Tom Choi, CEO, Asia Broadcast Satellite

Asia Broadcast Satellite (ABS) is one of the new breed of satellite operators trying to make an impact in Asia. The company, founded less than two years ago, was established to meet the growing demands of broadcast and telecommunications operators in the Indian Ocean Region.
ABS founders Thomas Choi and Gregg Daffner took a quicker route to space than most satellite operators, working with major shareholder Citigroup Venture Capital International and with the financial backing of Asia Debt Management to acquire the Lockheed Martin Intersputnik (LMI) satellite operator from Lockheed Martin. (Daffner resigned as president of ABS in April but  will remain a strategic advisor and individual shareholder.)
The satellite, renamed ABS-1, began commercial operations in the 2006 fourth quarter and throughout the last two years, ABS has been working hard to establish its presence in the region. Since the launch, ABS has secured some interesting deals.
In October, the operator announced an intriguing cooperation with Vietnam Telecom International, a subsidiary of Vietnam Posts and Telecommunications Group (VNPT), Vietnam’s largest telecommunications company. Under a memorandum of understanding, the two companies will exchange capacity on ABS-1 and VinaSat-1, which was lofted into orbit in April. The agreement also provides for joint cooperation for telecommunications and satellite services.
ABS is also casting its eye toward markets outside of Asia, such as the Middle East. In April 2007, ABS teamed up with Batelco, a leading telecommunications company in the Middle East, to offer broadband satellite services in the Middle East as well as Asia.
ABS also plans to expand its capacity offerings with the scheduled launch of the ABS-2 satellite, which will carry more than 60 transponders, in 2010.
In an exclusive interview to Via Satellite, Tom Choi, CEO of ABS, discusses the operator’s growth plans and how the new satellites it is planning will enable it to become more of a force throughout the Asia-Pacific region.

Via Satellite: What demands are you seeing for satellite capacity in Asia?

Choi: The demand for satellite capacity in Asia is currently being driven by growth in cellular trunking, VSAT and local cable TV distribution channels. Currently a lot of C-band capacity in the Asia-Pacific region is being used for IP transit, point-to-point backbone services, but this segment of the market is diminishing in both profitability as well as volume.

Via Satellite: What will be the major growth markets for ABS?

Choi: We are bullish in the growth of [cable] TV distribution, cellular backhaul as well as the emergence of low-cost Ku-band VSAT terminals for affordable rural connectivity services.

Via Satellite: Given the availability of low-cost capacity, do you expect pricing pressures to continue in the region?

Choi: The Asia-Pacific region will continue to suffer from pricing pressure due to the continual investments in satellite capacity by new national and commercial operators. The emergence of the newly merged Chinese satellite operator (created by the merger of SinoSat and ChinaSat) along with their new satellites has resulted in a loss of capacity to both AsiaSat and APT Telecommunications. Both Indonesian satellite operators will be launching new and larger satellites in the next three years. They will be both adding significant amount of Ku-band capacity over Southeast Asia. ProtoStar will be launching two satellites in 2008 and 2009, and VinaSat just successfully launched their new satellite VinaSat-1. … Ku-band over China and C-band over Asia will continue to be under pricing pressure for many years to come.

Via Satellite: NSR analyst Patrick French, wonders where your growth is going to come from after adding a second satellite. How do you answer that?

Choi: Aside from ABS-2 which we are feverishly working on to co-locate at 75 degrees East with ABS-1, we are in the midst of seeking an orbital position for the expansion of our fleet and are engaged in multiple discussions with various operators and governmental organizations. Thus far, we have not concluded any agreements, but we have some anchor customers already in hand for another position and hope to release [a request for proposal] for ABS-3 sometime late 2008.

Via Satellite: How important is it to be at the cutting edge when bringing new satellites to the region?

Choi: Not including markets of India, Russia, China and Japan, the investments in AsiaSat-5, VinaSat-1, Intelsat-15, Measat-3A, ST-2, Protostar 1 and 2, Telstar-10R, Palapa-D and Telkom-3 as well as ABS-2 will represent over $2.2 billion of new satellite hardware being launched into geostationary orbit over the Asia-Pacific region in the next three years. Fortunately for ABS, we will not have to compete with all of these satellites, as ABS-2 will be serving markets in capacity-constrained areas of the Middle East, Eastern Europe and Africa as well as the Asia-Pacific region.
Almost all of the newly planned satellites, including ABS-2, will use traditional transponder bentpipe technologies. I don’t believe that we will see any new investments in cutting edge technology such as IPStar in the near future. Cutting-edge technology investments sometimes tend to cut both sides.

Via Satellite: How do you view the opportunities for Ka-band in the region? Will any Asian operators look to have a dedicated Ka-band satellite?

Choi: ISRO [The Indian Space Research Organisation], Korea Telecom and JSAT are all either operating or planning to fly Ka-band payloads in the near future. The newly formed operator Yahsat will deploy Ka-band services on their new satellite in the Middle East and Africa. Asian operators that are planning to serve Southeast Asia are discouraged from offering Ka-band services in that region due to the high levels of rain-fade.

Via Satellite: Have the dynamics for fixed satellite services (FSS) in the region changed?

Choi: The dynamics of the FSS industry has changed quite substantially over the past several years, brought on by the rapid pace of consolidation amongst the larger global operators. Although there is less commercial competition, we are seeing more trade barriers being imposed on our business in Asia.
One key concern that I have for the region is the signs of protectionism that is appearing in key domestic markets. Without naming names, a significant number of domestic markets that have either launched or are launching new or replacement satellites are putting in either regulatory or commercial pressure to their domestic customers to buy local. This doesn’t bode well for global or regional satellite operators for every country to have a satellite network and put in protectionist barriers against foreign satellite operators. Fortunately some countries with domestic satellite operators such as Malaysia have maintained an open skies policy. We hope that this trend continues for the health of the satellite industry.

Via Satellite: Do you see consolidation among FSS operators in the region?

Choi: As the investment in satellites and launch vehicles continue to sky-rocket, we will see more partnerships developing to coordinate investment costs between satellite operators — as Intelsat has done with JSAT for their Horizon’s investments.
ABS is always interested in partnering with other regional operators to explore mutually attractive investment opportunities. Although people discuss consolidation amongst Asian FSS operators, due to the political complexities of satellite investments, I don’t believe we will be witnessing a flurry of activities any time soon.

Via Satellite: How do you assess the prospects for direct-to-home (DTH) services throughout the region?

Choi: Coming from the United States and from Hughes Communications International, (the company that created the biggest DTH operator in the world, DirecTV), I have some insights about the factors which can yield strong and successful DTH operations. Without mentioning all of them here, I believe that some of the essential ingredients for successful DTH operations include a large domestic population base with upper class income segment with sufficient disposable income as well as a dynamic domestic television and media market.
India embodies these traits. Although some of these countries have had limited success (mostly failures) in DTH operations, I believe countries such as the Philippines, Indonesia, Thailand and Pakistan also have the basics for future DTH success. Let’s hope for the satellite industry that the local companies with sufficient investment capabilities are awarded licenses to see those plans come to fruition.

Via Satellite: How do you see the satellite landscape developing in Asia? Do you see any significant changes to the landscape over the next year?

Choi: The satellite market in Asia will continue to be a fiercely competitive landscape in Asia with the emergence of new domestic operators as well as other regional operators joining the market. The cable TV distribution market is being fragmented on domestic and local levels, and the days of paying premium for one or two satellite positions for a pan-Asian distribution will diminish over time.
The IP backbone market will continue to dwindle and simultaneously result in low revenue yields per transponder due to increasing competition from fiber.
The cellular backhaul market segments will stay strong — if not growing — in the intermediate future, however, this segment too will be substituted with domestic fiber and microwave links.

Via Satellite: What role do you see ABS playing in this future?

Choi: ABS will strive to be competitive in the local video distribution markets for both cable TV and DTH services while seeking profitable niches in serving our customers in the data communications services sector. We already have over 80 cable TV and DTH channels on our satellite, with most of these channels coming on line the past 24 months. We are planning to expand this by a factor of 150 percent in the next 24 months. We also boast one of the largest Ku-band VSAT networks in the Asia-Pacific region.