How Arabsat Is Beefing Up Mid-East Service Offerings
The Middle East is a vibrant market for satellite communications. In the direct-to-home (DTH) arena, such operators as Showtime have gained subscribers at a healthy rate. Showtime also has high Average Revenue Per User (ARPU) figures among its subscribers. Saudi Arabia, where there are limited forms of entertainment, could offer great opportunities for satellite pay-TV service providers. In addition, the situation in Iraq has increased the need for effective satellite communications.
Satellite operators view this area of the world as “rich pickings.” One of the operators hoping to increase its presence is local provider Arabsat. Hoping to trade off its local knowledge, the operator is well-positioned to provide services across the region. The operator has revised its strategy and marketing plans, and it aims to have a more commercial focus in the future. In an exclusive interview with Satellite News, Khalid Balkheyour, Arabsat’s director general, talks about the operator’s plans in terms of new satellites and how his organization aims to boost its revenues in the Middle East.
Satellite News: What role do you see the company playing on the satellite services landscape in the Middle East? Where do you hope to position the company?
Balkheyour: We have the highest market share in the region in terms of telecom and connectivity. We also have the higher viewership in the region, if you consider both C-band and Ku-band for direct-to-home (DTH) services. We would like to maintain that and grow it. We have five satellites in operation today for DTH and telecom.
In 2003, our net revenue was $54 million, and we expect to grow revenues in 2004 compared to 2003. We are hoping for double-digit growth, but we definitely expect it to be higher than last year. Even though we are owned by government entities through their telecom operations, many markets have liberalised so these entities are more commercially oriented. This drives Arabsat and that is what the board, assembly and management of Arabsat are trying to do. We are refocusing on profitability and competitiveness in the region by stressing quality, reliability and service. I think we have the tools, technology, expertise and knowledge to do that.
Satellite News: What do you see as the major new market opportunities for the company?
Balkheyour: Telecommunications regulatory environments are being liberalized in the Arab world, and there is a lot of commercial activity going on here. Given the geography of the region, with wide expanses between cities and town, there are many locations without terrestrial connectivity. This presents an opportunity for satellite operators for years to come. With the markets liberalizing, they will have more freedom to build up their ground infrastructure and reach out to the customer. To do that quickly, they will need space capacity.
Satellite News: What are the major challenges for Arabsat during the next 12 months?
Balkheyour: In the first half of 2003, we started procuring our fourth generation of satellites. We were in the process of receiving proposals and evaluating them and, by October of last year, we finalized the evaluation of the proposals and signed a contract with EADS Astrium for 4A and 4B. The first satellite (4A) has 24 C-band transponders and 16 Ku-band BSS band transponders. The second satellite (4B) has 16 FSS Ku-band and 16 Ku-band BSS transponders. We plan to launch Arabsat 4A in the last quarter of next year, and Arabsat 4B should be launched in the first quarter of 2006.
The fourth-generation satellites will replace the satellites we have on lease right now, one from PanAmSat and one from Eutelsat, in addition to our existing our fleet. Part of our challenge during the next 12 months is to make sure our new satellites are progressing on time, and another part of our challenge is to drive this organization to operate more on a commercial basis than we have in the past. We also have revised our strategies and our marketing plan. We have a new logo and corporate identity emphasizing quality, reliability and customer service.
Satellite News: What Arabsat’s plans for Ka-band satellites?
Balkheyour: We do have plans for Ka-band transmission and reception. We are filing through the proper ITU channels and, once we acquire the frequencies, it will be part of our future satellites. Potentially, we could announce new Ka-band satellites within the next 18 months. It will not be in the 4A or 4B satellites, because they have already been designed. But Ka-band could be part of the 4C or 5A series that is coming in the next two or three years.
Satellite News: We have seen private investment firms invest in New Skies, Intelsat and PanAmSat? What do you think about this? Is it healthy for the satellite industry?
Balkheyour: This issue was discussed at our Board and Assembly levels. It needs more study and analysis. We are watching these developments and looking for an opening.
It is possible that these new owners may be more interested in the short-term balance sheet than on the long-term relationship with their customers. You have to keep your eye on the customer and the market so you can be in position for the long term.
Satellite News: How do you see the DTH market developing in the Middle East?
Balkheyour: There is an opportunity for growth in the region. We cover most Arab countries from the Gulf to all of North Africa, and we cover some parts of Europe. The region is still growing, but it is reaching a maturity level. I don’t think there will the same rates of growth we saw four or five years ago regarding DTH.
There are three DTH pay-TV operators in the region: Orbit on Arabsat, Showtime and ART on Nilesat. However, growth of DTH will be limited, and it will reach saturation very soon. Some channels are governmental, funded by their respective governments. Many governmental channels along with private ones are run on a commercial basis and are funded by advertising. This funding pool is limited, and that’s why I don’t expect the same rate of growth.
Satellite News: What is the future for high-definition TV?
Balkheyour: HDTV is strong and growing quickly in North America but the market is trending up at a somewhat slower rate in Europe. And in our region, I think HDTV is coming soon, perhaps the next two or three years. Already, a couple of major broadcasters have moved to HD production. More will certainly follow, and Arabsat is engaging with customers and providing them the opportunity to learn about HDTV via satellite in partnership with us. I think there will be a big push here in the region, especially in sports and movies.
Satellite News: How do you see the broadband access market developing in the Middle East?
Balkheyour: The region is seeing good growth rates in broadband, Internet and data connectivity. It doesn’t mean there won’t be growth in other sectors like DTH or telecom, but broadband and multimedia services are experiencing faster regional growth.
We provide space segment, but that is no longer good enough for our customers. Our approach is to offer an integrated solution in partnership with other service providers in areas like broadcasting, broadband and VSAT services. In this region, this is a more practical model and productive model in terms of revenue growth.
Many areas of the Middle East have a need for fast Internet connectivity and fast download speeds, which is simply not yet available for many customers. Market liberalization has an enormous effect on the productivity of this approach. We believe this will continue accelerate during the next few months so more customers can reach out for broadband access in the residential and business markets within the region.
(Craig Lewis Moll, Arabsat, CraigM@arabsat.com)