SES and Intelsat CEOs Clash on Approaches to Serving IFC Market
Viasat‘s new CEO Rick Baldridge joined executives from major satellite operators SES, Intelsat, Hughes Networks Systems, and Eutelsat on a virtual executive panel just days after he was named the new CEO replacing Mark Dankberg. The discussion at World Satellite Business Week Virtual Edition hosted by Euroconsult, centered on numerous topics, but mobility was one area in which perspectives differed, as Intelsat and SES shared different ideas.
Intelsat CEO Stephen Spengler talked in depth about Intelsat’s recent acquisition of Gogo saying that he feels very strongly about the growth of In-Flight Connectivity (IFC), and that it will be a double-digit growth market over the next decade. However, it is clear that Spengler believes traditional approaches can definitely be improved upon.
“Our view is that the service provider level was not performing optimally. The impact was really felt by customers. By vertically integrating here, we can dramatically change the customer experience. We are going to be enhance that user experience. Our integration planning is well underway. We will make some significant network investments to support this. We think this is a long-term growth area for Intelsat, as well as the industry as a whole,” Spengler said.
However, Steve Collar, SES’s CEO seemed to think the partnership approach, rather than the vertically integrated approach could lead to optimal performance. He said, “We have been working with IFC providers. We have been seeing sustained growth in the IFC market. We have a really good satellite [SES-17] coming to this market. Direct versus indirect can be overstated. There are pros and cons. The pros of working with different service providers, is we get access to a significant amount of [airline] fleet. However, with Intelsat’s move, the traditional positions of satellite operators and providers will evolve.”
Spengler added, “We will still work with other satellite operators. We do expect to be a lot of growth. It creates partnership opportunities across the industry. The most important thing is to get the right solutions with the right economics to the end user.”
Baldridge was also optimistic about this market for Viasat. He said Viasat had been focused on IFC very early on, and cited the operator’s work with JetBlue as an example of how an airline could deliver free on-board Wi-Fi but still reap the benefits. He said, “JetBlue has seen higher revenue per seat, more business travellers. We have invested a lot of money in terms of platforms. It is all about the customer experience. The market for new aircraft will be down over the next couple of years. The forecast overall by 2030 is substantial growth in the marketplace, but a lot of churn in the near term.”
Eutelsat CEO Rodolphe Belmer spoke about the importance of broadcast for Eutelsat. Belmer believes Eutelsat has turned a corner in terms of video after recent deals with MultiChoice, Canal+, Sky Italia. “All of these deals were on good terms. The broadcast segment for our company is extremely resilient. We are able to stabilize revenues. It will stay mature. We see a slight erosion of broadcast business in Western Europe, but this is compensated by the growth in emerging markets. Even though there is strong growth in OTT, our broadcast business remains strong,” he said.
Collar congratulated Belmer on its recent Sky Italia deal Eutelsat and said the whole satellite industry benefits from such deals. “We did a big deal with Canal+. It gave reassurance that this business will go on for a long period of time. It creates interest in a hybrid world. We think there is value in being the operator that brings all of this together. We are talking with our [broadcast] customers about building platforms, with linear and live content over satellite. We can provide solutions. I think it will underpin the value we are bringing. Collectively, we are the best solution for bringing the best content in the broadcast industry.”
Investing in Broadband
For Eutelsat, the strong performance in broadcast enables it to invest more in new growth segments such as fixed broadband. Belmer said looking ahead, he was very confident in the resilience of the satellite industry, and that the current situation will reinforce satellite as part of the communications ecosystem. In the medium to long term, he said Eutelsat will stay focused on connectivity verticals, such as fixed broadband.
“We think there is significant potential. We also focus on mobility, IFC and maritime. We expect a long-term recovery here. We are adding a third leg to this, IoT [Internet of Things]. We are developing a constellation to serve the IoT market. 2021 will represent a turning point in our fixed broadband strategy,” he said. “On the broadband to consumer segment, we believe it is a very significant business for tomorrow. For example, Orange will use our KONNECT satellite and distribute satellite broadband. We are chasing opportunities with other similar providers.”
Hughes President Pradman Kaul was also bullish about consumer broadband highlighting recent growth the operator has seen in this area. “We have over 1.5 million broadband subscribers. Net subscribers are growing fast. If you look at the economics of that business, the ARPUs are growing every quarter. We are offering new services to customers, so ARPUs are going up,” he said. “The consumer business saw growth. We really felt the demand increased. The financials were very good for the last three quarters. Unfortunately, our beams in the U.S. were pretty much full, so we had to constrain the growth. In Latin America, we grew dramatically our consumer business. We have been doing very well. The business looks good.”
A Challenging Year
Most of the CEOs also talked about the uniqueness of 2020, but also how it has underlined the importance of satellite. Spengler said, “It has been a remarkable year, a year that we didn’t expect. We have seen is what we do is important. It is really essential.”
Collar added, “It has been a tough period, a tough year, from a human, emotional perspective as well as a business perspective. This has been one of the most challenging periods we have lived through. Today’s announcement around a vaccine will hopefully all move us on. Despite all of that, from a business perspective, things have remained resilient.”