[Satellite News 06-29-11] Earlier this year, SES CEO Romain Bausch said that it was “reaching crunch time” for its Solaris Mobile joint venture with Eutelsat, as its progress in gaining commercial deals has been slower than expected since the launch of Solaris Mobile’s S-band payload on W2A in 2009.
In May, SES streamlined its management structure as part of a strategy that consolidates SES Astra and SES World Skies’ activities in order to meet the increasing needs of its customers and help the operator grow its businesses in the emerging markets.
In the first piece of this two-part interview, SES CEO Romain Bausch forecasts what is next for Solaris Mobile, as well as what opportunities are shaping up for the company in emerging markets.
Satellite News: What is the current state of Solaris Mobile and what is your plan with the joint venture moving forward?
Bausch: Solaris Mobile and its shareholders are in discussions with a couple of investors that are interested in including Solaris in their development plans. The approach we have always taken, together with Eutelsat, is that Solaris will remain a satellite infrastructure provider, contracting capacity to third parties that are investing in the necessary complimentary terrestrial infrastructure. What has shifted since the launch of Solaris in 2006 is that, unfortunately, mobile TV has not really developed the way we anticipated it would a few years ago. The focus is now more on two-way broadband communications rather than on broadcasting. The bandwidth that Solaris is making available can be used in order to supplement bandwidth that will be offered in other frequency bands by terrestrial operators. The first role of Solaris is to simply supply more bandwidth. It supplies 2 x 15 Mhz of additional bandwidth, which can be used to supplement other terrestrial bandwidth. Secondly, whenever and wherever there is no coverage of terrestrial networks, the satellite component can fill the gap.
Satellite News: You have been waiting to make Solaris Mobile deals for some time. How close is Solaris Mobile to signing contracts?
Bausch: While we are in the middle of intensive discussions, this is not comparable to a deal to lease a couple of transponders. We have to convince potential investors about the business case of combining terrestrial frequencies and satellite bandwidth and offer attractive terms of investment. You also need to have investors that are financially solid enough to commit to an additional satellite or payload. The initial Eutelsat satellite carrying the S-band payload, as you know, is not working like it was initially designed. However, we are talking with broadcasters and other service providers about offering regular services to some of the target markets. There needs to be another satellite in order for Solaris Mobile to really work and it needs to be designed to fit the investor’s target markets. But, that requires an additional investment and we are speaking of an investment of around 250 million euros ($354.83 million) or even more. This takes time. We are negotiating for a complete eco-system, where the space component and the ground component come together. The investors also need to have sufficient confidence that there are operators out there that will really use this offer.
Satellite News: SES has changed its management structure in recent months. Was there something wrong with the existing management structure that led you to make this change?
Bausch: The reason for streamlining the SES management organization resides in our willingness to improve our capabilities on delivering the very ambitious growth plans that we have decided to invest in. Most of the incremental satellite capacity (80-90 percent) we are investing in will indeed go into the emerging markets. So, what we see is that in time the relevance of the emerging markets in our business mix will continue to grow, probably even faster in the future than during the last couple of years. That is one of the main reasons why we wanted to have a management structure with the right balance in the different regions we are targeting. The old organization was focused on Europe with SES Astra, and North America and the emerging markets through SES World Skies. The new organization notably means that we are doubling our head count in the emerging markets.
Secondly, by bringing our teams together and having the different skill sets working hand-in-hand, we believe we are in a better position to serve our customers. We also will be able to have a more structured approach towards key customers, such as telecoms operators, to solve some of their bandwidth problems. We clearly can see a complement between satellite and terrestrial infrastructure because of a desperate need for bandwidth. Our new structure is thus even more customer-centric, from a regional development perspective as well as from a segment development perspective.
Satellite News: Out of the emerging markets you are targeting in Africa, Latin America and Asia, which one excites you the most?
Bausch: I would say all of them excite me equally. But they all offer different opportunities. The drivers of demand are always DTH television and HDTV. India is the best example of that. There has been very fast growth of the DTH market, with now around 34 million subscribers there. I think the forecast is that it will reach 60-70 million very soon. So, there are huge markets for DTH such as India and Brazil and these are very important drivers for growth, but there are also segments other than DTH. There is a strong demand for backhaul services for cellular operators, as well as for broadband services. We see good demand in Africa for trunking and backhauling services through O3b. One element that is not often recognized is that there is a unique opportunity for satellites to help terrestrial operators bridge the gap in terms of putting more bandwidth into their network. There is tremendous demand for video services, for example, that will further fuel this growth. We are investing in satellites providing additional bandwidth where we know there will be fiber and undersea cable, such as in Africa. We also know that they won’t provide complete coverage of all of these countries. Satellite solutions will continue to be, by far, the most cost efficient solution in many of these regions, more efficient than terrestrial solutions.