Maritime Offers Cruiseline Cell Service, Looks To Oil And Gas Markets

Miramar, Fla., March 19, 2004— Since private investment firm Falconhead Capital bought out Maritime Telecommunications Network for approximately $30 million a year ago, the provider of communications services on cruise ships has more than doubled its profits.

But that's not all it's been up to.

On Tuesday the company announced a joint venture with AT&T Wireless that will allow cruise ship passengers to use their cellphones while at sea. It also says its technology has been sought after more by the U.S. military and government since the 9/11 terrorist attacks.

It built a satellite-based mobile communications truck used by NBC correspondents during Iraq war coverage, and managed the satellite feed for President Bush's aircraft-carrier landing. And it is expanding beyond its traditional market in cruiseline communications to the market for communications on oil and gas rigs.

The joint venture formed by AT&T Wireless and MTN, as Maritime is known, will sell the companies' services to cruiseline companies as a package deal. The cruise operators, however, won't bill the customers for their usage time. Instead, the call charges will appear on the bill the passenger gets from his wireless carrier.

This is the "critical element to why we believe we will be very successful" with the service, said David Kagan, chief executive officer of MTN.

Carnival Cruise Lines is testing the service, according to David Moross, chairman and CEO of Falconhead.

Mr. Moross said he thinks passengers will be far more likely to make calls using their cellphones than they have been to place calls using shipboard phones, which are located on the decks and in cabins. This is a plus for the cruise operators, he said.

Passenger interest may hang on more than convenience, however. There is also the issue of price. Currently, it can cost anywhere between $3.00 per minute and $15.00 per minute to make a telephone call on a ship, and prices vary widely between cruise lines, according to Mr. Kagan.

If the cellphone service from AT&T Wireless and MTN carries a smaller price tag, passengers may be more inclined to gab, said Roger Entner, director of wireless mobile services at research firm Yankee Group.

If there is a far smaller price, said Mr. Entner, "you talk about [how] you met this great man or woman, or the weather," or other casual topics. Before, he said, you would use on-board phones only for emergency calls.

The prices for the calls haven't been determined, though, and it is far too early to determine what they will be, said an AT&T Wireless spokesman.

In addition, the service is restricted to people whose carriers both use the GSM standard for cellular communications and have a roaming agreement with AT&T Wireless, a spokesman for the carrier said.

This means that presently only AT&T Wireless and Cingular users will have access to the service. (AT&T Wireless agreed last month to be acquired by Cingular for $41 billion.)

Users of Verizon, Sprint, Alltel, US Cellular, and Nextel, which don't use GSM, won't have access.

Despite the possible hurdles, MTN views its latest offering as a success in the making. At present, half of its services for cruise ships are so-called variable services, such as personal calls made by crew members and passengers. The other half are services necessary for managing the ships themselves, such as communicating payroll and fuel management data.

Mr. Moross said it is highly likely the variable services it sells will overtake the other, "fixed" services.

Another development under way at MTN is the company's expansion into the communications market for oil and gas rigs. Bolstering this expansion is MTN's minority shareholder, Natural Gas Partners, a provider of private equity capital for the oil and gas sectors. Falconhead still owns over 80% of MTN.

Having NGP become a shareholder was "strictly a strategic move" for getting into the oil and gas business, said Mr. Moross. So far MTN has announced contracts for offshore installations operated by Baker Oil Tools, Heerema Marine Contractors, and others. 
 

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