Nilesat, the Middle East-based satellite operator is likely to order a new satellite in the first half of 2005. Salah Hamza, head of engineering, Nilesat, told Satellite News in an exclusive interview about the operator’s capital expenditure plans, “In terms of new satellites, it is still under study. We do not have a clear plan right now. We will either plan to have a new satellite or we might go to a different solution for acquiring temporary capacity until we get a new satellite. The new satellite will be a Ku-band satellite. We would hope to order the new satellite by the second quarter of 2005.”

The operator, which is based out of Cairo, Egypt, is one of the biggest regional operators in the Middle East. Established in 1996, Nilesat is a significant player in terms of driving direct-to-home (DTH) in the region, and is seeing strong demand for its services. According to Hamza, “We are clearly seeing a big demand on our satellites. We have 240 TV channels on the two satellites. We still have a backlog of new channels. Our plan is to have satellite services that are not devoted to DTH services like backhaul, newsgathering capacity. We are going to have capacity to put these services on. We have two transponders free for our new requests. We also are working on adding data transmission services and VSAT services. We want to diversify our revenue base.”

In particular, the DTH markets in the Middle East are seeing strong growth, due to a more relaxed regulatory framework in many countries. Hamza said, “DTH is accelerating very fast because the regulation environment has started to accept the fact that certain TV channels, which were not allowed before, can now be shown. The regulations have changed in many countries. We have seen a big expansion on live television. We have some interactive applications, as well as some stations just with games. The market is growing very fast. There is a lot of new investment. There are a lot of people wanting to invest now that certain regulatory restrictions have been lifted. There is a very good market for DTH and live television.”

In terms of HDTV, Hamza expects that once it starts it will soon pick up momentum. He said, “For HDTV, we will follow Europe. Sports events such as the 2006 World Cup will be the key. If some of the broadcasting of the World Cup in 2006 was in HDTV, it would be a very good introduction for HDTV in the region. I think HDTV will move quite fast in the region. Sports will be the driver, as well as the pay-TV operators. By 2005, I think you will start to see HDTV penetrating the market.”

2005 Revenue Growth

The operator expects to see revenue growth in the 8 to 9 percent range in 2005. In terms of new markets, one of the most intriguing for the company is Iraq. Hamza admits Iraq has plenty of potential for Nilesat. He said, “Iraq has been a market of ours in the past. We see it is an emerging market. It will give us good opportunities for new customers. Regulation will be a key factor in this market. In 2004, we have already seen seven new Iraqi channels. On our backlog, there are four new Iraqi channels.”

As well as the broadcast market, Nilesat will also look to build its business in the data arena. However, Hamza admits that this is far from easy and that the company is looking for business models that will work in this area. He said, “We tried very hard to build a data business in Egypt. Egypt is considered the biggest market for satellite communications because of its economy. In the past, the data transmission market has been very hard for us to succeed in. We tried to very hard to build a data business in Egypt but we did not succeed because of competition.”

He added, “There are many businesses on ADSL in the Middle East so it made it difficult for us to compete with them. The Middle East is different from Europe where satellite broadband is a good play in rural area. If you went to rural areas in the Middle East, you would not find the clients for the service. I am sure this will change at some point. We are trying to find new business models to penetrate the enterprise market in these areas. The only way to play in this market is through specialised applications.”

Influx Of Private Equity Firms

One of the interesting developments in the satellite industry has been the influx of private equity (PE) companies into the sector. PE companies have acquired a number of satellite operators such as Panamsat and New Skies. So, is this good news for the satellite industry? Hamza said, “In terms of whether it is good news for the satellite industry, it will become clear next year when we find out more about their intentions. It is premature today to make a judgement. Are they going to invest to enlarge these companies, or are they going to make nominal investments in these companies. What will be the emphasis be on new satellites? But these questions will all become clear next year.”

What impact this might have for regional operators such as Nilesat remains to be seen. At the Euroconsult World Summit For Satellite Financing earlier this year, it was suggested that regional operators such as Nilesat could be the next targets for consolidation in the industry. So, is it feasible for Nilesat to be acquired by one of the bigger global operators? Hamza does not think so. He said, “I think the criteria of consolidation of acquiring regional operators by big operators has been modified a little bit. I think it is more about cooperation, rather than acquisition. It is about cooperation between regional operators and small operators. I do not see one of the big global operators buying one of the regional operators in the Middle East. In terms of what Nilesat is doing, we are talking to everybody about possible cooperation. I think these talks will deliver something, probably in 2005.”

-Mark Holmes

(Salah Hamza, Nilesat, e-mail, [email protected])