Bausch Outlines Latin American Ambitions for SES

[11-19-07 – Satellite News] It has been an eventful year for SES Global, as the satellite operator reshuffled its presence in the Latin American market.
    Earlier this year, SES divested its 20 percent stake in Brazil’s Star One as part of the General Electric deal. “We came to the conclusion that in order to be successful in our business, you need to be able to deploy synergies between the satellite assets,” SES Global CEO Romain Bausch said. In a very capital intensive business like ours you can only achieve synergies if you have control of the assets, which means you can swap satellites around between different orbital positions, or you can combine payloads serving different markets on one and the same satellite. This is not feasible if you don’t have control of the assets. The divestiture from Star One and fromAsiaSat is a result of this assessment. In the future, we will build our infrastructure business on either 100 percent controlled assets only, or assets where we have operational control.
    SES activities in Latin America now are based on New Skies assets, including the 806 satellite, which is providing cable services to Latin America, as well as the NSS-7 satellite. SES Americom also has satellites providing services to the region.
    SES also has been keeping a close eye on Satmex in Mexico and is in negotiations regarding the procurement of the QuetzSat 1 satellite in Mexico.
    Bausch discussed his company’s position in Latin America and how he sees it developing.

Satellite News: How do you view the competitive landscape for the satellite players in Latin America?

Bausch: We are quite optimistic. The demand for satellite capacity will be strong. The core of the growth story is being driven by capacity demand for video distribution. It is about new DTH (direct-to-home) platforms being launched. It is about demand from terrestrial operators who have additional distribution needs. We see strong demand from cable and telcos to use satellites in hybrid solutions. Then there is HDTV, which will be one of the growth drivers, and that will require additional capacity. There exists also a strong demand for broadband applications. You see that in the U.S, even in the broadband residential market, with WildBlue and [Hughes Network Systems] developing nicely. And in Europe we see a very good reaction to our Astra2Connect offering. Finally, there is also a strong demand for satellite capacity for government applications.

Satellite News: How do you view Mexico as a potential market for SES?

Bausch: We have SES Americom and SES New Skies satellites covering Mexico. Regarding dedicated satellites for Mexico, QuetzSat will be deployed under orbital rights that have been granted for the 77° West orbital position, which is a Mexican DBS slot. QuetzSat has secured this orbital position and we are finalizing the negotiations for the procurement of QuetzSat 1. Currently, we are still in negotiations over the service agreement between SES Americom and EchoStar. EchoStar will become the anchor customer for QuetzSat 1. They will serve the Mexican market, but they also intend to use part of the capacity for the U.S. market, with the satellite covering both central America and the U.S. It is comparable to our investment in the Canadian Ciel satellite.

Satellite News: Can you give us more information on the QuetzSat 1 satellite?

Bausch: It will not be so different from the satellite that Ciel Canada has contracted. This means that the satellite will have coverage of Central America, with Mexico being the most important market within that region. There will also be a footprint over the U.S. In terms of where the discussions are not finalized, this has more to do with the possible spot beams over the U.S. and having local programming beamed there. EchoStar has been pursuing other important developments such as spinning-off its FSS operations into a separate company, so the QuetzSat project may well have been on the backburner.

Satellite News: How do you view the potential for satellite pay-TV in Mexico?

Bausch: I believe Mexico will be quite an interesting market for pay-TV. I also think that a player like EchoStar will not limit itself to look into one single market. Mexico is key, but there will be other Central American markets which will be of interest. It is probably an interesting entry for broadcasters to approach other Spanish speaking countries in Latin America. The satellite could also be used for Spanish broadcasting packages to come into the U.S. You should just not look as Mexico as a standalone market.

Satellite News: How do you view the Satmex situation?

Bausch: According to recent reports, Satmex will go for an equity increase in order to finance their future development. So Satmex will, and I believe rightly so, look to develop its business further before considering later other possible transactions. Satmex had clear views about the value of the company, but no one was prepared to agree with them on this. I think the logical thing is then to develop the business to make it more attractive in the future.

Satellite News: Do you think we will see growth in the number of DTH operators in Latin America?

Bausch: I believe you will see offers with basic channel line-ups. You will see more of this in Latin America as telcos are moving into the triple-play business and offering TV content. They will compete with DTH and cable pay-TV operators. From a satellite business perspective, I believe the growth driver will come from the terrestrial operators rather than from additional DTH offerings. But having said this, I do also see IPTV services being offered via satellite. Today, people believe that IPTV has to come from the telephone line. Tomorrow, IPTV will come from cable as well from DTH. It is a little bit artificial to build these distinctions between DTH television and IPTV.

Satellite News: How do you view the region’s growth potential for satellite communications?

Bausch: We are seeing an increased demand for satellite-based services in all markets. This certainly includes Latin America. Today, there is greater economic stability in the region. The economic situation of Argentina has significantly improved over the last five years. The foundations have been laid for media and telecoms companies to invest more in growth.
What is very important for markets like Latin America is that we are well positioned with satellite to offer DTH services, but we are not limited to this market segment. We are also positioning ourselves as a delivery mechanism by satellite to headends of terrestrial networks, i.e. traditionally the cable networks. In the U.S. this year, we had our first initiative with DSL networks, where we launched our IP-based solution IP Prime. Latin America is quite an interesting market for these types of hybrid solutions, where satellite can be used quite effectively in order to feed terrestrial networks. While it is too early to speak about signed contracts, we are in negotiations for some large capacity needs where terrestrial operators need satellite delivery to enhance their service offerings.

Satellite News: Are you going to need a significant ramp-up of capacity to serve the region?

Bausch: If these discussions with players in Latin America develop positively we will need to add capacity also for that region. In addition to the QuetzSat satellite, we also mentioned a new New Skies satellite, which will also serve emerging markets such as Latin America.

Satellite News: How important was the WRC-07 decision on C-band?

Bausch: SES took the lead on the subject and despite considerable lobbying from terrestrial operators, the concerns of the satellite industry were fully recognized, protected and ultimately prevailed. WRC-07 also gave satellite operators assurances that any future IMT [international mobile telecommunications] networks will provide them with full protection from interference. Those who want to use C-band for mobile terrestrial services will have to do so on a country-by- country basis, but overall, C-band will continue to be protected by satellite.