Consolidation
Pacome Revillon, managing director, EuroConsult, believes there will be very little consolidation taking place in the FSS sector, although one or two regional operators could be up for grabs. "The main driver that could push major players to look for acquisitions is the strong growth of regional operators, that captured 37 percent of FSS revenue growth last year, while their market share stood at 31 percent. However, given their current financial positions, the most active operators would likely be SES and Eutelsat. In terms of opportunities, I am unsure whether consolidation would be driven more by regional priorities or more by the availability of target companies. Currently, only a few regional operators, considering their shareholding structure, would be potential targets."
Launch Industry Revenues
| "There has been a recent spate of failures, which contributes to the nervousness of various players from satellite operators to insurance underwriters. What is encouraging in this regard is the shorter recovery period following a launch failure than had been the case in the past." — Mechanick, White & Case LLP |
Revillon also believes a new category of FSS operator could develop over the next few years. "A new category of middle-sized operators is expected to appear, with at least one major operator per region, which should present a size of five to 10 satellites. For these operators, reaching a critical size to both generate growth, secure their positions in their regional markets and increase their bargaining power against suppliers potentially appears as a strong requirement."
In terms of the prospects for new, more regionally based FSS operators, Mechanick says, "In general, the prospects for the new operators should be quite favorable, as they tend to target specific markets with particularized demand requirements. With respect to regional consolidation, there are certainly some regulatory difficulties that can retard regional consolidation to an extent, including residual resistance to consolidation in the case of so-called national flag satellite operators, but the economic logic of consolidation will over time override the effect of those difficulties."
Satellite Manufacturing
In terms of satellite manufacturing, Futron said that "although more satellites were launching in 2007 compared to 2006, satellite manufacturing revenues actually decreased" due to the increased number of micro satellites being launched. The report said 21 new GEO satellites were ordered in 2007, four fewer than in 2006. It was a better year for U.S. satellite manufacturers, which received more than 50 percent of global orders, up 10 percent compared to 2006. European satellite manufacturers gained 43 percent of the orders, slightly down compared to 2006.
The general trend for orders in recent years has been up, rebounding from the early part of the decade, says Marco Caceres, an analyst at the Teal Group. "I think it was somewhere in the mid-20s in terms of commercial satellite orders in 2007. It has been going up gradually over the past two to three years. Early in the decade it was at a low point, but the market is cyclical and a lot of commercial geostationary satellites were launched in the late part of the last decade. We expected there would be a down cycle at some point, early on this decade, because the telecoms industry cannot absorb so much capacity," he says. "Now, if certain technologies/applications, like broadband, had demanded growth the way we had hoped, we may not have seen a down cycle. The projections for the demands of broadband satellite were probably over ambitious."
Also, while the U.S. manufacturers improved their performance in 2007 compared to 2006, Caceres believes the global playing field has levelled in recent years. "I think there is probably a more level playing field than perhaps there was 10 years ago. The top satellite manufacturers were Boeing, Lockheed Martin and Loral, but I think over the past five to six years you have seen the Europeans such as Thales Alenia Space and Astrium bring technologies that are the equal to their U.S. counterparts. In many cases, they don’t need U.S. companies whether they are subcontractors or prime to help build their satellites."
World Revenues By Sector
| A new category of middle-sized [FSS] operators is expected to appear, with at least one major operator per region, which should present a size of five to 10 satellites. — Revillon, EuroConsult |
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