The Keys To Success
For operators in Latin America, much like the business models succeeding in Asia, it is important to partner with customers who can offer full solutions and equipment financing. Gonzales-Sanfeliu, says, "Combining our partners' local infrastructure, their ability to provision certain types of equipment, our space segment and our joint knowledge of the market and of the customer, gave us the formula to provide value services."
As mentioned earlier, regulatory bodies in Latin America, however, can become burdensome. This is the case in Brazil, for example, where operators cannot sell space segment to a provider that is not licensed by those regulatory bodies, which tends to limit the market and business offerings of the service provider.
It is important to understand the regulatory and legal rules in order to do business in a specific country, which can be a challenge given the number of countries and diversity of governments. Some satellite services companies even have a dedicated regulatory staff working out the complexity of the trade.
On-site staff also allows international businesses to get access to the high level decision makers in each country, which can pose its own challenges. "In Latin America, having relationships at all levels is mandatory, but maintaining relationships at the decision-maker level increases your probability of success. This is why Gilat chose to open local offices in each of our major markets in Latin America. This allows us day-to-day contact with our customers and the ability to develop strong relationships at all levels," says Mike Mazza, Gilat's regional vice president for sales, Americas.
Finally, understanding the cycles and foreseeing the local problems is always a key in doing business within local markets, but it seems to be even more important in Latin America. Being flexible, responsive and innovative, patient and creative are what analysts cite as the keys to successful business.
Latin America in the Near Term
Analysts at Aon Explorer forecast that the satellite market will continue expanding, going from the current 501 transponders to 694 by 2014. Likewise they see a 3.2 percent compound aggregated growth revenue (CAGR) and revenues from operations expanding from an estimated $584 million in 2004 to $834 million by the end of 2014.
Within the next 10 years, Aon Explorer expects that C-band services will remain strong in the region, though declining from a current 76 percent to 66 percent by 2014. Television is expected to continue to generate nearly half of the demand for satellite transponders, while the Internet share is forecast to expand from 26 percent in 2004 to 39 percent by 2014.
In addition, industry analysts at Frost and Sullivan predict that, in the case of networking applications, the demand for satellite transponders will most likely stem from higher bandwidth requirements in videoconferencing, distance learning and telemedicine especially from large countries such as Argentina, Brazil and Mexico.
According to region analysts and industry executives, there is much revenue in Latin America ready to be invested. In particular Latin American governments have vested considerable amounts of money in the satellite industry by initiating programs to increase connectivity across villages, schools, universities and colleges through satellite- enabled broadband solutions. Such programs have been a driver of the satellite industry in recent times and are expected to increase the satellite bandwidth consumption in the region for the near term.
Velez de Berliner also sees a tendency for more mergers and acquisitions fostered by private equity funds. She considers Latin America to be an investor-friendly market but believes that private equity funds will only invest in Latin America if the satellite industry "puts its thinking cap on and comes up with the next technologies or innovations, such as the delivery of medical services."
One factor not to be overlooked is the investment influence of Carlos Slim's Grupo Carso through Telefonos de Mexico and Brazil's Star One, an Embratel company. Given its liquidity, Grupo Carso can very well set the trend for the direction of DFI in the telecommunications industry throughout the region for years to come, adds Velez de Berliner.
So what applications are generating revenue? Educational and social government sponsored projects, enabling cross-border connectivity. These e-governance projects include:
- E-training and e-learning projects such as eMexico, aimed to install and connect 10,000 digital community centers to provide the Mexican population with electronic services for distance learning, Internet access, government, health and commerce.
- E-voting projects, such as the one currently underway in Venezuela. Here, the government asked for the design and implementation of an e-voting system including fingerprint data to conduct a decisive political referendum. Last month, Venezuela became one of the first countries to use an e-voting system when 9 million Venezuelan citizens participated in the presidential referendum, among which 5.5 million voters used the satellite-enabled VSAT network with peak numbers of 6,300 votes per minute.
- Telemedicine services, such as the one Telespazio Brazil is using, delivering content through a satellite-enabled platform.
- Rural connectivity projects, such as Telerep's in Peru that implemented a satellite-based network in order to provide 1.5 million people in rural communities across Peru with telephony and to some, high-speed Internet access.
Other prospective applications for governments across Latin America to consider implementing include agriculture monitoring and border patrol monitoring.
Broadcasting and Broadband
Broadcasting, along with advanced broadband applications remain strong as well. Panamsat, for which broadcasting represents 60 to 75 percent of its business in Latin America, is now looking in particular at special sporting events, such as the upcoming World Cup 2006 and the Olympic Games as very good opportunities for revenue.
Likewise, media-rich applications will also increase satellite usage for e-governance and enterprise solutions as the need for distance learning increases. Other promising applications include advertising and particularly, digital signage. "Certainly in the last six months to a year, we have seen an increasing interest in digital signage," says Nick Marzella, vice president of sales for Latin America at Hughes Networks Systems.
Finally, broadband IP services will also keep driving the market in a positive growth direction. Pegaso Banda Ancha, for example, will provide DTH platforms, local telcos and cable television operators with nationwide two-way broadband service for consumers and enterprise customers. Panamsat is supporting Pegaso Banda Ancha with a combination of satellite and terrestrial services including dedicated national Mexican coverage on its PAS-1R spacecraft as well as high speed Internet connectivity and ground support for Pegaso's Surfbeam.
"By and large, the largest users of satellite VSATs in Latin America from an enterprise perspective are banks," says Marzella. Satellite is particularly well suited for banks for many reasons: its ubiquity of coverage, providing a uniform service across a large area and backing up the customer's existing terrestrial infrastructure, Marzella adds.
"There are still large untapped markets, particularly in the big economies like Brazil and Mexico, where there are enterprise networks for grocery store chains, for example in Mexico, and retailers and automotive dealerships in Brazil, in addition to banks," Marzella says.
So, the Latin American market remains on the business sheets of many satellite companies. Demand remains strong; resources are expanding and revenues are materializing.
Strategic positioning within the stronger countries, designing services around customer demand and put the right amount of effort in dealing with regulatory issues seems to be the recipe for success.
Julie Blondeau Samuel is the Managing Editor of Via Satellite magazine.