Phew…we survived! That seemed to be the expression on everyone’s lips at the recently-concluded Satellite Business Week organized by EuroConsult held in Paris from 7-10 September. There was a definite feeling of relief in the air. Relief that the recession hadn’t hit the satellite companies as badly as it had other industries. A sentiment that probably isn’t shared by companies that recently filed for bankruptcy such as ICO Gl
obal, Protostar and SeaLaunch-all but the latter were noticeably absent this year.
If we consider what has happened in the world at large since the last Satellite Business Week a year ago: starting 5 days later with the collapse of Lehman Brothers (who had been speaking at the conference), the near collapse of AIG, General Motors and Chrysler filing for Chapter 11, the Dow Jones Index which was at 11,510 at the beginning of the last SBW plummeting to 6,547 and a doubling of the unemployment rate in the US, to mention just a few of the "lowlights," it is hardly surprising that the mood was decidedly upbeat. Compared to most of the rest of the world we got away lightly. The most repeated word at the conference was Growth. Growth in the past year and more growth expected in the foreseeable future.
The conference covered many key areas: manufacturing, Global and Regional Operators, MSS, Broadband and Finance and this year a day was also devoted to Earth Observation. To try and encapsulate the mood of the conference I’m going to focus on the FSS sector.
The news from the major operators was positive - solid fill rates, revenue growth and expansion plans. All regions were reporting good fill rates: overall Euroconsult found an average of 76%. Individually Eutelsat, who were named FSS Operator of the Year, reported a fill rate of 88.8% and a 4 year backlog, SES an overall fill rate of around 80%, but 100% for DTH and also a 4 year backlog, Willy Chow of ABS said that they were expecting a fill rate of around 100% in the near future, Telesat - who are due to make a decision in the next few weeks as to whether to take capacity on ViaSat1 or not - is also reporting fill rates in the mid 80s, Hispasat 99% and Arabsat said that the overall fill rate for the MENA region is 83%. SES showed a chart indicating that in spite of an anticipated 22% additional C and Ku capacity being added around the world, fill rates in all regions were still expected to be around 80% in 2016.
The news was equally positive on the revenue front, overall FSS revenues for 2008 were 10.5% higher than the previous year. Intelsat reporting an increase of 10%, Eutelsat 7.2% and ABS a consistent increase of 20% quarter on quarter. SES reported a 15.5% increase in operating cash flow in the first 6 months of his year, but Mark Rigolle (CFO) emphasizing the need for a long term outlook in the satellite business, pointed out that this growth was due to decisions that had been made 3 or 4 years ago.
So what has been driving this growth? In a word - television. Euroconsult found a continued steep growth in the number of TV channels worldwide with over 2,900 added in the last year bringing the total to approximately 24,100 TV channels delivered by satellite. This is expected to continue to grow to 35,000 by 2017. Eutelsat showed that for Europe and MENA not only had the overall number of TV households grown but cable and satellite households were continuing to take share from terrestrial ending 2008 with 54% of the market compared to 42% in 2002. It is often said that in a recession the TV industry thrives as consumers turn to home entertainment. Eutelsat showed an interesting chart illustrating this point by demonstrating that there appears to be no correlation between GDP growth – or lack thereof – and growth in the numbers of Pay TV subscribers. This fact is also borne out by research from Nielsen indicating that TV viewing in US homes was at an all time high in the first quarter of 2009.
So far HD has had very little impact outside the US, with only 300 channels in the rest of the world but most operators are expecting this to change in the next few years. In 2008 for example there were 115 HD channels in Europe but this is expected to increase to 480 by 2012.
Geographically 71% of the net increase in capacity came from emerging markets and Euroconsult expect this growth to remain stronger than in more developed markets in the next few years. Although for Eutelsat the biggest growth was in Europe with the number of TV channels carried at 9° East nearly doubling to 245.
All this is good news for the manufacturers. 25 GEOs were ordered in 2008 and a similar number is expected for this year. Intelsat has embarked on the largest investment program in the FSS industry with 11 satellites to be launched by 2012. SES has 8 to be launched by 2011 and Eutelsat 5 in the same time period. Arabsat is planning one new satellite each year for the next 4 years. Possibly encouraged by all this good news both Boeing and Lockheed Martin stated very clearly that they were back in the commercial satellite business.
However although the overall mood was very positive a few notes of caution were sounded. Peter Jackson from AsiaSat commented that growth had slowed in Asia as funding tightened and cable operators delayed upgrade and expansion plans. Euroconsult noted that growth in DTH platforms had slowed considerably with only 3 new platforms so far this year compared to 17 last year. Consolidation is also expected in some markets where there are currently more than 2-3 DTH operators. A couple of the investment bankers warned that FSS may be a lagging indicator and that if the rest of the world recovers the satellite sector may under perform relative to other sectors. But they were not able to dampen the overall feeling of relief in the salons of the Westin Hotel, where there was also growth. Unlike many other conferences this year, at 450, attendance at Satellite Business Week was higher than last year.
-------------------------------
Elisabeth Tweedie has over 20 years experience at the cutting edge of new communication and entertainment technologies. She can be reached at: etweedie@definitivedirection.com or phone at +1-310-292-0755 or +44 (0)7768 610574.
