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Satellite industry outlook
Beyond the global economic downturn
 
 
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photo credit: EADS-ASTRIUM
The Alphabus platform developed by EADS Astrium and Thales Alenia
 

The satellite industry maintained strong growth in 2008 and has solid prospects for 2009 despite the global economic downturn, according to Euroconsult, international analysts specializing in satellite communications.

The firm (based in Paris, France) says that satellite operators continue to benefit from high demand for digital broadcasting, as well as from the increasing need for satellite imagery for security and environmental purposes. In addition, new satellite projects from emerging regional operators and innovative applications are creating demand for spacecraft, with 25 commercial geostationary satellites ordered by operators in 2008 and a similar number expected by the end of 2009.

These trends were highlighted at Euroconsult’s World Satellite Business Week, held in Paris, France, on 7–10 September 2009. The event brought together more than 500 chief executives and other business leaders from the global and regional fixedsatellite service (FSS) and mobile-satellite service (MSS) sectors, as well as broadband and Earth observation operators and service providers. Also attending were satellite manufacturers, launch service providers, and insurers and investors representing investment banks and private equities. A key theme of discussions was how to maintain growth in the global economic downturn and beyond.

The fixed-satellite service stays strong

The FSS sector has been one of the most resilient in the downturn, with total revenue growth of 10.7 per cent in 2008 (leading to around USD 9.8 billion), mainly as a result of big rises in demand for capacity, combined with high fill rates.

According to Euroconsult’s Chief Executive Officer Pacôme Revillon: “Digital television broadcasting remains the primary growth engine for the FFS market. In 2008, 18 new satellite pay-TV platforms were launched, bringing the total to 109 platforms now in service. Over 24 000 television channels are now broadcast via satellite, with more than 2900 channels added in 2008.” Subscribers to pay-television were estimated at 112 million in that year.

The introduction of high-definition television is also supporting the sector, as well as ongoing demand for corporate networks and the introduction of broadband satellite payloads and new technologies with improved compression techniques.

Emerging markets drive growth

Growth in demand for transponders has remained strong, particularly in emerging satellite markets, which include Latin America, Africa, Central Europe and large parts of Asia. These represented 53 per cent of capacity usage worldwide and 71 per cent of the net increase in capacity leased in 2008, according to Euroconsult’s report Satellite Communications and Broadcasting Markets Survey: Forecasts to 2018.

Figure 1 — Top 25 orbital positions for television broadcasting for FSS operators and proprietary systems (worldwide, January 2009)   
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Source: 16th Satellite Communications and Broadcasting Markets Survey — Forecasts to 2018. © 2009 Euroconsult

It says that these regions’ share of total demand for capacity is expected to reach about 58 per cent in 2013. Most are young, fast-growing markets for digital television. They also need to carry fixed and mobile telecommunication traffic using satellites as a backbone in areas not covered by terrestrial networks. While the economic downturn could affect the development of satellite services in emerging markets, growth is expected to remain stronger than in the established markets of North-East Asia, North America and Western Europe.

Broadband satellite services on the rise

The number of subscribers to broadband access by satellite exceeded 1.2 million in 2008. Growth was primarily in the United States, followed by Asia, and was due to the availability of dedicated broadband service satellites. In the United States, WildBlue and Hughes are driving market growth. In the Asia-Pacific region, coverage for many countries is provided by the IPSTAR broadband satellite that is designed for two-way high-speed communications over Internet protocol platforms.

The broadband satellite market is expected to change significantly in the next three years. New broadband satellite projects in the Ka-band have begun to flourish, and by 2011 new systems with much larger capacity are expected to be operational in North America, Europe, the Middle East, and North Africa. The market is expected to reach 10.5 million subscribers worldwide by 2018. But to ensure success, key challenges must be addressed, such as technical aspects and regulation, and the ability to build strong distribution networks in fragmented markets.

Prospects

Euroconsult predicts that although prospects remain solid for 2009, the FSS sector might have reached a peak in its growth cycle in 2008. Nevertheless, growth should remain significant. The global market value of capacity used for the traditional FSS market is predicted to reach some USD 13.4 billion in 2018 (or USD 16.8 billion, including wholesale revenues from BBS systems dedicated to providing broadband access). The analysts foresee continuing consolidation in the sector, offset by the emergence of new regional satellite systems.

 
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photo credit: © Jeff Greenberg/Alamy
The switch to digital television broadcasting is the main growth engine for the FSS sector
 

MSS: more revenue growth, but finance might be tight

In the mobile-satellite service (MSS) sector, operators’ revenues grew to over USD 1.2 billion in 2008, according to Euroconsult’s report Mobile Satellite Communications Markets Survey: Prospects to 2018, released on 7 October 2009. It says that the MSS industry is at a crucial point; growth opportunities lie ahead, but several operators have high capital requirements in a difficult financing situation. “Despite the adverse economic environment, MSS operators’ core market — critical mobile communications where terrestrial networks are not available — has been robust,” Mr Revillon commented. The demand for better broadband communications and remote control of assets is seen as a key growth driver for the sector. Several operators are on the verge of replacing their aging satellite fleets, while others are seeking funds for future systems. After Globalstar’s success in achieving funding in 2009 with support from the French export credit agency Coface, Iridium is looking to raise an estimated USD 2.7 billion for its constellation known as NEXT. Meanwhile, consolidation is a growing trend. Inmarsat recently acquired Stratos Global, and Apax Partners merged two large MSS providers to form Vizada. Renegotiation of the Commercial Framework Agreement in 2009, which defines the commercial relationships between Inmarsat and its service providers, is expected to further reshape the market.

Growth driven by aeronautical and maritime markets

The aeronautical segment is seen as the main growth driver for MSS communications in the coming decade. It is still at an early stage of development, accounting for 7 per cent of MSS wholesale revenues in 2008, but Euroconsult expects the market segment to significantly grow reaching wholesale revenues of more than USD 270 million in 2018. This positive outlook is due to the emergence of several specialized service providers, such as OnAir and AeroMobile, and the launch of new MSS products for the aeronautical segment. A particularly importantdriver of demand will be the adoption of communication services for passengers during flights. But in the short term growth could decline, since the economic crisis has had a major impact on two key markets: business aviation and commercial airlines.

The maritime sector is still a major market for MSS, with some USD 400 million in wholesale revenues in 2008. While data applications will provide the engine for growth — particularly higher datarate MSS broadband systems — voice will remain an important application for crew welfare and safety communications. The Asia-Pacific region will be especially important for MSS growth in maritime markets as competition among operators and service providers becomes more intense.

 

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