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Arabsat CEO Sees Growth, Consolidation in Middle East

By | September 17, 2008
      [Satellite News 09-17-08] The Arab Satellite Communications Organization (Arabsat) is one of the largest fixed satellite services operators in the Middle East and likely will play a strong role in the development of communications and television market in the region.
           Arabsat CEO Khalid Balkheyour spoke with Satellite News Associate Editor Mark Holmes about the operator’s growth plans in the wake of the launch of the BADR-6 satellite as well as competition from other satellite operators in the region.

      Satellite News: Is there enough demand for all the capacity planned for the Middle East?

      Balkheyour: Market forecasts say there is a strong demand for capacity. There may be new players like Yahsat in the market, but there will be growth for a few years to come in the market. How much that growth will be and how sustainable it will be is questionable. The Middle East has a number of markets so it is difficult to predict, however the indications are that growth will be stable over the coming years.

      Satellite News: Do you have any plans to add to the amount of capacity?

      Balkheyour:  What Arabsat has adopted is to have a complete system as well as a back-up. A few years ago we only had three satellites, and two of these had major anomalies, so we needed to have new, larger and healthier, satellites as well as in-orbit back-up capacity. To address those concerns and match these objectives, our revamped strategy has been to launch a satellite a year from 2008 to 2011. They are replacement satellites as well as additional capacity and an additional back-up. In total, we are budgeting around $1 billion dollars for the satellites. We have secured the funding we need for the satellites in this procurement cycle.

      Satellite News: How do you see high-definition (HD) take-up in the region?

      Balkheyour:  It is making slow progress here, but it will come. Arabsat has already made a number of deals for HD channels currently carried on our satellites on an exclusive basis over the [Middle East and North Africa] region. We are also promoting HD services through the Arab State Broadcasting Forum, which has a program for the region to support and stimulate the adoption of new technologies such as HD. But there is a whole value chain here. Broadcasters need to buy new equipment such as cameras and have all the production equipment, and then it goes all the way to the viewer. The satellite is the easiest part. It takes time but we need to be prepared for it.
          I think within three to four years we will have a significant number of other HDTV channels on the market here, the vast majority of them being region-specific.

      Satellite News: How do you assess the prospects for DTH in the region?

      Balkheyour:  I think DTH services will grow in the region. Some broadcasters will die along the way — most likely among the smaller ones — but some others will come in. The main broadcasters will grow and bring more channels.

      Satellite News: What impact do you think other distribution platforms such as IPTV will have?

      Balkheyour:  I don’t think IPTV will have an impact in the Middle East over the next five years. I think Internet penetration is not that high. There is a lack of DSL penetration. I think satellite reception will continue to be the preferred method to gain TV services. Fiber-to-the-home (FTTH) to the end user is not a very viable option right now, at least on a large scale. I don’t think there will be much of a massive impact in the near future. However, if/when IPTV eventually takes off in some geographically restricted niche markets, where either the copper network is good enough to support such high profile xDSL services or FTTH will be made available faster than originally expected, like a specific city or a small state, satellite still has a beautiful central enabler role to play as the most economically efficient way to feed content into the headends’ [digital subscriber line access multiplexer]. This has been demonstrated in many European countries where this business model has recently taken off.

      Satellite News: Where are the growth areas for satellite communications?

      Balkheyour:  We see a lot of growth coming from the Africa region. We see strong growth in terms of links between the Middle East and Africa. There are opportunities in terms of broadband and telecoms services. Three years ago, our revenues were two-thirds broadcasting and one-third telecoms. Now it is almost 50-50, and we certainly see a lot of growth coming from the telecoms area. People are eager to be connected and have high-speed data services.

      Satellite News: How do you see the satellite landscape developing in the Middle East?

      Balkheyour: I think there are some interesting local players in the markets. You have players like Yahsat, Nilesat and Rascom coming up. Rascom had a satellite failure, but they have a program in place. So there are already a few players around, and I would even expect some new ones to come up — either purely at the satellite operators level or even at the integrated service providers one — and make more of an impact. If you look at the overall picture, I think you could see some consolidation in the region, whether at the ownership level or at a business level. You could see some alliances and partnerships between operators. With all these operators and the demand in the region, I don’t think they will all have a solid business case in the longer run. We are an IGO, but our constitution allows us to get involved in possible consolidation and partnerships. If there is a good business case, we would consider it. We are indeed carefully monitoring and pursuing all sound options.

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