New Entrants Stoke Competitive Fires In Middle East
With a number of satellite operators and direct-to-home players fighting for business, the Middle East remains a fierce region in which to do business. While fixed satellite services operators such as SES Global, Arabsat, Nilesat and Eutelsat compete to sell capacity in the region’s major markets, pay-TV operators Showtime, Orbit and Art compete for the hearts and minds of TV households, even more companies are willing to enter a market in a strong growth period.
There is little doubt that satellite operators are escalating their plans to make more capacity available to customers in the Middle East.
In August, Al Yah Satellite Communications Co. (Yahsat) signed a $1.6 billion contract with EADS Astrium and Thales Alenia Space for the manufacturing of a dual satellite communications system. The two satellites are scheduled to be placed in orbit in the second half of 2010. This aggressive effort seems to exemplify the importance of satellite communications in the region, as operators continuously jostle for position to serve the various different market segments.
Other Middle Eastern-based operators such as Nilesat also are embarking on aggressive capital expenditure plans to keep up with the demand for capacity. “You can also look at the strength of our ambitions by the size of the new satellite we have ordered,” says Amin Bassiouny, chairman of Nilesat. “It will have 28 transponders. Our existing three satellites — the first generation of satellites — had around 12 transponders each.”
Arabsat, which lost its 4A satellite in a 2006 launch failure, has unveiled plans for three new satellites which CEO Khalid Balkeyour hopes will lead to a new phase of growth. “Over the next 12 months I would hope to tell you that we have expanded services like broadband and HD (high definition) and that we have added a lot of broadcasting channels,” he says. “We want to expand our geography to neighboring countries. If you picture the Arab world, we want to expand more in Africa, Turkey, Iran and Pakistan. We are looking at not only broadcasting services but also broadband and VSAT services.”
Yahsat may be the new operator on the block but CEO Jassem Al Zabbi is confident the company can make an impact. “It is a tough market, and Yahsat needs to be different,” he says. “We don’t just sell capacity. When customers think of Yahsat, we want them to think of the whole end-to-end solution. To do that we have to sell in-house expertise over and above what is available in this region now to provide innovative satellite solution. We want to be one of the major players in this market over the next few years.”
While there are several strong Middle Eastern-based operators, industry heavyweights such as Eutelsat and SES New Skies also are present in a region they say is full of promise. “I would say there are growth opportunities in all areas, says Robert Bednarek, CEO of SES New Skies. “You can certainly see the growth in economic development in most regions of the Middle East and strong network building activity associated with that economic development, and there are satellite capacity needs associated with that.” Bednarek also thinks government services could be a strong growth opportunity. “The Middle East governments themselves are increasing users of satellite networks for connecting their embassies and for other kinds of social activities in the region,” he says.
All satellite operators are expecting HD activity to intensify in the region. “In the Middle East there are a number of positive factors at work which should lead to good growth as well,” says Bednarek. “Obviously, there is the presence of the consumer equipment in a steadily increasing number of homes with prices constantly dropping, driven by the volumes that are being generated in markets elsewhere. So the consumer equipment can be there. Increasingly, programming is also available in the HD format because more of the production is in HD. And as the market gets more and more crowded with different platforms, HD becomes a differentiator.”
Arabsat is teaming up with the Arab State Broadcasting Union on an initiative to promote HDTV in the region. “We are creating a platform to promote [to] major broadcasters in the region, says Balkheyour. “We already have two HD channels on Arabsat. I cannot tell you how many HD channels we may have over the next two years.”
Bassiouny also sees the HD market as “very promising. We have already prepared our last satellite for HDTV,” he says. “We think it will be a good market. We hope the HDTV market will happen in 2009 when our second-generation 201 satellite will be launched. We think the jump for HD will take place at the same time.”
While the broadcast market is vibrant, it remains to be seen what impact satellite can have in the broadband market. Balkheyour admits the growth in broadband has not “been as we expected. … I don’t think there is much of a broadband play in the Middle East right now,” he says. “The broadband market is not well developed, but it is growing. … We want to continue to be one of the innovators in the region. I think satellite broadband could be strong in Saudi Arabia as well as Egypt, maybe Tunisia and maybe Morocco.”
Amiram Levinberg, chairman and CEO, Gilat Satellite Networks, says, “We see the satellite broadband market growing both in the region and world-wide. This trend is driven by the ever-increasing importance of communications for all aspects of businesses, governments and militaries as well as for the general populace. Communication is an important facet of competitiveness both on a business level as well as on a national level. The overall strength of an economy is dependant, among other things, on the quality of its communication infrastructure. Since I believe that this dependency will increase, I also believe that the demand for satellite communications will grow,” he says.
Bednarek believes there are two areas where satellite can aid broadband in the region. “You have Internet connectivity in all forms. Some of it is the classical trunking where SES New Skies is connecting a telecoms provider to the backbone somewhere in Europe or out of the region,” he says. “We see also some interest in two-way broadband with small enterprises and even for residential use. Both types of Internet connectivity show significant growth prospects in the years to come. The second broad category is what we call enterprise networking. This segment has an even higher demand. Here, you have businesses that are building networks, some of which are connected to the backbone but are in themselves broadband networks.”
The pay-TV competition in the Middle East also is heating up. Pay-TV operator Orbit offers two HD channels, and CEO Samir Abdulhadi, CEO believes 2008 will be the year that “will witness many HD announcements in the Middle East. One thing for sure, as one of the fastest-growing TV markets and one of the world’s most competitive, networks will be looking at different ways to stay ahead, and HD will be one of these ways. … We have recently announced the launch of the first fully-fledged HD channel in the region and we will also be looking into announcing more HD channels before the end of 2007.”
Showtime, one of Orbit’s main rivals relaunched its platform earlier this year and is pushing its Showbox personal video recorder service and is in discussions with set-top box vendors for an HD recorder. “We are still reviewing our various options,” says Marc-Antoine d’Halluin, Showtime’s CEO. “You need to find the right timing for going from [standard definition] to HD. It is a whole industry move, so we have to work with a number of industry players.”
The increase in activity has led to an increase in transponder demand, and the Middle East would appear to be able to sustain a number of satellite operators.
“Traditionally, the biggest player has been Arabsat,” says Bednarek. “… They have a lot of demand from the traditional PTTs and the video customers. I don’t think they can absorb all of that demand. Nilesat and Eutelsat are the other major players. There is a lot of capacity over the region, but it seems to be being absorbed. It is a fairly crowded part of the orbital arc, so you just cannot arbitrarily create a lot of new capacity. I think if we all behave rationally, there is going to be enough demand over time in the different market sectors,” he says.
Military demand also could be an important factor, says Levinberg. “Looking one to two years ahead, perhaps the biggest change that may occur is the U.S. military deployment in the region,” he says. “This has had a major effect on many aspects of the region, satellite capacity being one of these. I expect both launches of U.S. military satellites as well as the changing political environment in the [United States] to have an effect of freeing up much needed capacity to the region. I then hope that this will drive other opportunities, both for private enterprises and government projects.”