The charts are pretty grim when it comes to the share prices of major satellite operators. During a Monday morning discussion between financial analysts at the SATELLITE 2018 Conference & Exhibition, NSR President Christopher Baugh pointed out that, despite the industry’s massive technological advancements, investors are generally much less bullish on Fixed Satellite Service (FSS) stocks than in previous years.
According to Justin Cadman, Raymond James’ former senior vice president of investment banking, the biggest contributor to the decline is the “dramatic change in capital expenditure per Gigabit per second.” HTS, and soon LEO/MEO broadband constellations, are bringing more bandwidth online than ever before. “Part of [the problem] is their model today is dependent on that wholesale sale of capacity,” Cadman said.
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Wells Fargo Vice President of Equity Research Andrew Spinola said investors’ overall concern is that operators will continue to saturate their historical markets while struggling to recoup investments. “Investors are quite worried that the demand won’t be there, so that capacity falls back onto existing markets,” he said.
One solution, the analysts agreed, is to focus additional capacity on untapped verticals such as maritime or In-Flight Connectivity. “Incumbent markets will continue to go sideways — it’s these new markets that are much more interesting,” Spinola said.
Wim Steenbakkers, global head of satellite finance at ING Wholesale Banking, suggested absorbing a downstream service provider could unlock new opportunities. Overall, the panelists unanimously predicted significant consolidation over the next two years.
“There are way too many players. When you have 10 CEOs that all think they’re going to get 30 percent of the market, it’s a terrible place to be,” Spinola said. “I think it’s going to happen when there’s desperation.” VS
