Latin America: The New Jewel in Satellite

Exciting government projects, strong demand for capacity and economies showing growth even in difficult times — the Latin American region ticks all the boxes to be a lucrative market for satellite.

Latin America is fast emerging as an exciting growth market and presents a real opportunity for satellite communications, with large, unserved territories where satellite traditionally makes an impact. There are, however, certain issues and challenges that must be overcome if satellite players hope to realize the full potential of Latin America. One of the region’s most prominent issues is a lack of capacity.

New capacity is a must for a region with consistently increasing demands, says Russell Ribeiro, Gilat Network Systems’ regional vice president, Latin America.

“We continue to see a lack of good capacity at a competitive price. This means that for our customers, the service provider, there is a challenge to meet their demand for satellite communications. Sometimes it is just that there is not enough capacity. In others, the price of the space segment is high. We hope that the new satellites planned to be launched in the coming years will enable us to answer the demands for satellite services.”

One of the factors that makes the satellite market in Latin America so strong for companies targeting the region is that these economies have remained robust at times when others around the world have struggled. Carmen González-Sanfeliu, Intelsat regional vice president, Latin America & Caribbean, says economies in the region have “reached record GDP levels” and that this growth is resulting in “increased demand for telecommunications services such as corporate networking and cellular backhaul as well as increased interest in the distribution of HD channels.”

González-Sanfeliu says as the region continues to post economic gains, demand for satellite communications will continue to be healthy, and points to major sporting events such as the 2014 World Cup and the 2016 Summer Olympics in Brazil as aids for continuing economic growth.

With seemingly so much demand for capacity in Latin America, the region has turned into a melting pot of satellite players from across multiple verticals. FSS giants Intelsat and SES work in the region alongside others such as Telesat and Hispasat, which have particularly strong regional ambitions here. With local companies like Satmex and Arsat to add to the mix, it is becoming increasingly crowded, with many operators trying to carve out a niche in the market.

Robert Bednarek, a strategic advisor to SES, says “a great combination of video and data applications” is fuelling the demand for capacity. In addition to government programs, the broadcast market is beginning to heat up. “There is a robust cable market, and that is beginning to digitize. As we have seen in North America, the digitization will entice the need for more capacity and more programming. So the traditional role of satellites in cable networks will remain alive and well. It won’t be just U.S. broadcasters expanding to South America. Programmers in the region will also look for more presence,” Bednarek says.

Mexico

The lack of capacity is a particular issue for Mexican satellite operator Satmex, which is planning to launch its Satmex-8 satellite next year. Clemente Cabello, vice president of business development for Satmex says the operator has little room to maneuver in the current environment. “We have seen a very active market for a few years. Our satellites are 95 percent full. Right now, in C- and Ku-band, there is more demand than we can actually manage.”

With a population of close to 110 million people, Mexico is one of the largest markets in the region. The Mexican government issued a $1 billion contract last December for the next-generation Mexsat satellite system. The system will see Boeing design and deliver an end-to-end L-band mobile satellite services system, providing communications for military, civil and humanitarian needs, and enhanced coverage for domestic communications.

The country’s government has looked to use satellite to reduce the digital divide and bring state-of-the-art communications across the country to improve government efficiency, education, health, etc. In fact, the biggest government contract involving satellite this year is likely to come out of Mexico as it looks to ramp up its E-Mexico program still further.

E-Mexico is a sub-division of the SCT (The Mexican Communications Ministry) that focuses on bringing connectivity and telecom services to rural areas and schools within Mexico. Javier Braun Burillo, CEO Pegaso Bancha Anda, a service provider, believes that the Mexican government is contemplating structural changes to this program to make it more efficient going forward with the SCT taking direct responsibility for the program, which means individual Ministries, such as health and education, will have a lesser role. With the SCT taking much more of a leadership role, Braun says there will be a strong reason to spend on satellite there. “The plans are to install around 15,000 satellite sites this year. Those plans are to grow the network up to 50,000 satellite sites. That is very good news for us and satellite operators in Mexico, as long as the government wants private service providers like us to participate,” he says.

The Mexican Ministry of Education’s Enciclomedia program has been used to bring multimedia teachings to children in Mexico via satellite. It is a flagship program and a shining example globally of how satellite can be used to bring state-of-the-art education across the country. “We believe the Enciclomedia program has been a huge success. It has not only brought the latest technology into the poorer parts of Mexico, but it has also brought a broader array of technologies to children. For example, most of the children in these parts of Mexico have never gone out of the village. By bringing them these tools, in these history classes, they get to see how other countries look. It has broadened their perspective on life. In the beginning, we had a lot of challenges with the technology, as it was really hard to convince school-teachers about the value of this. They were not used to operating computers. Now, I believe the schools are really using it and seeing a lot of benefits, not just for the children but also the wider community,” Braun says.

Because of its success, the Mexican Government has been in talks regarding expanding the project. The main discussion is regarding Habilidades Digitales Para Todos (HDT), which Braun refers to as “a complement to the Enciclomedia program” that aims to provide classrooms with laptops and other digital learning aids. HDT is a new program, similar to the Enciclomedia program, but is aimed more towards middle schools. The main difference is that individual laptops will be provided to students, and in some cases connectivity will be brought to them via WiMAX as well as satellite.

The Enciclomedia project itself has initially been extended until June this year. “There are a lot of talks it is going to be extended until the end of the year, or even take it to the next level and expand it into middle school grades while keeping the current infrastructure for fifth and sixth grades,” Braun says.

South America

Governments in countries such as Bolivia, Colombia and Venezuela are just a few examples in the region of the sector’s willingness to build satellites and involve satellite in major communications’ projects.

In May 2011, The Venezuelan government reached an agreement with the Chinese government to build a second geostationary satellite. Venezuela’s first satellite, Venesat-1 was launched into orbit back in 2008; the new satellite will be used for nationwide monitoring.

In Bolivia late last year, China Great Wall Industry Corp. (CGWIC) announced that China’s development bank will lend Bolivia $251 million to finance the South American country’s first communications satellite. The financing will be used to help pay for Bolivia’s $295 million contract with CGWIC to build the satellite. While the government projects in Mexico are perhaps the most high profile, there also are many examples in smaller countries of governments using satellite to bridge digital divides. Ribeiro highlights another interesting program in Peru. “The (Peruvian) government has launched FITEL10 in order to provide Internet and telephony connectivity to remote regions. We are very proud to be part of these projects,” he says. “Another example is in Honduras, where we provide a VSAT network, connected by wireless technology, to schools. While this is a relatively small project, it has a very big impact on the children — enabling them to experience and learn from the Internet.”

Latin America’s innovative uses of satellite are evident in the sheer size of projects and by how far they reach. Guyane Numerique, the main telco out of French Guiana, has established an Internet and telephone network using satellite. “This network connects the major populated areas of the country with its most remote villages of Amazonia. Utilizing capacity on the Intelsat 905 (IS-905) satellite, Guyane Numerique is establishing a broadband network linking 17 remote sites to French Guiana’s capital of Cayenne and to the rest of the world. The network infrastructure, in addition to providing basic voice and data services, will be used for distance learning and telemedicine applications,” says González-Sanfeliu. 

Enterprise and Cellular Backhaul

The cellular backhaul market is also showing its worth as a target. Intelsat already has deals with some of the biggest wireless operators in the region, such as América Móvil and Movistar, which are increasing their capacity by using Intelsat’s cellular backhaul service. “In countries where land lines are sparse, such as Haiti, satellite has become an essential component to enable phone and Internet as well as TV. That also applies to governments that need to expand reliable connectivity to remote populations,” says González-Sanfeliu.

Latin America’s enterprise market has generated interest from international satellite companies Hughes and Gilat, which both work with a number of entities in the region to improve the reach of their communications networks’. Gilat works with O’Boticario, a large cosmetics company in Brazil, and Group Elektra, a large retail and financial corporation, which operates from Mexico. “Both companies have a network of more than 2,000-3,000 branches all connected by satellite. The network is being used for a variety of tasks — from in-store video broadcasting to employees training. The use of satellite technology allows these companies to offer a reliable and consistent service regardless of where the branches are located — a key asset in a geographically disperse country as Brazil, for example,” Ribeiro says.

But it is not just about helping locally based enterprises become more efficient. U.S. retail giant, Wal-Mart has expanded into Mexico and other parts of Central America. “They have started with 700 sites but now they have something like 1,200 sites in Mexico alone. There is a trend there,” says Nick Marzella, VP international, Hughes Network Systems.

Robert Feierbach, vice president, global sales, international division, Hughes Network Systems, admits the company is hopeful that “it will win an important deal in the Western part of Latin America.” Feierbach, like others, says there are “also a few more things happening in Venezuela,” but that it “remains to be seen” if there are deals to be done in the near future. 

Oil and Gas

There is a lot of fiber coming into Latin America, and with companies such as Global Crossing trying to meet the communications needs of oil companies in the region, the satellite industry has been working to avoid becoming marginalized. One of the companies to watch is Petrobras, one of Latin America’s major oil companies. Firmiano Perlingeiro, general manager, telecoms, Petrobras, admits that the company now has many options when using fiber. “There is a lot of fiber in Brazil. It goes along many of the pipelines, so there is a lot of capacity available to us. I would say the majority of the capacity we use is now fiber. Some of the fiber capacity reaches 10 Gbps. We have approximately 7,000 Kms of fiber in Brazil,” he says.

However, while fiber is an attractive option for an oil company such as Petrobras, satellite is still critical, and Perlingeiro confesses that the oil company is likely to need more capacity in the near future, and that VSAT is a viable alternative as Petrobras’s demands for satellite capacity are increasing daily. “At the moment, we lease one transponder. I think over the next five years, our needs for satellite capacity will double. So, we will need a second transponder. Our offshore operations are growing, so there will be a need for extra capacity. In the Pre_Sal region of Brazil, we have started operations where there is oil there,” Perlingeiro says. “We have to use satellite here because it is more flexible. It is fast to install and we can set up networks more quickly. We have arrived in the region with a satellite solution, and then after that, we can look for other possibilities. We have already started some operations here, and have some units in production already using satellite solutions.”

Petrobras may be looking to double the amount of capacity it leases in the near future, however, there is a frustration at the high price it has to pay for the scarce commodity. Perlingeiro says that Petrobras has little bargaining room. “We look around at the different companies to get the best price. We look at several companies. It is difficult to find good priced capacity, particularly in the Brazilian market, that fits with our needs in terms of footprint. We will continue to use satellite, as I don’t think it is feasible to go totally to fiber. We have a lot of applications and several units operating in the Amazon region, so we need satellite technology to integrate with our network,” Perlingeiro says.