HONOLULU–Private equity companies’ investments in global satellite operators will be good for system operators in the short term and signals a confidence by the market in the fundamentals of the commercial satellite business in the long term, said Asia-Pacific-based satellite CEOs last week.

“[Satellite] customers are making more money, which is good for the operators,” said AsiaSat CEO Peter Jackson, “but there still is a lot of spare capacity out there.” Jackson made his remarks here last week during a satellite CEO super session at the Pacific Telecommunications Council‘s(PTC) annual conference and exhibition.

Echoing Jackson’s comments was Lockheed Martin Commercial Space Systems President Ted Gavrilis who said that, ultimately, private equity firms will elect to exit the commercial satellite business before they need to spend steep sums of capital in order to replenish the global systems with new spacecraft. He believes that 2005 will bring upward of five new satellite construction contracts for Lockheed Martin with up to three of the orders coming from the Asia-Pacific region. He added that there would be up to 17 total construction contracts for this year with the replenishment market accounting for 20 satellites per year by 2008-09.

Panel memebers agreed that investment from equity concerns was inevitable but that they thought long-term holds by these companies was doubtful as the capital requirements needed to maintain and expand global satellite systems are steep. AsiaSat’s Jackson pointed to the recent announcement by Kohlberg, Kravis, Roberts (KKR) that it plans to issue an initial public offering (IPO) for its Wilton, CT-based PanAmSat Corp. this quarter. He added that this is a sign that equity investor groups want to spread the cost of running and reviving the fortunes of satellite system operators among many investors, in this case, public investors.

But not all private equity firms may be looking for the exit door immediately. Alan Auckenthaler, vice president and general counsel for Inmarsat Inc., speaking at a Jan. 18 Society of Satellite Professionals International Mid-Atlantic Chapter luncheon in Washington, D.C., noted that Inmarsat’s venture capital owners, including Apax Partners and Permira, are “steadfast” in their commitment to launch that company’s Broadband Global Area Network service. The first satellite to facilitate that service launches early this year.

Consumer Applications Drive Usage

On the applications front, Dr. Dumrong Kasemset, executive chairman, Shin Satellite PLC (Thailand’s satellite carrier), said he believes end user consumer and enterprise applications will continue to drive the satellite business. He noted that Shin will be launching its IPStar satellite this quarter, one of the largest commercial satellite payloads ever delivered into orbit. The spacecraft will feature numerous spotbeams that will provide two-way Internet services primarily to residential customers throughout Thailand and its surrounding neighbors.

Kasemset added that the two primary market applications that continue to drive services in the Asia-Pacific region (the third largest for the satellite industry) are interactive broadband and HDTV developments. He said that VSAT technology has been around for 30 years and the costs of VSATs also have been lowered dramatically, enabling the development of consumer- and enterprise-based broadband systems. He believes Shin Satellite (ThaiCom) will be able to deliver a two-way broadband consumer service throughout the Asia-Pacific region for approximately $40 per month. He added there will be “lots of applications” nested in the service at that price point.

Loral Skynet President Patrick Brant agreed with Kasemset saying, “the promise of broadband is coming now.” He said he believes that traditional transmission of video via Fixed Satellite Service (FSS) systems will be “one-way for a long, long time.”

Securing In-Orbit Assets

Brant also said, in response to a question from an attendee in the audience, that he believes there will be increasing calls from those involved with national security affairs to “harden” commercial satellites in orbit, thereby protecting them from ground-based laser attacks and other terrorist plots. He added, however, that this would increase the cost of building the satellites substantially and may not be viable for the commercial marketplace.

Both AsiaSat’s Jackson and Lockheed’s Gavrilis echoed Brant’s assertion, with Gavrilis saying ways exist today is to accomplish “hardening” of new commercial satellites but such steps would assuredly increase the costs of the birds.

Sea Launch Company President and General Manager Jim Maser jokingly told attendees that his company is prepared to launch any size and weight payload that commercial operators deem necessary in this age of terrorism. He also said that Sea Launch, increasingly, is looking at “rapid response” strategies to launch payloads into orbit with a short turnaround time for both government and commercial customers. Sea Launch is well positioned for such a services with its sea-based mobile launch platform.

ViaSat Inc. CEO Mark Dankberg added that there are always security concerns about the privacy and protected nature of satellite-based communications. He said that ViaSat works with its customers, both government and private, to assure that their ground-based end user equipment remains secure.

Lastly, all of the satellite leaders indicated their companies (directly or indirectly) were aiding the tsunami relief efforts throughout the entire region–either helping to raise cash from their employees for the relief fund or donating equipment and transponder time for emergency rescue and medical personnel throughout the devastated region.

-David Bross