WASHINGTON, D.C. -The troubled economy in Latin America has not deterred a number of satellite operators in that marketplace from making strategic plans to invest heavily to grow their services in the region.
The most ambitious strategy may be from Argentine-based Nahuelsat, one of the smallest satellite companies in the region. Nahuelsat is looking to invest $400 million during the next five years to expand from its traditional focus on the Southern Cone of South America to become a regional service with half of its annual revenues coming from the United States, Mexico and Brazil, said Jorge Irigoin, Nahuelsat’s CEO.
Nahuelsat took its financial lumps last year when it lost roughly $50 million amid a severe economic downturn in Argentina, Irigoin said. The company is projecting a return to break-even status by 2004, he added.
The challenging environment in 2002 caused the Nahuelsat to review all its business plans closely and to scale back a planned $550 million investment by $150 million between 2002 and 2007, Irigoin said.
Critics may doubt whether Nahuelsat can amass the hundreds of millions of dollars it plans to invest, but Irigoin said two major telecommunications companies in Argentina have stopped making investments altogether. The situation leaves “an opportunity” for others to grow, he added.
The Argentine economic crisis is “very much linked” with opportunities, Irigoin said. Demand in the region will grow slowly during the next five years and be available to the providers that can accomplish the “very tough task” of raising the funds to pursue it, he added. The key is a sound and realistic capital plan.
If a business plan is compelling enough, “money is available,” Irigoin said.
One challenge for all the companies operating in Latin America’s satellite market is a “price war,” Irigoin said. He voiced hope that the pricing pressure from all the competitors operating in the same market would begin to ease a bit.
The panel discussion on Latin America at SATELLITE 2003 in Washington where Irigoin offered his comments last week also featured investment plans of Embratel-backed Star One, a Brazilian-based satellite operator that expects to order two replacement satellites by year’s end, said Lincoln Oliveira, its chief technology officer. Star One operates five geostationary Brasilsat satellites in Latin America right now and will replace two of the older ones, B1 and B2, with C1 and C2.
Reduced growth in gross domestic product (GDP), a crash in the capital markets, and the breakout of a price war should not stop companies in the region from planning and preparing for the inevitable turnaround in the marketplace, he added.
Star One also is an example of how satellite operators based in other parts of the world have partnered with smaller companies in Latin America. SES Global [SES.LU] is a 20 percent shareholder in Star One. In addition, Star One is the legal representative of Telesat Canada in Brazil.
Economic problems in Argentina, currency rate devaluation in Brazil and a serious risk that political instability in Venezuela could turn into a “bloodbath” cannot prevent companies from looking to capitalize on marketplace opportunities, said Maria Velez de Berliner, president of the Gibsonia, Pa.-based consulting firm Latin Trade Solutions.
Economic Recovery?
A negative factor that could be a crimp in the economic recovery of Argentina, Brazil and Chile is the pending war in Iraq, Velez de Berliner said.
New Skies Satellites N.V. invested significantly in Latin America last year when it launched two satellites that are serve the market, said Dolores Martos, New Skies’ vice president of sales in Latin America and the Caribbean
Excess capacity in Latin America currently is a problem, Martos said. However, signs of a “recovery” are beginning to emerge, she added.
Carmen Gonzalez-Sanfeliu, PanAmSat’s vice president of Latin American operations, said her company is preparing to “move forward” this year by pursuing “good growth” opportunities in Brazil and shorter-term deals to boost the products of its customers in the economically ailing southern part of the region.
Any global industry consolidation that occurs also could have a “trickle down” impact on the regions, Gonzalez-Sanfeliu said.
The significant challenges faced by companies operating in the region can be addressed by strategies to offset these risk factors. Strategies that operators can use include: forming alliances with local companies to share risk; inking short-term deals in anticipation of improved market conditions; consolidating to allow profitable pricing; analyzing each opportunity on a case-by-case basis; and keeping a close watch on the political and regulatory environment to avoid costly mistakes. Those observations by Gonzalez-Sanfeliu were coupled by her expression of confidence that 2003 would be a successful year for PanAmSat in Latin America.
Miguel Pandruo Panadero, director of commercial business at Spain-based Hispasat, explained that his company is intent on doubling its Latin American capacity despite the obstacles in operating there. Hispamar is the name of the Latin American unit of Hispasat, which is 27 percent owned by Paris-based Eutelsat S.A.
Jorge Villarreal, marketing director of Satelites Mexicanos, S.A. de C.V. (SatMex), said major issues companies need to address to successfully operate in Latin America encompass market and technology trends, as well as offering integrated solutions. The “last mile” challenge continues to pose a hurdle for companies to clear in certain regions, he added.
The adoption of new technology in the region is a demand growth driver, Villareal said. A better understanding of final users of satellite services also helps to meet their requirements along the value chain, he added.
Satellites are poised to continue serving in the industry’s traditional niche as a gap-filler to supplement coverage that terrestrial or wireless services do not provide, Villareal said.
–Paul Dykewicz
Factors Hampering Operators In Latin America:
- Increased competition from regional and global operators;
- An economic recession;
- The devaluation of local currencies;
- An expected war in Iraq and its impact on the U.S. dollar;
- The debt load of many companies; and
- The perceived political instability.
Source: Carmen Gonzalez-Sanfeliu, PanAmSat
Latin American Broadband Internet Trends
- Decrease in broadband Internet penetration and usage;
- Increase in terrestrial offerings with better prices and performance ratios;
- Development of satellite broadband Internet access for residential users and companies.
Source: Lincoln Oliveira, Star One
