confirms the views held in the market at large. Our concerns in the immediate term remain in three areas: installation capacity; space segment price and availability; and, customer resistance. We believe that crew welfare will remain the primary purchase driver for VSAT and is the main reason that, in the longer term, broadband at sea is inevitable. There will then be a domino effect as other ship owners are forced to provide better conditions or risk losing crew – a situation that remains a

concern for fleet owners despite the downturn. Additionally, the growing demands of increasingly sophisticated vessels and greater and stricter regulatory compliance have combined with needs for greater operational efficiency to begin to force a new view within the maritime industry. As a consequence, we believe that VSAT services will continue to grow and, in all likelihood, this growth will accelerate as the commercial shipping industry begins to recover from the economic downturn. Whilst our study found that the high-end segments, including O&G rigs, cruise liners and ferries, are all but saturated, a great deal of potential remains in the larger deep-sea commercial fleets as well as the fishing and leisure segments. Our forecasts expect the number of vessels with VSATs on board to more than double to almost 20,000 over the next five years – and we consider these to be conservative estimates.

-

5

10

15

20

25

04 05 06 07 08 09 10 11 12 13 14

Num

ber o

f Sta

bilis

ed V

SATs

in S

ervi

ce (0

00s)

Actual

Most Likely Forecast

Optimistic Forecast

Figure 7 - Five Year Forecast Stabilised Maritime VSAT

Sites in Service

page 13

5. The COMSYS Maritime VSAT Report

The COMSYS Maritime VSAT Report is one of many multi-client reports on the VSAT industry that COMSYS has published since 1988. The foundations for our report on maritime stabilised VSAT services and systems were laid in 2006 when several companies requested COMSYS to look in more detail at this specific market vertical. We had already established an extensive understanding of the maritime VSAT market, but even with research which was conducted for The VSAT Report, it was clear that a study focused on stabilised services also required a far greater understanding of the maritime and oil & gas markets themselves. Between the end of 2007 and the

beginning of 2008 we undertook a great deal of specific research into stabilised antenna VSAT services and subsequently published the 1st Edition of this report in April 2008. The 2nd Edition builds on that knowledge base and is supplemented by our research during most of 2009 for the 11th Edition of the VSAT Report as well as specific research conducted between the end of 2009 and the first half of 2010. It is the culmination of 130 interviews with current and potential maritime VSAT operators, MSS L-band operators, stabilised platform manufacturers, VSAT and L-band system manufacturers, industry associations and experts in the maritime industry, several with key expertise in important segments. This Summary Report is primarily based on extracts from the 2nd Edition of the COMSYS Maritime VSAT Report. The full report details the growth of maritime VSAT services, analysing the number of vessels in service and market revenues by operator, region, technology and segment. Almost 120 pages containing 41 tables and 84 charts and figures provide a statistical analysis of the service market by number of vessels in service and revenues, both historically and forecast over the next five years. As always, COMSYS bases its information on primary research and builds from the ground up. The COMSYS Maritime VSAT Report includes:

Current VSAT penetration by operator and maritime segment type by number of vessels and revenues.

Competing technologies to VSAT.

Analysis of the stabilised VSAT antenna manufacturers, production, technology trends, pricing, market shares and revenues.

Size of the maritime market segmented as O&G Rigs & Platforms; High-End Commercial; Mainstream Commercial; Fishing; Leisure; Military & Government; and, Inland Waterways.

Total available and addressable markets for stabilised VSAT services.

Market drivers and inhibitors.

Operator65.9%

Vendor20.3%

Maritime Industry

8.9%

Technology Competitor

4.9%

Total 130 Interviews

Figure 8 - Primary Research Interviews by Type

page 14

Five year "Most Likely" and "Optimistic" forecasts by number of vessels and revenues by maritime segment.

It considers different stabilised antenna systems, their availability, price points, strengths and weaknesses as well as future development. The total size of the maritime market is assessed and the available market for each segment is calculated alongside a discussion of the major trends within each. Demand drivers are examined and explained and examples of actual decisions are cited. We first issued a forecast in our Maritime VSAT Report published in April 2008. The following figures compare our forecasts for 2008 and 2009 from the 1st Edition compared with what the market actually did.

04 05 06 07 08 09

Num

ber o

f Ves

sels

in S

ervi

ce

Actual

2008 Optimistic

2008 Most Likely

04 05 06 07 08 09

Rev

enue

s (U

S$m

)

Actual

2008 Optimistic

2008 Most Likely

In summary, our forecasts for the number of vessels in service were accurate for 2009 at the Most Likely scenario by 2% and by 9% for the Optimistic Scenario. For revenues, both Most Likely and Optimistic forecasts were within a 5% margin of error. For 2008 Most Likely forecasts for both vessels and revenues were within 5% of actual results and the Optimistic scenarios were within 1%! The complete COMSYS Maritime VSAT Report is provided in PDF form and costs £1,900 for a Single User version and £2,500 for an unlimited Multi-User version. It can be ordered from our website – www.comsys.co.uk – or by calling us on +44-1727-832288. If you would like to discuss the report and its contents in more detail you can call or email Simon Bull at simon@comsys.co.uk. COMSYS also publishes The VSAT Report – the standard reference and market analysis on the VSAT market. This has been variously described as “the industry Bible”, “the industry benchmark”, “the definitive market study” and, “so accurate – its scary”. More information on The VSAT Report is also available on our website.

page 15

About comsys

Communication Systems Limited (comsys) is a specialised telecommunications consultancy company which was founded in 1982. comsys performs a range of consultancy services in many areas of the telecommunications industry, but has concentrated its resources in the field of satellite technology and has developed expertise in business planning, regulatory, administrative, competitive and operational analysis. Clients range from users and governments to operators and manufacturers. Over the past 25 years we have visited essentially all manufacturers of VSAT systems and most of the world’s operators of VSAT systems as part of the primary research we do in the industry. comsys is regularly consulted on VSAT industry matters (as well as the satellite communications business in general) by clients both within the satcom industry and outside it (including the financial community, regulators and larger consulting firms). We have also advised clients on present and future markets, new products, service introductions, application platforms and network procurements ranging in size from 50 to 3,000 sites. On the financial side our figures and analysis of the VSAT industry have been extensively used by Wall Street analysts for many years as well as in filings to the SEC and in support of other financial documents and business plans. comsys has been the primary industry advisor or part of advisory teams in the purchases of most of the major satellite-related sales over the past few years, including those of Inmarsat, PanAmSat, Hughes Network Systems and Intelsat. comsys has earned a reputation for objective, empirical analysis and is known in the industry as a primary source of market information. This reputation has been hard-earned by constant monitoring of the world market through visits to businesses in more than 70 countries.

Simon Bull, Senior Consultant, comsys Simon Bull is a Senior Consultant with COMSYS. He has specialised in the VSAT market since 1985 and advises clients worldwide on all aspects of VSAT systems and satellite services. He is primarily responsible for the multi-client VSAT studies published by COMSYS during the last twenty years, including the company's VSAT Report and Maritime VSAT Report. He also advises clients on the regulatory, strategic and business planning, administrative and operational aspects of satellite communication systems. He has visited hundreds of VSAT companies in more than 70 countries worldwide and is regularly consulted by VSAT manufacturers, operators and users. He has been actively involved, directly and as part of multi-disciplinary teams, advising clients with respect to acquisitions ranging in size from $5 million to over $1 billion. In 1997, Simon was instrumental in forming the Global VSAT Forum (GVF), an industry organisation which represents over 140 of the leading manufacturers and operators of VSAT systems around the world. He currently co-Chairs the GVF’s Maritime Industry Group.