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Via Satellite: Do you see consolidation among FSS operators in the region?Brown-Kenyon: The business case for a satellite investment is not easy. With a large upfront investment, profitability requires transponder lease rates above cost and operating the satellite at high utilization rates over the satellite’s life. Given the transponder rates that some companies are leasing capacity at, I struggle to see how they are able to recoup their investment and justify replacements.
In terms of what this means to the competition, with a number of satellites coming up for replacement over the next three to four years, I think you will see some of the weaker players/satellites in the market reconsidering the replacement of spacecraft. This pressure at the lower end of the market may also lead to some consolidation, but in an industry where there are other interests at play, this will not always happen as quickly as everyone might want.
Of some concern in the market, however, is the entry of a number of new operators into the market. Starting a new satellite/new orbital slot is not easy. If these operators fail to establish themselves in the market quickly, [since they] often supporting heavy debt, you could see them reverting to dropping their transponder lease rates to bring in cash flow. This will be bad not only for themselves — once you drop your rates it is difficult for them to recover them — but also for the industry in general.
With some of the satellites looking like they will be launching without having completed the technical coordination of their satellite with existing operators, this raises an even greater concern.
Via Satellite: Have the dynamics for FSS services in recent years changed?Brown-Kenyon: I think the supply-and-demand balance has evened out over the last few years so in general, there is less spare capacity and you see less people dumping capacity. I think this statement, however, is heavily dependent on satellite and slot (with some satellite having to manage excess demand and others excess supply). At the lower end of the market I think you will see some turn over of operators, with some new operators entering the market while others may potentially drop out.
Via Satellite: How do you assess the prospects for DTH across the region?Brown-Kenyon: I think the prospects for DTH in the region are very good, but as with the market for satellite capacity, I think market dynamics will vary across the market depending on market size and prevalence of other forms of pay-TV platform. To give you an example, in Malaysia, which has relatively poor terrestrial infrastructure, DTH makes sense. It’s the best technology to use. But given the size of the market, and Astro’s relatively strong position, I think it would be challenging for a second DTH operator to develop a strong presence in the market. Compare this to a market such as Indonesia, which has a population of over 200 million. While there are cable networks across major cities, large parts of the country are beyond the reach of existing networks. Given these factors and the economic potential of the country, I think there is the opportunity for a number of competing DTH pay-TV platforms. In other markets, such as Taiwan, cable is dominant and it is difficult to see how DTH could gain a foothold.
Via Satellite: What role will Measat play in the Asian satellite landscape in the future?Brown-Kenyon: I think we and will continue to be a core part of the regional satellite industry supporting the DTH and video distribution sectors.
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