Asian Satellite Fleet Operators Bemoan Slowing Demand, Government Competition

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PARIS — Asian satellite fleet operators on Oct. 27 said their market faces the dual challenge of a slow-growing demand for traditional satellite applications and a still-growing number of national operators whose governments care about flags in space and not about market economics.

Addressing the CASBAA convention in Hong Kong, these operators refrained from directly accusing each other of what they all suspect: Some are selling their bandwidth below replacement cost to establish market share in the hope of better days later on.

“When you look at Europe or North America, DTH [direct-to-home satellite television] has plateaued,” said William Wade, chief executive of Hong Kong-based AsiaSat. “In Asia there is still growth, but there are significantly more players vying for the market. We are our own worst enemy.”

Wade said customers depend on business continuity but that pressure on prices in Asia is leading some operators to sell capacity at prices that cannot support the capital investment in replacement capacity.

“There’s a limit to [how low] you can sell,” Wade said. “I think we’re getting extremely close to that right now.”

Rumors of satellite operators signing customers at prices below $1,000 per megahertz per month – a rate where it may be difficult to finance a replacement satellite – are rampant in Asia. But despite this, national governments continue to invest in flag carriers.

Baozhong Huang, executive vice president of APT Satellite Ltd. of Hong Kong, partly owned by the Chinese government, said fleet operators have been calling for a consolidation of the market for a decade or more, with no results.

The proliferation of national operators continues. The governments of Bangladesh, Myanmar and Laos are preparing their own satellites without any regard of supply/demand issues.

“If you look closely to all of these, they did no feasibility studies,” Huang said of the coming new entrants. “It was purely for national pride. For the free-market operators, demand is not big.”

Thomas Choi, chief executive of Bermuda-based ABS, which has stitched together a fleet in part by purchasing aging government-owned satellites, said ABS is coping with the problem by purchasing satellites and launch services at low prices through bulk deals.

ABS and Satmex – now Eutelsat Americas, a subsidiary of Paris-based Eutelsat – together purchased the inaugural models of Boeing’s 702SP all-electric satellite platform, benefiting from both a first-customer and bulk-purchase discount. The first two were launched together aboard a SpaceX Falcon 9 rocket, allowing ABS and Eutelsat to cut in half, to around $30 million, each company’s launch cost.

Choi said ABS, whose first Boeing-built 702SP recently entered service, has grown by more than 20 percent in the past 12 months and is still projecting 30 percent growth for 2015.

“The reduced satellite and launch cost, and the way we design the satellite’s beams, means our effective per-megahertz price is lower than standard prices,” Choi said. “We are able to reduce prices and still remain profitable.”

Choi said ABS’s purchase of the Mabuhay satellite from the Philippines was the only example of a consolidation in Asia – but that the satellite “did not come with any spectrum. It did come with a satellite facility that we are using.”

Choi said recent developments at global fleet operator Intelsat of Luxembourg and McLean, Virginia, could result in the breakup of an existing fleet well before any fleet consolidation occurs in Asia. Intelsat has declined to comment on whether it has been trying to sell off a piece of its 50-satellite network in an attempt to reduce its debt.