By Jason Bates
As the makeup of the global satellite operators comes into focus, industry attention is shifting toward the regional operators. Industry executives and customers want to know which regional operators will continue to compete with the global giants as independent businesses and which niche operators will be swept up in an anticipated wave of mergers and acquisitions. Learn how these smaller operators will continue to shape the satellite business in their respective regions and how they will affect satellite launches, manufacturing and services going forward.
The four largest Fixed Satellite Services companies in terms of revenue -- SES Global, Intelsat Ltd., Eutelsat SA and Panamsat Corp -- accounted for nearly 60 percent of satellite transponder business in 2004, and that figure will be even more concentrated if Intelsat's announced acquisition of Panamsat is approved by government regulators. This consolidation of more than 100 satellites and more than half of the industry revenue among a small number of operators may make it more difficult for smaller operators to compete, but the nature of the satellite services market does not automatically favor the larger company, and in some areas of the world, the niche players are strong competitors, if not the dominant player, for business, says Patrick French of Northern Sky Research.
"There is a misconception in the market that a global operator is best thing you can be," French says. "It doesn't hurt to be global operator, but in reality is lot of business in satellite market is very regional. To look at the extreme point of view, it's almost an orbital-slot-by-orbital-slot business. If a regional operator is in a strong orbital slot, such as Star One, which is nearly full on its C-band satellites, they serve the Brazilian market very well and have a solid business in a growing market. This is an example of how regional player can do well against global players, because they have cornered a few key orbital slots and have built up a base of users in a good market."
Singtel Optus Pty Ltd., which operates four satellites and has two more on order, will continue to dominate in Australia and New Zealand, French says. "They compete against Panamsat and Intelsat all the time, but no one doubts that Optus is the number one player in this specific regional market and that's not going to change regardless of what Panamsat and Intelsat do. This might not be the case around the globe, because some regional payers are weaker than others. To judge how strong a regional operator is you have to look at what type of business they have built up at their orbital locations. If they are already the market leader in a specific country level or small regional market, they probably will continue along quite well."
Other regional operators in the highly competitive Asian market also are confident they will be able to compete with the global operators. "Asia is a large and fast growing region. Operating in a region this big, there is sufficient market opportunity for a number of strong, independent regional satellite operators," says Paul Brown-Kenyon, COO of Measat Satellite Systems, a Malaysian operator with two satellites in orbit. "These operators understand the local requirements better than global operators and can provide solutions better tailored to the local market.
As transponder prices continue to stabilize in Asia, many regional players will be able to find business in the growing market, says Patompob Suwansiri, head of marketing for Thailand's Shin Satellite PLC. "The satellite industry in Asia-Pacific is unique compared to other regions. Of course, we still have the problem of oversupply of transponders in the region, but we have seen prices start to stabilize. Although there has been consolidation of the global satellite operators, it will be difficult to see the same trend happening in Asia-Pacific as most of the satellite operators are still national carriers. "
Regional operators outside of Asia also are thriving. Telesat Canada, which launched service with its Anik F1 in 1972 to serve Canada, now garners about 30 percent of its revenue from outside the country's boarders, says Paul Bush, the company's vice president of broadcasting and corporate development. To remain competitive, Telesat Canada has added direct broadcast services, Internet protocol (IP) business and broadband Internet to its video broadcasting business and the company is aiming for international revenues account for 50 percent of its business within another three or four years, he says. Telesat announced Oct. 3 that it began commercial service on its new Anik F1R satellite, bringing its number of spacecraft to six.
"To remain a satellite operator, you have to be good at what you do and be creative and keep growing," Bush says. "We make sure as competition broke out to provide service needed to keep our existing customers. The jury still out on massive global providers," says Bush. "I would challenge any one that says its any different. Customers buy within region. Chrsyler buys in North America. They have sites in Europe, Mexico and South America, but the decisions are made as to what to do in North America. I think most customers like that. The idea of a global decision in terms of technology not there yet. The decision I finds tend to be still regional decisions."
The situation in Europe resembles Asia, as nationalism and state and corporate ownership also play a role with regional operators such as Spain's Hispasat. Hispasat, founded as a state initiative, now is owned by a mix of eight different entities, including Spanish businesses and government agencies. Hispasat holds a pair of orbital slots over the Atlantic region and also is expanding its business interests overseas. The Amazonas spacecraft, placed into orbit in August 2004 provides service to Brazil, North and South America, as well as a transatlantic link to Europe. The Xtar-Eur satellite was built and launched by a partnership of Space Systems/Loral and Hidesat, which was founded by Hispasat and the Spanish Defense Ministry. The satellite entered service in April with the Spanish Defense Ministry the first customer for Xtar-Eur's X-band capabilities.
Other regional operators are beginning to be consolidated under global operators. Panamsat signed an agreement with Alcatel in June, prior to Intelsat's announced purchase of Panamsat, to acquire the Europe*Star-1, satellite, now renamed PAS-12, and two orbital slots -- 45 degrees East and 47.5 degrees East. Europe*Star was created by Loral Space & Communications and Alcatel Space, but Loral pulled out of the partnership, leaving satellite manufacturer Alcatel to operate the satellite. The company has been looking to offload the satellite in recent years. The acquired satellite will enable Panamsat to provide a broad range of enhanced services to European customers for programming distribution, broadcast contribution and enterprise networking. Panamsat said the potential applications it may offer with the satellite and the orbital locations is acquired include new offerings in direct-to-home and high definition television, on-demand satellite services, digital satellite news gathering, as well as support for government satellite communications.
The remaining small operators cannot stand pat on their current business if they wish to remain independent and avoid being swallowed up as Europe*Star was, officials say. Those that do not find a way to provide new service offerings are the ones most likely to be acquired or merge with other operators. "We do not believe in the future you can be just a seller of capacity," Bush says. "You have to be a service provider, able to integrate and get into the applications. When you package everything together, we're still a satellite company, but more and more of the growth has been on the services size. I think a regional operator in the commodities game is in a tough business. In a commodities game, the big will get bigger and then the commodity prices drop. We have been systematically ensuring we are not in the commodities game."
Providing video broadcasting services will remain the bread-and-butter of the satellite services market, but new direct-to-home and broadband platforms such as IPStar in Asia and Wildblue in North America will help the regional players compete, officials say. "As Asian countries develop economically, the importance of having a broadband infrastructure that is able to cover the country is vital and broadband satellite is the ideal solution," Suwansiri says. "In terms of broadband satellite, the demand will come from two major areas. First, the traditional vertical or VSAT markets, such as rural telephony, mobile trunking, e-learning, virtual private networks and disaster management. But due to new cutting edge technologies which have significantly increase bandwidth efficiency and lowered user terminal costs, we will see growth in these areas. The second and perhaps the more exciting growth will come from the consumer broadband market, which is made possible through a very large platform such as IPStar with bandwidth efficiencies and lower terminals costs. This makes possible end-user price points that are comparable to DSL prices and will open up new demands in the region."
The consolidation of the regional operators will occur but most likely will be a long process, French says. "Things happen slowly in this industry. The biggest consolidation was SES buying Americom, and then it was three years until we saw something nearly as big. We will we see others, but I can't answer when."
The number and makeup of the regional operators will look different within a few decades. but during the shakeout, and beyond, these niche players will exert a strong influence on the global satellite market, both in terms of satellites ordered and services offered.
Jason Bates is the Assistant Editor of Via Satellite Magazine.