The Cornerstone of SES’ 2012 Strategy: Incremental Capacity for Emerging Markets

[Satellite News 02-17-12] European operator SES entered 2011 knowing it would be a year of operational transition, according to SES President and CEO Romain Bausch, with incremental transponder capacity being launched late in the year, the disposal of its majority interest in ND SatCom and an internal reorganization of its sales and marketing activities in the emerging markets where the bulk of the operator’s new capacity will be directed.            
   “SES’ organizational realignment is delivering real benefits, including enhanced focus on our key markets,” Bausch said in the operator’s latest financial results issued Feb. 17. “Seven further satellites are being built and are due to be launched before the end of 2014. The majority of the new capacity will be serving customers in emerging markets. SES’ high-quality orbital positions and footprints are laying down the foundation for future growth.”            
   The operator knows that transition will continue in 2012, following the intensive launch campaign its started in April with the launch of YahSat 1A. SES launched Astra 1N, SES-2 and SES-3 — all replacement satellites — in the third quarter of 2011. QuetzSat-1, a satellite wholly contracted to EchoStar, was launched at the end of September, some two months later than originally anticipated. The launch of the SES-4 and SES-5 satellites, which the operator designed to deliver more than 90 incremental transponders between them, were delayed into 2012, with SES-4 finally achieving orbit on Feb. 15.

   Despite the challenge of launch delays, SES’ full-year 2011 revenue was on target. The group’s profits grew 26.8 percent year-on-year thanks to a busy second half, although impacted by the launch delays of QuetzSat-1 and SES-4, as well as by solar array anomalies on certain Lockheed Martin A2100 model satellites.
   Bausch stressed that 2012 would be an even more important year for the company as it develops is presence in emerging markets, while maintaining its position in the more mature European and North American regions.
   “In 2012, we will experience the exceptional impact of the analogue TV switch-off in Germany,” said Bausch. “When eliminating the impact of this, we foresee an underlying three-year revenue CAGR between 2012 and 2014 of approximately 7.5 percent. On a recurring basis, this is expected to be approximately 4.5 percent. This fully reflects the launch delays and satellite health issues. We look to the future with confidence.”
   Although operating at high utilization rates, SES’ Astra fleet continued its growth despite Germany’s analog capacity switch-off, which is reduced the country’s dedicated transponders from 35 to 32 during the year. Three further transponders terminated analog transmissions on Dec. 31. The remaining 29 transponders will be switched off at the end of April 2012. HD Plus, SES’ technical platform delivering encrypted free-to-air HDTV in Germany, surpassed expectations, said Bausch. At the end of 2011, the number of viewers had risen to 2.3 million, of whom 1.9 million were in the service’s free trial period.
   According to Bausch, the strength of SES capacity demand in Asia, particularly in the Indian DTH market, supported his decision to procure a new satellite to complement the fleet at the 95 degrees East orbital slot. Designated SES-8, the satellite aims to add capacity in the region when it is launched in the first half of 2013. “During the second half of 2011, incremental solar array circuit failures on AMC-15, a spacecraft wholly contracted by Dish Network, resulted in part of the payload being taken out of service. This payload reduction reduces the customer’s payments by approximately euros 5 million per annum,” the CEO said.
   In North America, the launch of the SES-2 replacement satellite marked a new operational milestone for the U.S. government hosted payload market with the orbiting of the Commercially Hosted Infra-Red Payload (CHIRP). Bausch said other hosted payload opportunities are currently under discussion with the U.S. and other governments.
   “In the relatively mature North American market, demand and utilization remained essentially stable,” said Bausch. “In South America, developments continued apace. TIBA, the Argentina-based cable network services provider throughout the region, contracted additional capacity on the SES-6 satellite that is to be launched in 2013, to satisfy the rising demand for new channels and HD content. The sports network ESPN Brazil took additional capacity for regional HD distribution. AxeSat, a regional broadband provider, extended its contract to two transponders on AMC-4 at the 67 degrees West slot to support demand from corporate customers across the Latin American and Caribbean markets.”
   SES will continue to increase its stake in O3b Networks. Its current 39 percent interest in outstanding shares will rise to approximately 45 percent in 2013, as funding commitments are met and contributions in kind are recognized. O3b is on schedule for launch of its first four satellites in the first quarter of 2013, with the second batch of four to be launched in second quarter of that year.
   SES will launch two more satellites in 2012 — SES-5 in the middle of the year from Baikonur and the Astra 2F satellite in the fourth quarter.
   “SES’ 2012 revenue growth will be primarily driven by our investment in incremental capacity for emerging markets, QuetzSat-1 and continued growth from Eurosopean digital infrastructure and services,” said Bausch. “Excluding the German analog switch-off impact, the underlying revenue and EBITDA should improve by approximately 9 percent. The recent satellite launch delays and solar array circuit failures will impact 2012 revenue and EBITDA growth rates by approximately 1 percent.”

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