Yahsat satellite delay punts Eutelsat’s Konnect Africa growth to 2019

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WASHINGTON — Delays with Yahsat’s Al Yah 3 satellite, now more than a year past its initial launch target, have forced Eutelsat Communications to hold off on expanding its Konnect Africa broadband business until next year.

More than three quarters of the capacity for the new business venture is hedged on Al Yah 3, Eutelsat CEO Rodolphe Belmer told investors Oct. 26, leaving the company with too little capacity to otherwise jump start the business.

Konnect Africa is Paris-based Eutelsat’s new broadband business focused on bringing internet access to people across the sub-Saharan half of the continent through partnerships with mobile service providers. Eutelsat started Konnect Africa in June, having struck a capacity lease with Yahsat of Abu Dhabi in late 2016 for Ka-band capacity on Yahsat 1B, which launched in 2012, and on Al Yah 3 which at the time had slipped slightly from a late 2016 launch to early 2017. That capacity replaces what Eutelsat already lost on Amos 6, a large satellite for Israeli satellite operator Spacecom that was destroyed when its Falcon 9 rocket exploded during a test-firing.

Al Yah 3 suffered several delays, Belmer said, but now has a definite launch date in the first quarter of 2018.

“Our understanding is that first the manufacturing of the satellite took more time than anticipated, and second they had difficulty to find a launch slot with Ariane,” Belmer said.

Orbital ATK is building the 3,500-kilogram satellite, and Arianespace is supplying an Ariane 5 rocket for launch.

Belmer said Eutelsat expects to bring its Africa broadband business to full size starting in June 2018 at the earliest, pushing a projected 15 million euros ($17.5 million) in new 2018 revenue out to 2019. Without Al Yah 3, Konnect Africa lacks enough capacity to generate meaningful revenue, he said.

Eutelsat has another satellite, the Africa Broadband Satellite, under construction by Thales Alenia Space. The Africa Broadband Satellite is expected to launch in 2019 with 75 Gbps of capacity distributed through 65 spot beams.

ViaSat negotiations continuing

Eutelsat’s joint venture with Carlsbad, California, satellite operator ViaSat to sell internet subscriptions to residences across Europe is up and running with Eutelsat’s KA-SAT, Belmer said, but the two companies are still negotiating on the framework of the second ViaSat-3 satellite.

Belmer admitted negotiations on ViaSat-3’s procurement are going “long,” and are “very complex,” but said a conclusion is expected by the end of this year.

“We intend to sign and end up with a positive conclusion,” he said. “On both parts the intention is very clear. There is no lack of unity.”

ViaSat is building the first two 1-terabit satellites in the ViaSat-3 trio using platforms from Boeing and payloads built in-house. Eutelsat is helping finance the ViaSat-3 satellite that covers Europe, the Middle East and Africa, and as part of the deal, ViaSat paid 132 million euros earlier this year for 49 percent of KA-SAT. Belmer said the partnership doesn’t cut off Eutelsat from selling capacity to aviation competitors of ViaSat, such as Panasonic Avionics and Gogo, though ViaSat wants to extend its mobility business in Europe.

Mobility, driven in large part by capacity for inflight Wi-Fi, is Eutelsat’s fastest growing business vertical with 33.3 percent year over year growth. Panasonic Avionics is Eutelsat’s anchor customer for the Asia-Pacific-focused Eutelsat-172b satellite, for which Belmer said 60 percent of the capacity is already sold.

Ample broadcast potential with HD

Belmer said television broadcasting, representing 65 percent of Eutelsat’s business, is now poised for meaningful high definition growth now that lots of channels have transitioned to a more modern compression standard.

Almost 60 percent of Eutelsat’s broadcast customers are using MPEG-4, a standard that lets them use less satellite capacity to broadcast the same channels. In the early rollout, the compression upgrade can cost satellite operators business, but MPEG-4 is better suited for HD broadcasts, which are more bandwidth intensive. Eutelsat has already borne the brunt of the compression storm, Belmer said, and is now ready to capitalize on more transitions to HD.

“We have only 18 percent of channels which are in HD, meaning that we are now going to grow more in HD than in MPEG-4. That’s the inflection point we are moving to,” he said.

“MPEG-4 has grown by a bit less than 10 percent [per year] and HD has grown by around 30 percent [per year], which means that we add much much more capacity consumption than we reduce capacity consumption because of compression,” he added.

Eutelsat purchased Noorsat, one of its broadcast customers, for $75 million on Oct. 13, citing HD growth as one of the primary drivers. Based in Bahrain, Noorsat distributes around 300 television channels across the Middle East and Northern Africa (MENA) region.

Belmer said Eutelsat is also in the early stages of developing a pay-TV business in Ukraine.

Eutelsat’s broadcast business shrank by 0.8 percent year over year, but increased by 0.5 percent for the quarter thanks to new business in Poland, Russia, and MENA. The company’s total channel count reached 6,755, up 6.6 percent from last year, with HD channels growing by 4 percent.