Key Sectors Spur Industry Growth
LONG BEACH, Calif.–Strong sales of transponders to government and military customers, coupled with sustained growth at satellite broadcasting companies, appear to be the current bright spots, industry officials at a conference here said.
“Overall, in 2003 [the year in which the most recent numbers are available], global satellite industry revenues grew,” said Kalpak Gude, chairman of Alexandria, Va.-based Satellite Industry Association (SIA), who also is vice president and associate general counsel at Wilton, Conn.-based PanAmSat. “U.S. market share in the segment is 43 percent.”
Gude made his remarks here last Wednesday morning during a “State of the Industry” report that opened the third annual ISCe 2004 Satellite & Communications conference, sponsored by Hannover Fairs USA.
Gude added that worldwide satellite employment stood at approximately 175,000 jobs in 2003, with the United States accounting for roughly 50,000 of those positions, according to Bethesda, Md.-based Futron Corp.
Futron broke down the numbers into five categories:
- Subscriber/retail segments — rising 15 percent (driven largely by the success of DBS companies, satellite radio concerns and mobile satellite systems;
- Transponder leasing companies (the fixed satellite service market) — climbing 7 percent, driven by increased government and military spending;
- Satellite manufacturing — staying flat due to a “disconnect” between the laws of supply and demand on a global basis;
- Launch services providers — very slow growth, with government spending accounting for nearly all of the growth in this sector, and;
- Ground equipment suppliers — showcasing themselves as “steady performers,” with modest to flat growth.
Despite the overall growth of global satellite revenues in 2003, Gude advised the satellite industry to galvanize around the key issues that are obstacles to future, sustained growth.
Those issues include:
- Addressing the changing business case for new versus replacement satellites;
- Reassessing supply and demand curves;
- Dealing with higher insurance costs industry-wide;
- Protecting existing spectrum allocations for satellites and obtaining additional spectrum for such growth services as broadband via satellite and DBS, and satellite radio services;
- Heading off future over capacity issues and stifling satellite export controls that continue to wreak havoc with the balance sheets of satellite manufacturers and launch services providers, and;
- Clearing interference from terrestrial devices that tend to get in the way of traditional satellite ground equipment.
Conference keynote speaker Robert Bednarek, executive vice president of corporate development with Luxembourg-based SES Global [SES], also predicted further change ahead for 2004. He highlighted direct-to-home (DTH) satellite revenues as a “bright spot.” More than 60 million DTH subscribers worldwide account for $33 billion-plus in annual revenues. He added that two-thirds of all DTH operations are profitable.
Bednarek predicted continued ownership changes among fixed satellite service (FSS) operators, but no consolidation yet. However, he did not rule out future intra-industry consolidation among FSS companies once banks and equity funds (the likely purchasers of New Skies [NSK], Loral Skynet and Intelsat) have built and grown their assets. PanAmSat was purchased in April by investment company Kohlberg Kravis Roberts (KKR). Announcements affecting the others are expected soon.
Bednarek voiced the need to “protect spectrum” from terrestrial claims, telling the assembled 160 attendees that the industry must “remain vigilant” to preserve its bandwidth.
Finally, Bednarek offered his take on what the future trends will be for the industry, including:
- The explosive growth of HDTV services, which will translate into moderate growth for the satellite industry;
- Marketplace reliability replacing technological reliability as the new paradigm in the industry. He said the industry needs to treat technology the same way in which the aviation industry treats safety reliability:
- Interactive services from satellite (broadband services) hold great promise for the industry globally;
- The continued success of mobile services, including mobile satellite systems as well as music and video to automobiles, boats and planes via satellite; and
- Satellite companies need to make a return on investment to the backers of such services.
Nagging questions continue to linger about whether satellite-based Internet companies will be a success in the commercial marketplace. “Conventional fixed satellite services [FSS] can’t be re-branded as broadband and succeed; this has been demonstrated,” said Mark Dankberg, chairman and CEO of Carlsbad, Calif.-based ViaSat [VSAT]. “There is an undying demand for broadband services, though.”
Dankberg made his remarks during a CEO panel session at the conference. He added that there are a number of issues that satellite-based providers of broadband services face including:
*Will the technology work? *How is it priced? *How do companies reduce both churn and subsidies of the end-user equipment? –Dave Bross
(Kalpak Gude, PanAmSat, 202/292-4353; Rob Bednarek, SES Global, 352 710 725 273; Monica Morgan, SES Americom, 609/987-4143)