Three veterans of the Asian satellite scene on Sept. 12 discussed whether satellite bandwidth prices would continue to fall, whether mobility markets would provide growth to fleet operators and whether pockets of growth remained in their current businesses.
Measat Chief Executive Paul Brown-Kenyon, ABS Chief Executive Tom Choi and APT Satellite Vice President Huang Baozhong have been at their jobs long enough to see the Asian market go from one dominated by the global fleet operators to today’s heavily populated scene, including several one-satellite companies born of their nations’ desire to have a flag in space.
Two of them may not be long in their jobs. Brown-Kenyon said during the recent World Satellite Business Week conference in Paris that he would be leaving Measat shortly. ABS owner Permira has put the company up for sale, and Choi’s job may disappear depending on who the buyer is.
> Trends in the Asian satellite market
“The industry is seeing so many changes that it’s time for satellite operators to think of themselves as communications providers, not satellite fleet operators. I’m not saying we go into the OTT business. But we need to figure out where we as a company can do a better job than our competitors. And I think you move away from being a wholesale satellite provider. We’re already doing that at Measat. We’re doing end-to-end broadband solutions into Malaysia. That’s one area where we moved beyond our traditional business to innovate and develop a sticky customer set.
“Today I have a DTH system that has growth in it, and a C-band distribution that I think has some growth. I don’t think it makes sense for the company today to provide an OTT service.”
“We have more than tripled our revenue compared to 10 years ago. In the last five years we have a CAGR of over 16 percent. We have been performing pretty good even over the last six months despite the market conditions.
“Yes, we feel the pressure, especially the price pressure. But we are adapting. We are helping our broadcasting clients distribute their content worldwide. The pickup of HD from SD is slower than many had expected. This is worrisome.”
> Aeronautical, maritime markets: An opportunity?
“We have announced the creation of APT Mobile Satcom with Chinese investors and the Chinese Ministry of Communications.
“We now have three satellites under construction. Apstar 5C, continuing are partnership with Telesat, is progressing very well. Then Apstar 6C, which we announced with Apstar 9. The third is Apstar 6B, to develop the mobile market in China, with Chinese Ministry of Communications as partner. The share-capital money is paid in and the company has already started. We hope to deliver a satellite into orbit in 2019. It’s mainly Ku-band beams over China, but also surrounding region.
The main customer is the Chinee market, but we are not limited to that. China has over 710 million internet users. Of them, 650 million are mobile users. Such a big market cannot be filled just by the mobile network infrastructure.
We have announced we will have global coverage for the high-throughput satellites. The first satellite is for the domestic Chinese market and then gradually we will expand east and west to cover the world.”
“We may not have a mobility initiative for a long time. Our industry has been running from competition in the past 10 years. We’re not investing in mobility markets. Maritime is likely to be a niche where prices fall because of all the satellite operators jumping in to serve it.”
“We provide some maritime services today but we are not investing heavily in the maritime market. We don’t think we can compete there strongly. And I personally don’t think it’s going to be an attractive segment longer term. So we choose segments where we believe we can compete strongly against the competition.
“Mobility doesn’t need a wide global footprint, which is what we offer. I also believe a lot of people have thrown their hat into the mobility market in the last couple of years. The forecasts I’ve seen suggest that there is going to be overcapacity. And finally, you don’t make money in mobility unless you actually own the equipment in the ship or own the equipment in the aircraft because people will switch from one satellite provider to another. Maybe if you’re Inmarsat you can protect your margins, but otherwise people are going to switch to the lowest-cost provider.”
“Indonesia has a relatively open market and we have a full telecom license, VSAT and satellite license, and the first service we’re launching is a DTH service, this year. The country has less than 3 million broadband households, around Jakarta. We’re targeting the other 60 million plus householders where people don’t have multi-channel TV services, and it will be available for free.
“We think DTH is a bigger opportunity than OTT in Indonesia.
“Over the next year, prices will drop further and it’s a good thing. Prices are dropping because customer demand is growing at double digits and satellite operators built capacity that is growing faster than demand. Our industry is very cyclical. It will probably take another four or five years to rebalance. Prices are likely to drop another 25 percent in the coming years, but there are lots of different applications.”
“We have some segments where we believe prices will increase over the next five years given contractual commitments. Other segments, it will be dropping.”
“I would say pricing will keep dropping. We will try to find more value-added services. Prices will keep dropping but we will try to find more value for the customers.”
“In segments where I have a [DTH] neighborhood and long-term contracts, I see prices increasing slightly. In segments such as data there will be a significant price adjustment. HTS [high-throughput satellites] can do what wideband satellites can do but much less expensively. It will be like your mobile data plan, you are paying about the same today but for 1,000 times more data.”
> $500 per MHz per month?
“We notice that in some extreme cases in Asia, some operators are selling at close to $1,000 per MHz per month. This is a crazy price, I am pretty sure of that. A satellite has its own cost. If you are selling below cost you will die. This is why we must secure half of the satellite’s capacity before we invest in it. If we can do that, then there is room to drop the price.”
“Prices will be going down to $500 [per MHz/month]. I personally have seen prices like that from one of our competitors. HTS are going to dramatically lower the cost per bit, but it will not take away revenue from a regional-beam DTH platform. It will bring into the market new users.”
> ABS-8 and dodging a bullet
“Our ABS-8 that we had ordered from Boeing was dependent on Ex-Im Bank financing. First they had their authorization revoked, and now without a functioning board they cannot approve our loan. So we have been stuck.
“That was not necessarily a bad thing. In early 2015, when we were conceiving ABS-8, it was going to be a high-throughput satellite. It was going to beat satellites like Intelsat’s Epic in terms of pricing. Then we had an interesting announcement from ViaSat with ViaSat-3 and the economics they can achieve with that bird.
“So we dodged a bullet. Now we are re-examining what satellites we need to be competitive with ViaSat. That is the bar we would shoot for. Within a few months we will no longer need to depend on the Ex-Im Bank. By the first half of 2017 we will restart the program again but it will be a completely different design.”