HONOLULU–Existing and new satellite customers continue to ask satellite operators to be integrated services providers, not just “bent pipe” carriers offering single, space- based solutions to customers’ telecommunications needs.

“We view fiber as an enabling technology [today],” said Mike Antonovich, senior vice president of global services, at PanAmSat Corp. [SPOT]. “The market is asking us to be less of a satellite carrier and more of an integrated services provider.”

Antonovich made his comments here last week during a panel session on creating new satellite customers at the Pacific Telecommunications Council (PTC) annual show (for additional show coverage, see page 6 of this issue).

“The Internet has destabilized what was a rational market,” he said. “The entire telecom food chain is affected.” Key factors that are working to change the landscape for satellite operators are:

• Decreased advertising revenues for broadcasters;
• Tough international markets;
• Digital compression technology eroding satellite newsgathering (SNG) demand;
• Shaky margins at traditional telecom companies;
• The end of the cable “gold rush;”
• Fewer direct broadcast satellite (DBS) opportunities; and
• Investors demanding that satellite companies report finances on a quarterly basis.

Antonovich said the satellite industry needs to identify applications and opportunities that are uniquely well-served by satellite technology including: keying on geographically dispersed customers, pursuing data markets, focusing on “blue chip” customers, providing integrated product offerings and establishing relationship-based sales efforts.

Echoing Antonovich’s comments was Andreas Georghiou, senior vice president of domestic and international sales at Princeton, N.J.-based SES Americom. He admitted that “growth in new business is either flat or none.”

Georghiou said that future growth opportunities lie in broadband markets, enterprise solutions and SES’ proposal to use the 105.5 degreesW orbital slot for DBS services in the United States.

Lastly, Georghiou said that the media/entertainment sector is a promising area for growth, as is the introduction of Ka-band broadband services sometime during the fourth quarter of 2004.

John Stanton, president, Intelsat’s global sales and marketing unit, told attendees at the session that he believes more consolidation among satellite companies will continue this year. Stephen Tom, president of Massachusetts-based Teleport Consulting Group International USA, said that it is important for satellite operators to remember that the sales effort should be “about the customer.” He added that sales teams need to do a better job of creating a buying opportunity for customers. “Don’t expect change if you don’t change how you act,” Tom said.

PanAmSat’s Antonovich predicted that this year 1) top-line revenues will continue to be flat for operators, 2) satellite companies will focus on cost reductions, 3) satellite operators will key on capacity utilization, 4) there will be increased consolidation in the industry, 5) customers will take the opportunity to migrate to solid carriers and 6) bargain hunting by customers will be prevalent.

Beleaguered Launch Sector

As the world’s commercial expendable launch vehicle (ELV) companies struggle to regain their footing following a year of plummeting prices for their services and a series of high-profile rocket failures, some executives at the PTC show said they do not expect a recovery for this sector for the next 10 years.

“I said it last year and I’ll stick with my prediction today, I think we’re going to see flat sales in [the ELV market] for 10 years,” said Tom Carroll, director of international marketing and sales for Asia-Pacific for International Launch Services (ILS). Carroll made his comments during a launch vehicle panel session last week.

Jean Yves Le Gall, chief executive of European launch leader Arianespace, said his company is reaching a crossroads regarding its transition from the Ariane 4 to the Ariane 5 launcher. The final Ariane 4 launch scheduled Feb. 11 (carrying the final Intelsat 9-series satellite), and an additional five generic Ariane 5 launches scheduled this year with a possibility of one heavy-lifting 10-ton Ariane 5 ECA launch by the fourth quarter. An Ariane 5 ECA launcher failed in December carrying a Eutelsat satellite, grounding the entire ECA fleet.

The inquiry board concluded that the main anomaly issue centered on the nozzle on the Vulcain engine and not with the engine itself, Le Gall said.

“The independent review commission focused on the qualification process in order to reaffirm the robustness and success of the Ariane 5 launch vehicle,” Le Gall added. “The Ariane 5 ECA recovery program includes upgrading the Vulcain 2 nozzle using the flight proven technology of the Vulcain 1 nozzle and an extensive analysis of the qualification of the launch vehicle, especially for aspects not demonstrated in flight.” The European launcher company’s current backlog stands at 41 contracts.

In addition to getting the Ariane 5 launcher back on track, Le Gall said his company is waiting for the final financing decision from the European Space Agency (ESA) as to whether or not the Soyuz launch vehicle will be launched from its Kourou, French Guyana, launch site. If Soyuz joins the Ariane 5 in Kourou, ESA will have to carry the fixed cost of the launch facility for that vehicle.

Telecom Slows Digital TV

Although the global march toward digital television continues, it has slowed down due to global economic woes, which are causing regional and global satellite operators to adjust their sales and marketing efforts with broadcasters and to reevaluate strategic decisions regarding fleet management.

“This decade promises to be a decade of change” both for broadcasters and satellite operators as digital subscriber-based pay-TV services continue to roll out country by country and region by region, said Joan Byrnes, chief operating officer of Loral Skynet, a unit of Loral Space and Communications [LOR]. “Many countries are looking to the United States to see how the new HDTV system will be implemented.”

Byrnes told a PTC show panel that subscriber pay-TV services in the United States, both cable and direct-to-home satellite service, account for more than 90 million total TV households, with more than 80 percent market penetration. This translates into roughly $50 billion in total subscriber revenues.

By contrast, Europe logs approximately $19 billion in total pay-TV household revenues annually from 110 million subscribers. Lastly, in Asia, there are approximately 160 million pay-TV households that account for roughly $40 billion in revenues

Byrnes pointed out that pay-TV profits in Asia have lagged those in the United States due to higher operating costs, rampant piracy and regulatory hurdles. Lastly, Byrnes said that Asia continues to be the fastest-growing subscription TV market in the world.

–David Bross (Nick Mitsis contributed to this report)