SES Sees Emerging Market Focus Paying Off

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PARIS — Satellite fleet operator SES on July 26 said its policy of refocusing its resources on emerging markets in South America and Asia is paying off with a 9.3 percent increase in revenue from customers outside North America and Europe for the first six months of 2013.

Demand for satellite bandwidth in Latin America continues to grow despite the slowing of the Brazilian economy, and SES plans to order another satellite over the region almost immediately, SES Chief Executive Romain Bausch said in a conference call with journalists. He did not say what orbital slot would be used.

SES’s 2013 results show the effects of the April 2012 switch-off of German analog television signals, removing these highly profitable leases from the SES accounts. The revenue attributable to these analog broadcasts in 2012 was 42.6 million euros ($56.2 million).

SES was not able to fully compensate for this lost revenue in Europe, but growth in other regions carried the company’s total revenue for the first six months to 910.5 million euros, up 2.1 percent from a year ago.

European revenue for the first half of 2013 dropped by 3 percent because of the analog loss. Removing that event from the equation, European revenue grew by 6.7 percent.

North American revenue increased by 5.9 percent, although part of this included less-profitable equipment sales, SES said.

Bausch said that judging from recent bandwidth-lease contracts the company has signed in South America, North America, Europe, Africa and Asia, global transponder prices are holding steady.

Luxembourg-based SES said its current concerns are centered on the availability of launch vehicles, whose delays are likely to cost the company some 18 million euros in EBITDA, or earnings before interest, taxes, depreciation and amortization, in 2013.

Reporting its results for the first six months of 2013, SES said it is trimming its revenue and EBITDA forecasts for 2013 only because of the launch delays. Bausch said in a conference call that this revenue is deferred, not lost, as a result of three satellites whose launches on three separate vehicles are occurring later than expected.

The most recent delay was in the launch, aboard an International Launch Services Proton rocket, of the Astra 2E telecommunications satellite. Originally scheduled for mid-July, the launch campaign has been put on hold following the July 2 Proton failure.

The failure has been tentatively traced to a blatant component-assembly error on the part of Proton prime contractor Khrunichev State Research and Production Space Center of Moscow.

Because the error was so obvious, industry officials said, Proton rockets might be cleared for flight in short order. Bausch said SES has penciled in a September launch date for Astra 2E, which even by Proton standards would be a near-record turnaround before failure and reflight.

Bausch said SES, which already has purchased Astra 2E launch insurance, does not expect to pay a higher insurance premium following the July 2 failure.

The second satellite awaiting launch clearance is the SES-8, whose launch as the first geostationary-orbit passenger aboard the new Falcon 9 v.1.1 rocket has been delayed repeatedly as Falcon 9 builder Space Exploration Technologies Corp. (SpaceX) of Hawthorne, Calif., readies the new rocket for commercial use.

SES is now forecasting that SES-8 could launch in October if a planned September inaugural flight of the new Falcon 9 occurs as scheduled and without incident.

The third satellite that is behind schedule is the Astra 5B, which had been preparing for a September or October liftoff as one of two passengers aboard a European Ariane 5 ECA heavy-lift rocket.

But the intended co-passenger for this flight, the Optus 10 satellite owned by Optus Satellite of Australia, has been removed from the Arianespace lineup, at least for the moment.

Industry officials said Optus owner SingTel Optus appears to have decided to delay the launch while the company looks for a buyer for the Optus Satellite fleet.

Evry, France-based Arianespace, which operates the Ariane 5 rocket, was unable to find a quick substitute for Optus 10 before December, meaning Astra 5B will not be generating revenue for SES until 2014.

Bausch did not mention Optus in the conference call, saying only that the intended Astra 5B co-passenger has been replaced in the Arianespace queue by another satellite that would not be available before December.

For SES there is an unhappy irony in the situation. Once SingTel Optus removed the Optus 10 from its launch slot, the Ariane 5 rocket carrying the Astra 5B had a vacancy at what is sometimes called the “second seat” on the Ariane 5 rocket, which means the lower position reserved for the lighter of the two satellite payloads.

SES-8 could have been that payload, given its size, thus providing SES the launch of two satellites aboard the same rocket in September. But SES officials, referring to their long-held policy of seeking to widen the pool of available commercial launchers, have stuck with SpaceX and the Falcon 9 through the successive delays.

In the conference call, Bausch also touched on these topics:

  • SES and rival Eutelsat of Paris have won an agreement from the International Chamber of Commerce (ICC) that the arbitration body will rule on at least part of the dispute between the two companies before a key Oct. 3 deadline.

SES and Eutelsat dispute whether 500 megahertz of bandwidth now carried on a Eutelsat satellite will move to SES on Oct. 3. Eutelsat has said SES has no right to the spectrum. Bausch said the ICC has signaled that it will rule on at least part of the dispute before Oct. 3 to give both satellite operators, and their customers, time to prepare.

  • An anomaly aboard a European government navigation payload on the SES-5 satellite that has caused the European Commission to withhold payment to SES for the service has been resolved, with commission payments to start soon, Bausch said. SES’s Astra 5B carries a similar navigation payload as part of Europe’s Egnos GPS-overlay navigation service.
     
  • SES expects it will conclude an agreement with fleet operator Avanti Communications of London on Ka-band spectrum sharing at 31 and 31.5 degrees east so that both companies can operate without hindrance, Bausch said.

International frequency regulators ruled in late 2012 that Avanti, not SES, had priority to the Ka-band frequencies there, meaning SES was in an inferior position as the companies headed into negotiations to avoid signal interference.