Asia, Middle East And Africa Markets To Watch In 2008, Experts Say
[Satellite News – 2-19-08] The satellite industry is very much a global industry. In 2007, there were numerous interesting developments around the world. In Africa, Nigcomsat launched a satellite. In the Middle East, Yahsat emerged. Every region of the world has its own dynamics, but there are interesting satellite stories to be found in each region. Satellite 2008 Show Daily spoke to Maria Velez de Berliner, president of Latin Intelligence Corp, Simon Twiston Davies, CEO, CASBAA (Cable & Satellite Broadcasting Association of Asia), William Barrett, SVP, Asia Pacific Aerospace Consultants (APAC), and Patrick French, a satellite analyst at NSR about the role satellite technology is playing in different regions of the world
Satellite News: What do you see as the prospects for satellite services in regions such as Africa, Latin America and Asia? Are the economic situations positive enough for satellite to have a much stronger impact in these regions than before?
Velez de Berliner: Asia’s economy is buttressed by China’s, and Africa’s by China’s and India’s contest for, and investments in, its natural resources, minerals, precious metals, and oil. Neither China nor Africa has significant exposure to the financial risks the US has in the subprime market.
Excluding the economic mismanagement of Venezuela, Bolivia, Ecuador, Nicaragua, and to some extent Argentina, Latin America’s orthodox economic policies will continue to support economic growth, albeit slower in 2008 than in 2007.
Latin America has limited exposure to the U.S. subprime market and, so far, only its financial markets have experienced periodic declines in response to fluctuations in the U.S. The speculative influx of liquid capital, such as the ‘fondos golondrina’ that underpinned Argentina’s economic meltdown, is also limited. But Latin America’s surprising economic stability comes from strong intra-regional and domestic markets, fueled by exports to China, India, the EU, and the U.S. This still makes the region susceptible to outside shocks, if external demand falters.
Neither China, Africa, nor Latin America will be fully unscathed should the U.S. go into recession in 2008. A decline in household wealth in the U.S. and its repercussions on consumers’ purchasing power will curtail exports from China and Latin America to their major market, the U.S.
French: The African, Latin American and Asian satellite markets continue to show good growth in specific applications. Notably DTH and free-to-air bouquets are generating substantial demand for leased capacity from satellite operators for carriage of television programming. Cellular backhaul is another market that remains buoyant in these regions, though it is becoming more difficult for cellcos to lease capacity at prices that they have become accustomed to in prior years. Enterprise VSAT networking services are also strong is certain countries and for specific market verticals, however this application probably accounts for less new leased satellite capacity than video or cell backhaul.
Barrett: The emergence of these new satellite operators in 2007 goes against the trend of satellite operator consolidation in recent years and has overtones of one of the original major drivers of satellite systems in the region – attempting to establish a national presence in the industry. Nigcomsat is government owned although it plans to privatize in the near future. The UAE generally has been trying to position itself as a regional hub in many areas including shipping and air transport and now perhaps satellites given the success of the UAE based mobile satellite operator Thuraya.
Satellite News: What do you see as the prospects for satellite services in Asia? Are the economic situations positive enough for satellite to have a much stronger impact in these regions than before?
Barrett: The Asian economies are again booming. While this growth may be tempered a bit in 2008 by the slowdown in the U.S. market most Asian economies will continue to record significant growth in 2008. China and India attract most of the headlines but Vietnam, Indonesia, Philippines, Thailand, Malaysia and Australia should all deliver strong growth in 2008. The dramatic increase in intra-Asian trade over the last five years has made these economies somewhat less dependent on the U.S. and European markets hence the Asian markets should continue to grow even with a slowdown in the Western countries.
Twiston Davies: The Asia Pacific satellite services industry has good reason to be optimistic about growth opportunities although there are a number of issues needed to be addressed in order to boost further development. Among other things, the new demand for spectrum devoted to HDTV, interactive and broadband TV content is driving the market. On top of this, the industry expects to see new demand emerging from still undeveloped video services such as mobile TV and the further deployment of VSAT networks. Meanwhile, after unprecedented growth in supply during the 1990s, the Asian market is starting to see the initial stirrings of healthy consolidation.
Satellite News: Do you expect other regional players to emerge in Latin America?
Velez de Berliner: We saw the revival of SatMex and Brazil’s Star One‘s continued growth in 2007. We also saw the continuation of TeleSur and the decision of Venezuela to go ahead with the development and launching of its own satellite. That president Hugo Chávez has the liquid capital required to finance these projects can’t be denied. However, it is doubtful Venezuela will become a significant player in the industry, even if Chávez finishes its current presidential period, which is also doubtful, given that a revocatory referendum seems likely to put him out of office in 2010. A succeeding Venezuelan government will have more pressing needs than the building of its own satellites.
Significant industry players require advanced technical skills and intensive capital for R&D, manufacturing, launching, and the provision of advanced connectivity and communications that deliver customer-specific services and security. As a general rule, these are not plentiful in Latin America
Satellite News: How do you view the prospects for new DTH players in Asia? Are there strong opportunities for new platforms?
Barrett: The Asian DTH market is not as developed as that in North America or Europe and hence presents definite opportunities. As discretionary incomes rise in Asia as a result of the economic boom DTH, a proven driver of satellite growth, will grow in Asia as well. Already a number of new DTH players are emerging in India and China and this trend is likely to continue elsewhere in Asia. The intense Asian interest in the Beijing Olympic Games will provide a powerful stimulus for DTH services in 2008. DTH is also likely to be the most effective means of introducing HDTV in the region. The vast population of rural Asia, often located in somewhat mountainous terrain, is not always well served by terrestrial based television stations and has a strong desire for more television services. Strong demand for additional television offerings is also present in urban Asia. Both of these areas represent potential markets for DTH. The issue, as always in Asia, is to overcome the distribution challenges and provide a service offering within the means of the general population. Protostar and EchoStar are both building satellite platforms for the region with DTH capacity available for lease to regional operators.
Twiston Davies: According to our research there are less than 20 DTH platforms across Asia, along with only about 14 million DTH subscribers. The growth opportunities are huge. For instance, the DTH subscription market in India represents less than five percent of today’s pay-TV subscriber base of more than 60 million cable households. China doesn’t yet have a DTH platform; The Indonesia DTH market represents less than one million subscribers out of the total 40 million TV households across 17,508 islands; It’s the same story in the Philippines with well below 100,000 DTH subscribers. Meanwhile, in India, we still wait for the launch of two new DTH platforms sometime this year. The upside for DTH services can only be very positive in a regional economy that is growing by almost 10 percent per year.
Satellite News: Piracy remains a major issue for pay-TV operators. Do you believe the regulatory environments are strong enough to allow satellite operators to maximise their potential revenue return in these markets?
Twiston Davies: Certainly, the problem of piracy is serious in the Asia Pacific, destroying the value of pay-TV video content, sapping the industry’s vitality and often deterring new investment. For year end 2007, CASBAA estimated that piracy had cost the market well in excess of US$1 billion in revenues. To explain further, Thailand and the Philippines are the worst-hit jurisdictions in Asia; piracy in Indonesia, unfortunately, is also rapidly rising and China’s burgeoning Internet industry is also a great source of concern, given that rampant piracy is undermining the legitimate pay-TV and fast leaking to rest of the region. Thus, without strong regime of intellectual property rights, the development of satellite-supported video distribution remains under persistent threat.
Barrett: Asian regulatory environments are not that different to those in North America and Europe. In fact many Asian countries have modeled their regulatory systems on those from Europe or the U.S. The main issue in Asia is whether the resources and the political will are available to investigate and enforce anti-piracy regulations. In the contention for resources for the many pressing needs in Asia nothing gets the resources it needs and this includes resources to enforce anti-piracy regulations. Operators should use encryption and work with the government, customers and equipment providers to deter piracy. Strong local distribution partners, who have a street presence that provides good intelligence on violations, are the key to success in these markets.
Satellite News: How do you view the prospects for new DTH players in Latin America? Are there strong opportunities for new platforms?
Velez de Berliner: Disposable income will continue to determine the growth of this sector. Increases in the cost of energy, food, and education, higher levels of tax collections, and implementation of monetary policies to counter inflation will crimp incomes.
Growth will also depend on programming offered. Social networking platforms such as (My Space and You Tube) have yet to make inroads. Decency regulations regarding content and restrictions on private information and its public display, which vary from country to country, will constrain the sector. Growth prospects will remain low to medium in 2008.
Satellite News: Where do you see the strong growth opportunities for satellite in Latin America?
Velez de Berliner: Colombia. Brazil, Mexico, and Chile are the strongest markets for service providers and integrators. Private industry in these countries uses broadband for their inter-country and international communications and daily activities. Also, the governments are strong supporters and users of satellites and their applications. Concurrently, these are the countries where outside-the-box applications will be most welcomed in education, health care, cyber cafés, security, intelligence collection and analysis, ship-to-shore communications, cargo identification and monitoring, mapping and protection of oil and gas exploration, and tracking of downstream activities.
These markets are ripe for joint-venture partnerships where satellite companies team with the government and educational and research institutions (few as they are) to create innovation and solution centers in agriculture, energy, alternative fuels, critical materials production, storage, and managing, treatment of tropical diseases, water desalination, and access to and distribution of potable water.
Satellite News: How do you view the prospects for new DTH players in Africa and Asia? Are there strong opportunities for new platforms?
French: NSR is of the opinion that DTH will remain one of the highlights of the market in Asia and Africa. There remain a number of green-field opportunities in Asia and it is also likely that several countries will see the emergence of new players seeking to compete with an underperforming incumbent, as has happened in Indonesia. And of course the Indian market for DTH is booming and is unlikely to see any shakeout for several years at least.
Africa is a step or two behind Asia, but NSR speculates that it will be the hot DTH market for the next decade. Some early new platforms are emerging and even though not all will succeed, this is just setting the stage for what is likely to come as more and more nations in Africa see a gradual strengthening of their economies and a bettering of the prospects for the everyday citizen.