[Satellite News – 09-0908] CEOs of the globe’s largest commercial satellite operators says that despite the overall credit crunch, there are expecting good revenue growth over the next few years.
    “We are still experiencing strong demand. We have been building backlog. We have seen good demand. Our customers are able to pay us and pay us on time,” David McGlade, CEO of Intelsat, said Sept 9 during the “Global Satellite Operators in a Changing World” at Euroconsult’s World Satellite Business Week in Paris.
    The biggest concern for the fixed satellite services executives remains launch costs. “I believe satellites and launchers are too expensive,” Giuliano Berretta, CEO of  Eutelsat, said. “What is happening in the last year is too much. Some of have paid $120 million for a Proton. It is another world. There has been a change in policy in launching the rockets. The reliability has not improved, but the price has.”
    McGlade agreed. “The costs of building and launching a satellite is going up far faster than inflation,” he said. “As it is dollar denominated, it is very expensive for us. We have to be careful as an industry in terms of how we push it. We want quality and price.”
    The increase in launch costs is beginning to have an impact on “whether projects can go forward,” said Dan Goldberg, CEO of Telesat.
    But the biggest threat to growing revenues “is launch failure,” said Romain Bausch, CEO of SES.
    In terms of new markets, China remains the biggest prize, but the majority of the panel believe access to this market will not happen any time soon. “We are trying to get a piece of what is happening there,” said McGlade. “I think China is losing out on what it can do for its citizens. We are a perfect solution for that. It would be good for the business, but I am less optimistic” that anything will happen.
    “There are markets where some of us don’t have any position, such as China,” sid Bausch. “I don’t see that changing. It is very clear the Chinese satellite operator will be servicing that market.”

Finance
In a separate panel, representatives of the finance community said they believe the credit crunch likely will be around for a little while. “We think the economic crisis will be a long storm,” said Philippe-Olivier Rousseau, senior banker for BNP Paribas. “We are just half way through the storm. The end of next year is when the storm will start to recede.”
    The landscape had changed, said Rousseau, noting that a deal such as BC Partners acquisition of Intelsat most likely would not take place in today’s climate. “This is one of the last financings under old-world rules,” he said during the “Financing Satellite Systems and Services.” “The top three operators remain highly leveraging. Under current debt market conditions, any major consolidation transaction would be extremely difficult to finance.”
    Financial analysts see the funding issues having a particular impact on the  mobile satellite services (MSS) sector. “The MSS sector faces an enormous capital question,” said Malcolm Morris, managing director, media investment banking, Deutsche Bank Securities. “Can it be met and can the businesses survive? This is going to be extremely challenging. The industry can achieve finance, but it is on significantly worse terms than before.”
    The MSS sector offers a compelling business opportunity with strong dynamics in core maritime and land markets for data and voice services as well as new market opportunities such as aeronautical services, said Charles Harman, managing director of JP Morgan, said. But this may not be enough.
    “The financial market is different from 12 months ago,” Harman said. “There are questions such as, ‘Who are the logical long term owners of MSS operators?’ I think whatever happens, we are likely to be proved entirely wrong by what actually happens.”
    Rousseau believes these issues could provide an opportunity for fixed satellite services operators to enter the mobile market.