WASHINGTON, DC — Eutelsat CEO Giuliano Berretta is sceptical about the wisdom of large-scale mergers in the fixed-satellite services (FSS) sector. His view is intriguing, given the recent attempts by both PanAmSat and Intelsat to combine with Eutelsat.

Sharing a table with Intelsat CEO Conny Kullman and PanAmSat CEO Joe Wright at Satellite 2003 last month, Berretta said, “I think there is an overplay about consolidation … it is very difficult between big companies. There are issues of culture. Consolidation is better between a big company and a small company.”

During the panel, SES Global CEO Romain Bausch and Kullman clashed over the type of consolidation that might take place. Bausch commented, “You should combine operators that are strong in the same areas. If there is no good strategic fit, there will not be much consolidation.”

Kullman responded, “In terms of consolidation strategy, it is more important to look at complementary capabilities and regional coverage; you can build a stronger business from that. We are looking at that. In addition, we are taking a look at what savings we can do on the synergy side.” He added that every satellite that does not need to be built and launched can save $250 million.”

Dan Goldberg, the CEO of New Skies Satellites, expressed the view that the whole consolidation issue “was given a disproportionate amount of airtime.”

U.S. Government Opportunities

One market all FSS operators seem to be targeting for greater revenue generation is the military and government users. The United States has taken the lead in terms of military spending for satellite services, so the competition among the FSS players is intense.

Joe Wright, the CEO of PanAmSat, questioned whether there was a level playing field in bidding for U.S. government service contracts. “The [U.S.] government is going to be an increasing part of our business and they are going to require us to meet their demands. They are going to have to tell us what their plans are … PanAmSat has got a simple process. Let there be a level playing field. I believe there has been a tradition established in [awarding contracts based on pre-existing] relationships.”

Kullman disagreed, “All customers are concerned with price and connectivity coverage. We have got into a good business situation with the military because of the coverage and quality we provide. What you see in terms of military, they are buying where they get the right coverage, price and capacity … the way it should be resolved in the market place.”

Loral Space & Communications is also looking to increase its business with the U.S. government. Eric Zahler, Loral president and COO, told the panel: “We are seeing an increase in defence interests. I think that will continue as the government [realises it] doesn’t have enough of their own capacity. We see customers more focused on solutions, rather than capacity … We see the move into a vertically end-to-end solution as responding to the demands of customers. What the government is not good at is long-term planning and letting us know what their requirements are.”

For the European operators, the opportunities may be more limited. “In this field, we are a very small player,” Berretta said, adding, “Most of the countries have their own military satellites. We are mainly a company that is dealing with commercial applications.”

Goldberg said, “there has been too much of a focus on government services. There are growing sources of demand outside of the government market. For example, demand is being fuelled by deregulation in countries such as India.”

–Mark Holmes