Latest News

O3b Sees Contract Surge, Targets New Markets

By | June 19, 2015
      O3b SES GS

      An O3b satellite. Photo: O3b

      [Via Satellite 06-19-2015] O3b Networks, operator of a constellation of 12 High Throughput Satellites (HTS) in Medium Earth Orbit (MEO) has announced a slew of new and upgraded contracts for its Ka-band services. Many of these awards came from telcos in the Asia-Pacific, though O3B continues to branch out, expecting more customers in markets such as energy and maritime.

      In the past few days the operator announced new agreements with, Bharti Airtel, the American Samoa Telecommunications Authority (ASTCA), the Chilean telco Entel, and Emerging Markets Communications (EMC).

      Bharti Airtel entered a multi-year strategic framework agreement with O3b for IP trunking services to Timor-Leste in order to support 2G and 3G services. Timor Leste has a population of approximately one million. ASTCA and Entel are both using the IP trunking solution O3bTrunk, the former to connect the Samoan archipelago and establish backup for its submarine fiber system, and the latter to connect Easter Island, which, located nearly 3,700 kilometers from mainland, draws roughly 80,000 tourists on an annual basis largely due to the famous Moai stone statues. The ASTCA contract includes a commitment for 1.2 Gbps — more than doubling the archipelago’s backhaul and Internet capacity — and supports the Broadband Linking the American Samoa Territory (BLAST) Project to connect all of the main islands.

      EMC contracted O3b to provide connectivity to a Tier One global telecommunications company in the Oil and Gas (O&G) industry. The energy sector contract could be part of a larger push into this market for the operator. Andrew Spinola, senior analyst at Wells Fargo, wrote in a June 17 investor note following SES recent investor day, that markets that have previously been smaller for O3b now represent new goals.

      “Collar stated that 2014 was the year of maritime for O3b, 2015 is the year of energy (e.g. deep water drilling rigs), and 2016 is likely to be the year of government,” he wrote.

      SES owns a partial stake in O3b. According to O3b’s investor day presentation, maritime represents 30 percent of the company’s backlog, energy represents 5 percent, and government 1 percent. Trunking services account for 60 percent of backlog and backhaul comprises the remaining 4 percent.

      O3b also revealed that existing customers Our Telekom of the Solomon Islands, Royal Caribbean, Digicel PNG in Papua New Guinea, and Palau National Communications Corporation (PNCC) have all upgraded contracts to bolster telecommunications services.

      O3b proved to be a highlight of SES’ investor day, touting $530 million in backlog, and estimating revenue of $32 to $36 million per satellite.

      “We remain confident of SES’s position within the various ecosystems it competes in, and while growth fundamentals are robust, it is beyond the top-line that we have greatest cause for optimism: O3b and [capital expenditures] capex,” Giles Thorne, equity analyst at Jefferies International Limited, wrote in a June 17 research note.

      Maritime is also anticipated as an area of continued growth, nearly doubling its share of O3b’s backlog since July 2015. Royal Caribbean’s recent contract brings O3bMaritime to its largest ship, the Quantum of the Seas. Spinola noted that the ship will receive 500 Mbps constantly, and that O3b expects to recognize $30 million from the cruise line in 2016. O3b also trialed LTE backhaul to a warship with the U.S. Navy’s 7th fleet, increasing the ship’s bandwidth from 20 Mbps with Geostationary Earth Orbit (GEO) satellites to 500 Mbps from MEO.

      Looking forward, Collar also hinted at decisions regarding new satellites in the near future.

      “This was also the first time that we’ve heard O3b talk about a next-generation constellation. Collar noted that the next constellation would take advantage of cheaper and better ground equipment to go further downstream to applications like enterprise,” wrote Spinola.

      O3b, having ample spectrum, has room to grow its satellite fleet considerably should it chose to do so.