Executive Q&A: Georghiou Seeks To Raise Spacenet’s Profile, Revenues

By | December 4, 2006 | Feature, Telecom

With demand for satellite services growing, Gilat Satellite Networks Ltd. would like to see better performance from its Spacenet Inc. services group. To accomplish this, Gilat has completed a makeover of Spacenet’s executive team and placed the pressure to perform on new CEO Andreas Georghiou.

They first asked Georghiou, who has more than 20 years of experience in the industry and most recently served as chief commercial officer for SES Americom. "I’ve known them for almost their entire life, going back to the times when I use to compete with GTE Spacenet and then as GE Americom decided to buy them because they had good orbital slots, good satellites and good customers," he said. "As part of that purchase was the VSAT business. We streamlined the business and sold it to Gilat. In the process I got to know a lot of the people running Gilat, and throughout this time, they were asking me if I was interested in working for them in some capacity."

Georghiou resisted those initial advances, but reconsidered when the current management of Gilat was brought back to run the business, he said. He took the helm of Spacenet in August, and he feels that one of his main efforts ought be to raise the profile of the company.

"Spacenet has kept a fairly low profile over the past five years for some reasons that are obvious and some that are not so obvious," he said. "One of our goals is to really raise the profile of the company, because we have every reason to be raising the profile, whether it is the pride of the products and services we sell, [or] the nature of the good people that have been holding up Spacenet and propelling it along. It not only is good business to raise our profile, but also we have a good reason to be proud of this company, and we have kept way too low a profile for my liking."

Georghiou spoke with Satellite News editorial staff at Spacenet’s McLean, Va. Offices.

SATELLITE NEWS: What do you see in the industry that made this the right time to take on this challenge?

Georghiou: I have done just about every job that one would like to have in the satellite operator arena. I have done business development, finance, [information technology], sales and marketing, and operations. It was time to do something else. Along comes this opportunity, and in talking to Amiram Levinberg (Gilat’s chairman and CEO), he related to me some of the products they have on the drawing board. The Cisco development — integrating the VSAT into the Cisco routers — was an exciting one. With the disaster recovery and business continuity issues making industries take a very serious look at the satellite alternatives and the government issues with homeland security and the first responders’ challenges they have with communications, I thought this was an interesting time.

SATELLITE NEWS: Is there one area that stands out?

Georghiou: Disaster recovery is big for us. The people we have talked to, whether they are customers or partners, find a lot of appeal in the ability to install a satellite-based network that is seamlessly connected to the terrestrial network, and can sense the unavailability of the terrestrial connection and switch to the satellite network, and you would not even know it. That is something we want to leverage more, because it looks like we have hit a sweet spot, both on the government side with disaster recovery and security issues, but also on the industrial side. That is something we want to do more of.

SATELLITE NEWS: What needs to be done to tap into these markets?

Georghiou: We have a job to do as an industry, and that is to educate the customers. They might not be aware as much as we would like them to be that the cost of downtime may be a lot more when they think about it more explicitly. They might not be thinking about it because they aren’t aware that there are alternatives where you don’t have to accept downtime. If you are a financial institution with 2,000 or 3,000 branches around the country or with 10,000 to 15,000 ATMs, why would you accept any downtime if you could help it? So the cost of installing these hybrid networks that provide business continuity versus the cost of being out of business for a period of time, to me it makes a very compelling case that you just do it. All you have to do is calculate the capital expenditure cost and a very tiny if any at all monthly maintenance cost for the opportunity that you have almost nonstop availability of your network. I think this is a compelling case, but as an industry, we need to make this case to potential customers in more vivid colors.

SATELLITE NEWS: What imipact will the Cisco deal have for Spacenet?

Georghiou: It’s a growth opportunity because it enables us to provide services and equipment that enable that business continuity concept to be there. How big can that be? We have on the installed enterprise a base of more than 80,000 customers, and our competitors have some as well. Even for a technology refresh effort, were you to replace all of these over the next two or three years with technology that is both more efficient on the utilization of space segment and have the business continuity aspect, it could be a very interesting proposition.

SATELLITE NEWS: What opportunities do you see in Internet protocol (IP) services?

Georghiou: When it comes to IPTV, our view is that is a media play. It is an efficient way of delivering content to the end user. Whether there is enough of a value proposition or not to be successful remains to be seen. On the broadband side, we play a significant role and we hope it will become even more significant, whether that is in the enterprise arena, the industrial verticals or the consumer or the small office/home office (so/ho) environment and with government. The broadband aspect of that I think is very promising. It’s not just theater of operations necessity. We have hostilities overseas, what are the prospects of this?

I think the communications on a security standpoint, on a global basis [with] the continued effort to provide security for the civilized world, is going to provide an opportunity for innovative solutions for broadband on the move, and that is also going to be IP based.

If there is a network operations opportunity for the IPTV part, we know how to be efficient. We know how to be effective in providing high-quality, high-availability services in that area. We would be delighted to find a niche where we bring our backbone operations, skills and facilities to play in that arena. But some of the important players today such as SES and Intelsat choose to provide their own operations for this sort of thing, and some of the bigger telcos will be providing their own operations. Some of the smaller ones will find it less attractive to find IPTV to their customers, so we can hope we can play a role in that niche as well.

SATELLITE NEWS: What are you goals in the home office/small office arena?

Georghiou: The new platforms have 40 percent to 50 percent efficiency in the use of space segment, and also the cost of the CPE is lower. I will not argue that the underlying economic market for broadband to home over satellite is an attractive one. We found out the hard way in this business, and others are finding it out, and some have predicted it correctly and decided to stay out of it. We have found a niche, and we have learned a lot of lessons and made some certain investments infrastructure, and as a result of that, we have found it interestingly profitable to stay in the business and continue pushing the envelope ever so quietly but consistently. So we came up the Nova product, and we announced it a month ago. Our numbers look good and they are about at our expectations. One of our concerns is that we don’t want to be so overly successful that we push down the quality of the service, because the space segment becomes a limiting factor in a number of ways. To acquire more space segment is to acquire a huge overhead and I don’t like overhead. As long as I have anything to do with Spacenet, we will not be adding overhead in that fashion. On the other hand, we find that in working with certain of our space segment providers, they acknowledge that and have given us a little bit of room to expand in that area. We find that staying the course on the consumer and so/ho markets with regards to the Nova products, it’s a good business decision for us. We will be continuously evaluating and making sure our targets are being met, and so far so good.

SATELLITE NEWS: Why are so many companies trying to play in this market if the economics are not favorable?

Georghiou: People that play in this space get excited with technology. I like technology, but I am not enamored with technology that doesn’t make money. People find something that is exciting and want to get in and then let someone else pay the bills later. We’ve been there, done that. I think people are hopeful that something else will happen, and clearly, a spotbeam satellite design that can provide the efficiency that is needed to cover hundreds of thousands if not millions of subscribers and a CPE that can bring down the cost to low figures are the keys to a generalized economic model for this type of business. From our perspective, we’re not there yet. Our interest in this is that we’ve been there, we made an investment in the infrastructure, we have the infrastructure, we are very good at it, we know how to operate in a cost-efficient manner and utilizing the expertise we have developed and the infrastructure we’ve built we are happy staying where we are and just moving the ball along ever so slowly. But jumping in in a big way, I don’t know what other people know that we don’t.

SATELLITE NEWS: What does the creation of Spacenet government services bring that Spacenet was not doing for that market previously?

Georghiou: Spacenet in the past had a very significant government business. Going through the various ownerships stages, that business was retained. Some of the contract vehicles that Spacenet had developed are still in existence, though not with us. So we have a heritage, but really don’t have the business we created in the past.

We are in the government business in a fairly significant way. The largest U.S. government VSAT network is the U.S. Post Office. When we won that a few years ago that was probably the largest satellite-based network in the world. It was just recompeted and the Post Office will make an announcement shortly.

We have been in a player in that arena. Government agencies are very interested in satellite networks, because it provides the mobility and addresses the seamless turn-on of a satellite-based network. All these elements make the government an attractive target, so we created the government services division. It’s clearly an area everybody is targeting and we hope we will be successful in tapping that market.

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