2005 Looks To Be a Strong Year For Leading Satellite Operators
Four of the world’s top 10 satellite-fleet operators reported increased revenues for the nine months ending Sept. 30 — three of them posting double-digit increases — with demand from television broadcasters remaining high and the promise of high-definition television (HDTV) coming closer to fruition.
Strong demand in North America, Europe, Africa and the Middle East offset continued softness in Latin America and East Asia. Industry officials said government customers, led by the U.S. government, are maintaining high usage rates despite the absence of military flare-ups compared to 2004.
Intelsat Ltd., PanAmSat Holding Corp. and New Skies Satellites all reported strong cash flows aided by the fact that all three will spend at least two years enjoying a capital-expenditure holiday. Investment in new satellite capacity, with minor exceptions, will not be needed until 2007 at the earliest for these companies.
SES Global of Luxembourg is the exception, with seven satellites on order and new investment in Canadian and Mexican satellites also expected soon.
SES Chairman Romain Bausch said his company for the most part would rely on organic growth for its projected 10- percent average annual revenue increases through 2007. In a Nov. 7 conference call with financial analysts, Bausch said SES Global was not interested in purchasing any satellites that Intelsat Ltd. of Washington and Bermuda might be forced to sell to win U.S. regulatory approval for its $3.2 billion purchase of Wilton, Conn.-based PanAmSat.
While not ruling out a protest to the U.S. Federal Communications Commission, Bausch strongly hinted that SES Global has no problem with the Intelsat-PanAmSat merger even though it will create a dominant player in satellite-delivered television to U.S. cable head-ends. “We are quite relaxed” about the merger, Bausch said.
Here are highlights from the four companies’ conference calls on their performance for the nine months ending Sept. 30.
SES Global revenues increased 13 percent, to 922 million euros ($1.09 billion), due in part to satellite broadcasting contracts that booked 22 transponders between July and September — 15.5 for Europe and Africa, and 6.5 for North America. Three of those transponders were leased by British satellite-television broadcaster BSkyB for HDTV programming.
Bausch said SES Global forecasts that digital compression technologies will permit four HDTV channels to fit onto a single satellite transponder.
In Europe, SES Global has signed up 20 HDTV channels on five transponders, a figure that Bausch said should double to 10 transponders in 2006 and 25 transponders by the end of the decade.
HDTV is being introduced in Europe more slowly than in the United States, where SES Global has booked HDTV capacity for cable broadcasters and for satellite-television provider EchoStar Communications Corp.
Intelsat reported Nov. 10 that revenues for the first nine months of the year increased 15 percent, to $876.6 million, with direct transponder-lease services making up the majority of the increase.
Intelsat, which was acquired in January by a holding company owned by private-equity investors, reported a net loss of $259.6 million for the period compared to a net profit the previous year. The company has been paying special dividends to its private-equity owners and has incurred other charges related to the January acquisition.
Intelsat Chief Operating Officer Ramu Potarazu said the company has sold out its U.S. Ku-band capacity aboard the IA-8 satellite, which was launched in June, demonstrating the continued health of the U.S. Ku-band market.
Potarazu said prices in North America and Europe are holding firm, and that Intelsat General, the company’s subsidiary that sells capacity to government customers, has posted increases especially related to mobile satellite services. Intelsat purchased Comsat General, a reseller of Inmarsat and other mobile satellites services, in October 2004. Government customers have accounted for 21 percent of Intelsat’s revenues for the year so far, Intelsat reported.
Potarazu said Intelsat’s preparation for the PanAmSat purchase, expected to clear U.S. government regulatory review by mid-2006, is expected to find the same kinds of cost efficiencies Intelsat realized in early 2004 with its billion-dollar purchase of Loral Space and Communications’ Atlantic satellite fleet.
“We took the entire Loral [North American] business, five satellites, and we took on just 20 operational staff to take on the video programming,” Potarazu said. “The same principles will be used for the PanAmSat integration.”
PanAmSat reported nine-month revenues of $631.8 million, up 2 percent over the previous year. PanAmSat Chief Executive Joseph R. Wright said full-year growth will be 4 percent.
PanAmSat’s G2 division, which sells to government customers, reported a 6.1-percent increase in revenues, to $60.9 million, after excluding the effects of the division’s sale of L-band capacity to the U.S. government for augmented GPS navigation services. PanAmSat added an L-band payload to its Galaxy 15 satellite as part of a contract with the U.S. Federal Aviation Administration .
Wright said G2 uses PanAmSat satellites for about half its business, with the other half being booked with satellites owned by PanAmSat competitors. This figure will change once the merger with Intelsat closes.
PanAmSat President James B. Frownfelter said 33 percent of the company’s U.S. television customers are still using the analog format, and that the speed of their conversion to digital and HDTV remains uncertain. To convert, cable companies would need to invest in new equipment at their cable head-ends.
Frownfelter said U.S. customers are not adopting advanced compression technologies such as MPEG-4 as quickly as expected.
“Two years ago I said it was three to five years out. Last year I said three to five years and this year I’m telling you it’s three to five years out,” Frownfelter said.
New Skies Satellites Holdings Ltd.
New Skies Satellites Holdings Ltd. of The Hague, Netherlands, reported a 14-percent increase in revenues, to $179.1 million, for the first nine months of 2005. New Skies Chief Executive Daniel S. Goldberg said government sales have been a highlight of the year, and that government demand is global.
“We concluded a lot of government services business,” Goldberg said. “It tends to be one-year contracts because there is no longer-term budget authority, and we charge them a higher price than we do for long-term contracts. We expect government services to continue to grow, and to be higher at the end of 2006.”
Goldberg said new business booked in the three months ending Sept. 30 carried an average annualized price of $1.5 million per transponder, the highest rates in about two years. This is a global average that New Skies did not break down by region.
New Skies’ overall backlog is for an average of $1.2 million per transponder per year, Goldberg said.