Khaled Derbas Managing Director, SmartSat

The Middle East is a market in desperate need of more satellite capacity. It seems as fast as the satellites are going up, the capacity is being snapped up by broadcasters, telcos and others due to an insatiable demand for satellite capacity in the region.

The market is served by established local players such as Nilesat and Arabsat, who compete alongside industry giants such as SES Americom-New Skies, Eutelsat Communications and Intelsat. And now the region is home to two of the most talked about new satellite operators in the world. Yahsat is building a dual satellite system valued at $1.6 billion, and not to be outdone, a new operator has emerged.

SmartSat, based in the United Arab Emirates plans to spend $500 million on what it claims is the Arab world’s first private satellite that will serve the Middle East and North Africa (MENA) region. SmartSat aims to provide services to ISPs, GSM providers, broadband technology solutions providers, television stations, ministries of communication, military agencies and companies dealing with data systems among others.

The company is a joint venture between a Jordanian private shareholding company that operates as a global broadband satellite services provider in the Middle East, North Africa and Eastern Europe and a leading Kuwaiti investment holding company, which will be the financial advisor for the project. SmartLink will serve as managing partner.

SmartSat managing director Khaled Derbas discusses the opportunities he sees in the Middle East and where the operator fits in on an increasingly crowded landscape in the region.

VIA SATELLITE: What opportunities give SmartSat’s backers the confidence to invest $500 million in the project?

DERBAS: SmartLink, the service provider, and Al Jawhara Holding, the Kuwaiti investment company, have joined forces for this project. They like the idea of SmartSat, even though we are in a time of a global financial crisis. Liquidity in MENA region is still available, but it’s all about making the right investment decisions at the right time and in the right business. They saw the business plan we had for this project, and they said it made perfect financial and business sense as this is a telecoms venture away from the stock market and away from the real estate, which have collapsed since August 2008.

VIA SATELLITE: What are capital expenditure plans in terms of ordering satellites?

DERBAS: We now have a shortlist of three manufacturers: Derbas Alenia Space, Loral and Orbital. We are still in negotiations regarding technical specifications. We expect to make an announcement in May in terms of who wins the contract. We are at the final stage in terms of technical specifications and things like that.

VIA SATELLITE: What is the makeup of the satellite?

DERBAS: It will be Ku-/Ka-/C-band satellite. We know that Ka-band may not be much needed at this time in the region, but over the next few years everything will change. The future for Ka-band is positive, so we have to prepare to have the bandwidth for this technology.

VIA SATELLITE: How do you see the broadband access market developing in the Middle East?

DERBAS: We think satellite broadband will be an attractive business opportunity. This is a channel we have to open. We are looking to open up this market. This satellite will give us the opportunity to create new markets such as satellite broadband.

VIA SATELLITE: Have you finalized all the details in terms of satellite location?

DERBAS: In terms of orbital slots, we have a wide range of options to choose from. We have already shortlisted two of them and shall announce it very soon.

VIA SATELLITE: Is there a demand for all this capacity which is going to come into the Middle East over the next two years?

DERBAS: In this region, the demand for capacity is very high. The growth in Internet and telecommunication usage requires a lot of capacity. The number of Arab TV channels is growing. The demand is huge. When you look at SmartLink there are customers who want bandwidth for telecoms services via satellite. Unfortunately, the market is saturated. It is difficult to find capacity.

VIA SATELLITE: Who is going to be buying SmartSat’s capacity?

DERBAS: We will be open for every sector. We are targeting the GSM operators. We think we can differentiate our satellite as a communications satellite, so part of it will be for broadcasting. But we are also mainly targeting the GSM operators. We are also looking at telco/ISPs as well as the capacity being used for military purposes. We have a customer base through SmartLink. We are providing satellite services to 35 countries.

VIA SATELLITE: Why would a broadcaster come to SmartSat rather than an Arabsat or a Nilesat, for example?

DERBAS: We have the freedom in terms of price and power. We can provide exactly what the customer wants. We can give them a price which we think is competitive in this region. We have the freedom to select our customers. We have no outside forces to dictate our price structure or marketing structure. We have the freedom to give different price structures to customers. We think we can open opportunities for companies to get to market faster. There are no obstacles in the market. When you have bandwidth available, this will reduce the price and benefit the customers. If the market is saturated, the price of capacity goes up. We have seen this happen in the Middle East.

VIA SATELLITE: When do you expect the operator to be profitable? How much capacity do you hope to have sold by the time the satellite launches?

DERBAS: We are planning to be profitable in the first three years after the satellite has launched. Our sales projections indicate that 80 percent of the capacity inventory will be sold out by that time. We are already signing deals for the capacity of the satellite.

VIA SATELLITE: Do you think other new operators will look to enter the market?

DERBAS: The key point is the know-how. Finding the money sometimes is not the issue. It is having the know-how about the technology and things like that. You can build a satellite and launch it, but if you don’t have the customers, you will have problems.

VIA SATELLITE: Are there already plans beyond May for further SmartSat satellites?

DERBAS: In this business you always need a backup satellite. You cannot launch just one satellite, so during the first three years, we have to look to have another satellite

VIA SATELLITE: How big can SmartSat become? What is your ultimate vision for the company?

DERBAS: We are entering into uncharted territory. Nonetheless, we aim to stay a step ahead of the competition by offering cutting-edge technology solutions that support and direct the growth of this business in our region. We aim to launch multiple satellites and shape the future of communications in this part of the world. SmartSat will focus on offering price-conscious alternatives to customers around the region.