Telenor’s gamble and Panasonic’s predicament

News that AeroMobile was placed into administration on 21 December has prompted many in the aviation world to ask: why?

It’s a reasonable question. While the in-flight entertainment and connectivity (IFEC) landscape is littered with Dodo birds – firms that become extinct and then look rather clumsy and ludicrous when discussed in retrospect – AeroMobile seemed to have its sustainability act together.

The firm, formed in 2003 as a 50/50 joint venture between Arinc and Telenor, secured a major international customer in Emirates, and set about to equip the carrier’s entire fleet with its in-flight mobile phone connectivity solution (nearly half of the Emirates fleet has been equipped thus far).

AeroMobile also has what appears to be a nice deal with Panasonic Avionics. The London Gatwick-headquartered firm provides its hardware to the IFEC manufacturer, which in turn brands the solution eXPhone and offers it to customers – including, notably, Lufthansa – as part of a suite of connectivity solutions.

While the Emirates arrangement is still going strong, and installations of eXPhone are still planned for Lufthansa and others, other aspects of AeroMobile’s business have changed.

For starters, we can probably stop calling AeroMobile a joint venture. In the last 18 months, Norway-based telecommunications giant Telenor has been increasing its shareholding in AeroMobile, and now owns a 99.88% majority (Arinc’s decision not to issue a formal statement in the wake of AeroMobile’s administration shows just how small a role Arinc plays anymore).

Secondly, it is becoming increasingly rare to hear of AeroMobile discussed as a standalone solution. Panasonic and AeroMobile are now so inextricably linked that Panasonic all but talks about the Emirates deal as its own. “We continue to make steady progress on our in-flight mobile phone connectivity solutions (eXPhone), which have been in the market for years,” says the firm.

So, let’s ask some logical questions. If Telenor essentially owns AeroMobile anyways, why didn’t it simply buy Arinc’s final 0.12% and pony up the cash to keep AeroMobile out of administration?

Why would Telenor allow AeroMobile to suffer the indignity of administration if the company ultimately plans to buy AeroMobile out at auction?

IFEC executives from around the world are speculating about the answers to these questions. My own intelligence gathering is leading to two possible motives (neither has been confirmed by Telenor).

The sense is that the administration process will rid AeroMobile of some key liabilities (meaning AeroMobile can be bought for less than it would cost Telenor to meet obligations in full).

Additionally, there are many existing agreements where Telenor and Arinc are joint signatories, which can make life awkward for the senior partner.

If either or both motives are driving Telenor right now – and I stress the word if – then I don’t think it would be out of line to have a discussion about the ethics of such a move.

Outside of that debate, however, it seems clear that AeroMobile’s administration is good for Telenor IF nobody else emerges with a higher bid for the firm.

Here is where Telenor is taking a gamble.

Panasonic could very well decide to outbid Telenor at auction. Asked whether or not it is planning a bid, Panasonic played a little bit coy on the subject. Its spokeswoman – the always helpful Theresa Yeoh – says she is not aware of any bid activity for AeroMobile. But that doesn’t mean it isn’t happening.

And then there is AeroMobile’s arch rival, Airbus/SITA joint venture OnAir, whose CEO says the firm is mulling a potential bid. If OnAir is in any way serious about making a bid, then Panasonic has a lot of thinking to do.

Panasonic has been embroiled in a nasty argument with Airbus over gaining offerability status for eXPhone. And, as reported here before, Airbus is not backing down in its insistence that Panasonic first meet the communications architecture requirements of its long-haul aircraft, including the A380 (of which Emirates is a big customer) and the A350.  If OnAir snatches up AeroMobile, would Panasonic be forced to finally play ball with Airbus and OnAir?

Also, if OnAir comes to AeroMobile’s rescue, could it spell further IFEC industry consolidation?

Heck, maybe Boeing should grab AeroMobile, whose solution the US airframer intends to make line-fit offerable this year, and who is no doubt planning some response (with Panasonic) to Boeing’s RFI for 787 connectivity.  

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