State Of The Industry: Expansion On The Horizon
By Nick Mitsis
The year 2005 was a robust year for services and hardware within the global satellite communications industry, with even stronger activity forecasted for the next few years. Once again, Via Satellite took a closer look at the industry developments that shaped business endeavors in 2005. Based on our database that tracks geostationary commercial satellite activity, all indicators pointed toward an uptick of hardware activity and growth among advanced applications.
Commercial Launch Activity
The launch services industry experienced a similar year in 2005 as it did in 2004. The major satellite launch service providers – International Launch Services (ILS), Arianespace and Sea Launch – maintained steady momentum with multiple successful launches, with ILS garnering roughly 36 percent of 2005’s commercial launcher market.
According to Via Satellite, 15 commercial launches were executed, with 16 commercial launch contracts signed in 2005. Pricing spikes and payloads slipping from the que did, however, impact this competitive landscape.
Today, we see supply and demand equalized and these major launch providers’ manifests are full through 2007. Government launches will continue to be the major source of capital for all players, but further backup constellation build out and replenishment of commercial spacecraft also will make an impact on the companies’ ledgers.
Commercial In-Orbit Activity
In 2005, the wave of change for commercial satellite operators began with significant movement toward consolidation among global players. SES Global has completed its acquisition of New Skies Satellites and Intelsat is set to acquire Panamsat, altering the leadership ranking among the major Fixed Satellite Services (FSS) players.
According to our numbers, as of Dec. 31, there were 243 geostationary commercial communications satellites in operational orbit.
SES Global commands 34 percent of the market share among the major satellite operators – Eutelsat, Intelsat, Loral Skynet, New Skies and Panamsat.
Once the proposed mergers are finalized and fleets are blended, the new Intelsat will own and operate 43 percent of the major’s market share.
Under new ownership, stronger business models will continue to be solidified within the FSS industry. Likewise, the new mergers among these players will change the landscape and service offerings. In addition, new customers are surfacing, more regions of the globe want access to advanced applications, and more hybrid solutions are materializing to provide complete services to customers. The new entities ultimately will have to service these emerging needs while tending to their current customers.
On the regional operator front, operators began to expand the size of their fleets as well, particularly in Asia. Not only have many of these regional players created a legacy of service among an established customer base, they are offering some of the most innovative services in today’s market. With so much activity underway, the commercial satellite operator arena will be one to watch as its business model changes and service requirements increase among its customer community.
Commercial Manufacturing Activity
In 2005, Via Satellite counted 19 orders among the major spacecraft manufacturers and cited 46 under construction. These orders reflect publicly announced, non-LEO, commercial communications satellite awarded in 2005 to a specific manufacturer.
Alcatel Alenia Space, Lockheed Martin Commercial Space Systems, Space Systems Loral and Orbital Sciences Corp. garnered roughly equal shares of the market in 2005. But what is interesting to note is that Orbital, once described as a niche manufacturer of smaller spacecraft, came into its own last year. The company secured four orders – 22 percent of the major manufacturers market share – while landing new customers in Europe and Asia. This shift indicates a growing attraction for smaller spacecraft, even among the large operators who usually procure large satellites for their fleets.
Space Systems/Loral (SS/L) continued to press forward as its parent company emerged from bankruptcy. In addition to signing four contracts, SS/L landed the XM Satellite Radio XM-5 satellite that many expected to go to Boeing. Boeing Satellite Systems remained focused on military business, though this past January, the company received its largest commercial order since 1997.
The near term will be interesting to follow. The major operators have built out their fleets – and backups, and now many satellite manufacturers will focus on the regional players to see if the majority of manufacturing contracts awarded throughout the next several years stem from the smaller operators.
By far, one of the most significant events that impacted the importance of satellite communications was the 2005 hurricane season in the United States. In the immediate aftermath of Hurricane Katrina, more than 20,000 satellite phones and terminals were deployed to the region. In just the first 72 hours following the disaster, satellite telephone traffic in the region increased more than 3,000 percent, while the number of subscribers increased more than 500 percent. Satellite phones were activated at a rate of more than 2,000 per day. Today, significant headway has been made in making satellite technology a top-line item for emergency response, but more work needs to be done. In the end, this market segment will emerge as significant to satellite business as the transmission of broadcast signals.
But the big news in 2006 will transcend the numbers, as business within the commercial satellite industry will be defined by the applications and services of tomorrow’s customers. According to Futron Corp., hybrid solutions that combine satellite and terrestrial capabilities are being implemented, often in partnership with telecommunications companies; new standards and equipment are being promoted to expand the use of high-definition video and other services, opening new markets; and the availability of more agile and compact equipment is now operating on the move with Ku-band capacity for government and emerging applications.
The satellite industry is indeed undergoing a paradigm shift. Advanced technology already under construction or in orbit will have to be used for sophisticated transmissions of voice, video and data. Even though consolidation has had a dramatic impact on the global satellite industry, strategic relationships with complementary service providers ultimately will have to be the next wave of change to emerge. Partnerships with cable operators, telecommunication providers and content managers will define tomorrow’s mergers and acquisitions.
Customized, mobile connectivity for data and video will lead the industry operators and manufacturers; payload size and the true need for more in-orbit hardware will shape the launcher scene beyond 2008; and complete transmission packages will be key for any operator’s success globally or regionally.
Advancements on the Mobile Satellite Services sector will continue to grow with the industry players focusing on further development of their ancillary terrestrial component services. It seems that in the near-term, industry will become more specialized and segmented among large satellite applications and small satellite services, with some overlapping areas for voice and simple data transmissions in the developing world. In the long term business expansion will be defined by strategic partnerships outside of the industry and content innovations.