AsiaSat Results Reflect Troop Withdrawals, Capacity Glut

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KOUROU, French Guiana – Satellite fleet operator AsiaSat reported a 9 percent drop in revenue and a 27 percent drop in new and renewal contracts in 2014, saying declining military sales and a regional oversupply are putting downward pressure on transponder-lease prices.

The company said changes in the way its customers download video suggest that a high-throughput satellite with multiple spot beams and frequency reuse may be in order, but not yet.

Hong Kong-based AsiaSat said it hopes for a fresh spurt of growth from two new satellites launched in late 2014, but that both are awaiting operating licenses in China and elsewhere.

“Surplus capacity created by increased supply and government cutbacks caused prices to soften in most of the major markets we serve,” AsiaSat Chairman Sherwood P. Dodge said in a March 26 statement to shareholders accompanying the earnings report to the Hong Kong Stock Exchange. “The challenges we faced in a competitive market will continue into 2015.”

AsiaSat’s four-satellite fleet grew to six in 2014 with the launch of AsiaSat 6 and AsiaSat 8. AsiaSat 6 opened a new slot for the company at 120 degrees east. The satellite’s 28 C-band transponders are half-owned by fleet operator Thaicom of Thailand as part of a previous arrangement between the two regional competitors that allowed Thaicom to retain access to a highly valued orbital position.

That leaves AsiaSat to market its 14 transponders, mainly intended for the mainly Chinese market. In its financial statement, the company said it is still awaiting landing rights for this capacity.

Similarly, the AsiaSat 8 satellite, which also entered service in late 2014 with 24 Ku-band transponders at 105.5 degrees east, is targeting markets in China, India, the Middle East and Southeast Asia but is awaiting licensing approval.

After removing the capacity dedicated to Thaicom, the AsiaSat 6 and AsiaSat 8 satellites add 22 percent to AsiaSat’s in-orbit capacity.

But the new capacity comes at a time when U.S. and allied troop withdrawal is taking demand out of the Middle East, affecting fleet operators large and small, including AsiaSat. The problem starts with lost sales from a high-paying customer and continues by making the freed-up capacity available at a time when the Asian market is flush with available satellites.

AsiaSat told investors in 2013 that one of its major customers had renegotiated a large contract that provided long-term stability for AsiaSat but at lower per-megahertz prices. It was not until 2014 that the full effect of this lower-value contract was felt.

For the 12 months ending Dec. 31, AsiaSat reported revenue of 1.365 billion Hong Kong dollars, or $176 million at end-year exchange rates. In Hong Kong dollar terms, the revenue figure was down 9 percent from 2013. The company said its profit for the year was 559 million Hong Kong dollars, down 25 percent from 2013. Its ordinary dividend was down 75 percent from 2013.

AsiaSat’s cash flow for the year was helped by Thaicom’s payment of 636 million Hong Kong dollars for the Thaicom share of AsiaSat 6.

New orders in 2014 totaled 357 million Hong Kong dollars, down 42 percent from 2013 – “the result of intense competition and our lack of capacity in relation to some customer requirements,” Dodge said in his statement.

Adding in renewals, AsiaSat’s total contract volume in 2014 was 932 million Hong Kong dollars, down 27 percent from 2013.

AsiaSat has one satellite on order, AsiaSat 9, under construction by SSL of Palo Alto, California, and scheduled for launch in mid-2016. It will replace AsiaSat 4 at 122 degrees east and provide expansion capacity as well through C-, Ku- and Ka-band.

AsiaSat has long been one of the most technologically alert of the regional fleet operators. The company said it is aware of the trend toward high-throughput satellites, but it apparently is not ready to make an order.

“[W]e are experiencing a growing need for satellites to provide increased bandwidth. One solution for addressing this need is the deployment of High Throughput Satellites (HTS),” the company said in its financial report.

“We are evaluating this technology for our market, particularly for enterprise services such as maritime, mining and mobile applications, as well as private networks with a need for high throughput. Although the market potential of HTS is not clear at the present time, HTS will eventually come to Asia and will ultimately have a significant impact on satellite delivery.”