With the launch of its Amazonas satellite last week, Hispasat is entering a key period in its history. The Amazonas satellite could change the face of digital television in Latin America, as it has been designed to provide DTH services to Latin America and the United States. In addition, it could provide coverage for the American continent, Europe and North Africa.

Amazonas has an expected life of at least 15 years and a capacity of 63 transponders. The transponder has 36 megahertz-equivalent bandwidth, using Ku-band and C-band frequencies, and it’s located at the 61º W orbital slot.

The challenge for the company now turns to selling the capacity as soon as possible. The potential for direct-to-home (DTH) and broadband services in Latin America long has been discussed but economic conditions in the region have caused financial turbulence and have left the potential unfulfilled. The challenge for Hispasat will be to generate revenues and profits in a region where doing so has been difficult.

The man in charge of positioning Hispasat as the number one satellite operator in Latin America is Jacinto Garcia Palacios, Hispasat’s CEO. In an exclusive interview with Satellite News, Palacios told International Editor Mark Holmes about the company’s ambitions and its intent to become a market leader in Latin America as the Amazonas era gets underway.

Satellite News: With the successful launch of Amazonas, what are the major challenges facing the operator during the next 12 months? Do you expect there to be strong opportunities?

Palacios: For the next 12 months, we want to fill up the satellite as soon as possible. For that, we have a very big contract, which is the one with Telemar, so a big job has to be done before the end of the year for the modification and the transfer of the stations in order to be pointed towards Amazonas. Secondly, we want to activate a certain number of MoUs and intention letters we have today for new capacity in Ku-band on Amazonas. The first 12 months will show whether this project will have a good performance or not. We need a big effort from everyone in Hispasat and Hispamar to make sure we have strong regional presence from the United States to south Argentina.

There will be a certain number of opportunities. The market is moving slowly, but in a positive way. We see that countries such as Colombia, Mexico and Chile plan to start a certain number of applications, particularly related to broadband. There are other opportunities. They have to renew contracts they have with competitors, and then we will enter into the competition. We are sure that the performance and power of Amazonas will be better than what they have today, so we hope to win some of those contracts.

We will continue to develop our projects and extend them to the north of Africa and Latin America. Any concentration for Hispasat today should be done through operators in Latin America. We should be closer to Satmex or Nahuelsat and Star One. These are potentially our natural arrangements for the future.

Satellite News: What are your targets in terms of filling capacity on Amazonas? How much capacity have you sold pre-launch?

Palacios: By the time we launch, we will have sold at least 27 percent of the capacity on Amazonas. We’ve also got another 10 percent sold if you count MoUs and intention letters. The 27-percent figure is in line with our expectations. The major problem for us is that the prices today for transponders are below what they were when we made our predictions. Certainly, we will fill up the satellite, but maybe the revenues from the overall project in the first year will be lower than expected.

Satellite News: Obviously, a number of operators are looking to do business in Latin America. What do you see as your competitive advantages compared with other satellite operators, and will pricing be an issue?

Palacios: We will be competitive for many reasons. This is the first Ku-band satellite really launched for Latin America. All the other satellites are marginal operations for the operators. Secondly, the power of this satellite and the technical specifications is much better than what is in the market today and what will be in the market over the next two years. Thirdly, a certain number of situations with our competitors could open the door for us. You have the situation with the Satmex and Estrela do Sul, for example. In some ways, we could almost be alone to start our operations.

We think the market is recovering, even if the prices are not going down any more than in the last two to three years. The prices are more fixed and are even starting to move up very slowly, so our expectations are reasonably optimistic. In Latin America, decisions can take longer than in other countries, but the need is there. Sooner or later, the demand for that capacity will be high from countries in the region.

Satellite News: How do you differentiate between the broadband and the broadcast markets in Latin America?

Palacios: The broadband market is dependent today on the political support of funding. There are organizations like the IBER bank of development, or even the FMI, which is more political and supports cooperative ventures between Europe and Latin America. It is not very difficult to understand that broadband in Latin America could involve huge marketing costs to start projects. All this is now in the mind of the countries that, for political reasons, want to reduce the digital divide. That means a certain number of countries, including Colombia, have already started this process. Mexico is about to start. You also have countries, such as Argentina and Chile — providing that they find the money — that want to make broadband more readily available.

So, broadband is really part of the new development we might expect to have in Latin America. For countries in Europe, satellite broadband may only represent between 10 percent and 15 percent of the regions, while it could be between 60 percent and 70 percent in certain territories in Latin America.

Satellite News: What are the company’s capital expenditure plans post-Amazonas? When do you expect to order your next major satellite?

Palacios: This will depend on how Amazonas succeeds. Today, as things stand, it is easier to think that the next satellite for Hispasat will be another Latin American satellite, maybe to provide back-up Amazonas and also maybe to take a position in another orbital constellation somewhere. In Europe today, the potential for growth in the data area is not huge. We could predict that the new satellite will be designed by the end of 2005, built in 2006 and launched in 2008. This could be the correct approach. It could be faster if the fill rates for Amazonas are better than the plan we have on the table.

In the next 12 months, it is conceivable that Latin America could account for 25 percent of our revenues. This year, Latin America only represents around six percent, so there could be significant growth.

Satellite News: What are your aims in terms of your satellite broadband strategy?

Palacios: We have vast experience in broadband services, although mainly in Spain. We now have more than 2,000 terminals already in operation. Some of these are with the government themselves, because we won the first bid that the government launched about 18 months ago; this includes about 6,000 stations. A new tender is on the way for another 2,000 stations. This means that in the next six or seven months, there will be close to 4,000 stations operating on our platform. There are also some small contracts starting to appear in Latin America, [particularly] in Brazil.

There is a big difference between the market in Latin America and in Europe. In Europe, you have big operators, such as France Telecom and Telefonica, and a certain number of other operators who can handle the logistics, installation and maintenance of the broadband networks. Maybe we are seeing in Latin America that we have to be ready to provide whole services from the installation, maintenance and even start-up the operations until the user is familiarized with the operations. The market is quite different, which means the efforts in Latin America will be much bigger.

Satellite News: Looking at the Spanish broadband market, SES Astra recently did a deal with Ya.com in Spain to boost its position. What are your views on the competitive dynamics of this market?

Palacios: We have a bigger operation, which is all over the country. We are also in outside provinces such as Baleares and Canarias as well as the Azores. We are in a better commercial and technical position to respond to the needs of the consumers in Spain. That is why we led the market over the last couple of years, and [it’s] where we expect to remain.

Satellite News: What are your views on private equity firms investing in the FSS industry after recent deals involving New Skies and PanAmSat?

Palacios: Hispasat is owned by a number of shareholders who may have different interests. Firstly, I expect that Hispasat will remain a company with Spanish majority owners, although not for nationalist reasons. It is because of the language we use to get our message across to the market. Today, we say we are in the hot Spanish and Portuguese position in the sky. We want to remain there. We want to have communications, services, multimedia and Internet in Spanish and Portuguese. Our marketing message is that Hispasat remains under the control of Spanish owners.

Secondly, the market will continue to consolidate. This is good for the market because, today, the costs of the satellites, insurance and launch services are so high that you have to concentrate the capital to account for these factors. Hispasat already has Eutelsat as one its owners. Our relationship is strong enough to avoid any hostile takeover of Hispasat by a third party. A certain number of shareholders could want to sell their stakes in Hispasat, but there are other big Spanish companies that would like to invest in Hispasat because they are customers of the company.

Contact, Inaki Latasa, Hispasat, e-mail, [email protected].