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Growing Launch Prices Could Threaten Satellite Replacement, New Ventures

By | September 14, 2008

      Satellite operators have seen the prices for launch services rise, and continued growth could begin have an impact on future satellite purchases. There has been “huge increases in launch service prices” and that combined with the increased costs for new satellites, was having “a dramatic impact in the satellite industry,” said Intelsat CEO David McGlade. “… Current costs are making things harder when it comes to replacement satellites, for example. When you add factors such as insurance costs, it is making business cases harder to close.”
           Cato Halsaa, CEO of Telenor Satellite Broadcasting (TSB), shared these sentiments. “Prices are absolutely increasing, particularly on the launch services side. It is definitely making things harder in terms of acquiring new satellites,” he said.
           TSB, the satellite broadcasting arm of Telenor, traditionally has served the Nordic region but would like to boost its position in Central Europe, where demand for satellite capacity is running high. TSB likely will issue a request for proposal for the Thor 7 satellite before the end of the year and would like to have the Ku-band satellite in orbit by 2011.
           But the potential costs of the satellite and launch could present “a very real barrier” to the overall business case for the satellite, and in a worst case scenario, the satellite contract could be delayed, said Halsaa. “The pressure on getting good costs per transponder is higher than ever right now,” he said. “When we look to get quotes (launch and manufacturing), we expect the quotes to be a lot higher” than in the past.
           Even Intelsat, the operator of the world’s largest commercial satellite fleet even will have to be smarter than ever when it comes to capital expenditures, said McGlade. “We need to be smarter and better when looking to acquire new satellites,” he said. “We have to look at things combining satellite procurements and figuring out exactly what we need. We also look at flight-proven technology and plan to use our superior technical acumen when it comes to new satellites. We also want to encourage other providers into the market.”
           In terms of whether launch service providers are taking advantage of satellite operators, McGlade was diplomatic. “We want to launch service providers to have a healthy sustainable business, but there has been perhaps a taking advantage of the situation to increase prices. Although, historically, prices had been low before,” he said.

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