ABS CEO Does Not Rule Out ProtoStar Asset Bid
Asia Broadcast Satellite (ABS) is one of the new breed of dynamic players on the Asian satellite landscape. Interestingly though, the operator generates less than 10 percent of its overall revenues within the Asia-Pacific region.
The most recent deal for ABS may underline that ratio, as the operator signed a long-term, multiple transponder deal with GT Satellite Systems (GTSS) of Russia, as ABS views Eastern Europe as a big potential growth market. Under the agreement, ABS will provide GTSS with expansion capacity on the new ABS-2 satellite, which scheduled to be launched in 2012. As part of the multi-year contract, GTSS also will expand its capacity on ABS-1 by leasing Ku-band transponders on the ABS-2 Russia/CIS beam for further expansion of TV distribution services.
ABS CEO Tom Choi discussed revenue streams outside of Asia as well as capital expenditure plans in light of the company’s ABS-2 and Koreasat moves.
VIA SATELLITE: What percent of revenues do you derive from Eastern Europe and what percentage of your revenues do you currently derive from Asia?
Choi: In terms of Eastern Europe, we currently derive less than 15 percent, but we see that figure growing more to around 30 percent in the future. In terms of Asia, we derive less than 7 percent of our overall revenues. This percentage will probably increase when the ABS-2 satellite launches.
VIA SATELLITE: Is the company repositioning itself away from Asia?
Choi: We are in the Indian Ocean. Our capacity pretty much serves the landmass of the Eastern Hemisphere. So being a commercial entity, we will go where the customers are, and in particular where they can afford a quality service. I think the emerging markets outside of Asia have more capacity constraints and demand will grow. Naturally strong customer demand and capacity constraints will lead to higher prices per transponder.
In Asia, although the pricing pressure today is lot less than in the past, we still have a lot more competition, which naturally drives the capacity prices lower. Regardless we still greatly value Asia for all of its significant markets and still hope to be a major player in the region with ABS-1 and ABS-2. ABS-2 will have dedicated C- and Ku-band beams tailored for Asian countries.
VIA SATELLITE: When can we expect to hear about ABS-3 and ABS-4?
Choi: We have made some filings in Asia and we have discovered a couple of filings over the Atlantic Ocean Region, where we are interested in expanding our business. Coupled with the increase of our backlog and the completion of the Export Credit Agency financing for ABS-2, we may announce another project, ABS-3, which will be a C-/Ku-band satellite in the Atlantic Ocean Region next year. We have already identified an anchor customer already for this program. We may also do another project over the Pacific Ocean Region, but we are not sure yet as we would need to achieve coordination for some of our filings. Needless to say, our focus right now is to complete the Export Credit Agency financing process right now with [export-import bank and Coface as well as building up our backlog for ABS-2. Once that is completed, we will firm up our plans for additional expansion.
VIA SATELLITE: What is significance of the deal with GTSS?
Choi: The GTSS contract is significant for us as it is a confirmation of the ABS-2 business case. GTSS is already operating on of the largest television distribution platforms in Russia. The majority of the demand for ABS-2 comes from customers who are already operating successful businesses on ABS-1 and wish to expand their capacity. We have another deal in the pipeline which is about 100 percent larger than the GTSS deal in terms of dollars. These two deals, combined with the previously announced deal with Singapore Telecom, bring the total backlog of ABS-2 to over $300 million, which is significant at this stage of the program.
VIA SATELLITE: How do you see the African opportunity now for ABS?
Choi: We currently have a lot of capacity being used over Africa on ABS-1. I would say over 40 percent, but most of those customers are Asia-based operators such as PCCW and Singapore Telecom who are expanding their businesses into this region. We see Africa being a vibrant market but think it will become more competitive as there are more satellites launching in to the region over the next two years. There are also some cable networks running into the coastal areas of Africa. Service providers who have been making money by providing satellites IP backhaul services may see their pricing erode a bit due to the terrestrial competition. Regardless of the terrestrial or satellite competition I strongly feel that Africa will continue to grow as the region’s appetite for cellular backhaul, DTH, cable TV and enterprise networking will not slow down.
VIA SATELLITE: Is cellular backhaul a market you are targeting?
Choi: I think cellular backhaul represents today less than 20 percent consumption of our capacity. It is a growing segment overall for our industry. The mobile market is going to continue to grow in double digits over the next few decades. Satellites are attractive for this segment as laying of optical fiber into rural areas is significantly challenging from an ROI perspective, especially now that most of the urban cities in the developing world are now already saturated with cellular coverage. These mobile operators will expand their networks to rural areas where they will depend on satellites more than ever.
VIA SATELLITE: Do you expect the global economic situation to improve in the near term?
Choi: Today, we are in a situation where we have more demand for capacity and customers than we have available capacity to serve them. We have to turn away customers for most of our beams. This is the reason why we are prepared to launch such a large satellite for the ABS-2 program. If the downturn impacts one part of the market, we think we can recover and use that capacity for another market segment. I think that is the advantage we have with our position in the Indian Ocean region. We can serve customers in Africa, the Middle East and Eastern Europe as well as Asia. We have a lot of choices in where we can get customers from. While the FTA television market has suffered significantly the past two years due to the dramatic drop in advertising budgets, the pay-TV, mobile and data markets continue to grow. For assisting those risk averse video customers, ABS has put in place an end-to-end cable TV distribution solution inclusive of space segment, uplink and playout to enable several broadcasters to launch their business in Asia on a low-cost and risk-sharing basis with us.
VIA SATELLITE: What do you see as the major challenges for ABS over the next 12 months?
Choi: I think the global downturn in the past year has not really affected the satellite industry, but it has impacted our major customers like the video broadcasters. I also think it is impacting the financing ability of telecommunications customers. So it will be interesting to see what will happen with the global economy over the next couple of quarters. I think that most CEOs of our industry are hard at work making plans to hedge their positions in the event the global economic downturn affects our industry. â–