Latin American Sat Operators: No Lack of Demand for Capacity

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WASHINGTON — Latin American satellite operators agree that their region’s bull market in satellite bandwidth has plenty of life left and is unlikely to be stopped by new commercial and government capacity about to be launched.

In a unanimous show of optimism here during the Satellite 2013 conference last month, these companies said the increased capacity will be snapped up for consumer broadband applications and for the continued demand for satellite television.

High-definition television, which has substantial room to grow, will only add to the demand for satellite capacity.

Topping it all off, they said, is new legislation working its way through the Mexican government that will remove the constraints to establishing satellite operations there.

“The legislation increases the ownership a foreign [satellite] provider may have without needing a local partner,” said Carmen Gonzalez-Sanfeliu, Latin American vice president for satellite fleet operator Intelsat of Luxembourg and Washington. “There is basically no need to set up a joint venture with a Mexican partner. This is unbelievable for Mexico.”

Javier Recio, vice president of Mexican satellite operator Satmex, agreed that the Mexican government “is taking a significant step” that will boost competition in Mexico. Recio noted that almost all of the big satellite bandwidth providers in Latin America, whether they be headquartered there or based in North America or Europe, are privately owned.

Many of the satellite operators active in the region — Star One of Brazil, Hispasat of Spain, Telesat of Canada and SES of Luxembourg as well as Intelsat and Satmex — are adding new satellite capacity over the region.

Added to this, governments in Mexico and Brazil are planning new satellite systems, mainly for government use but with some applications that appear to overlap with what is already offered by the private sector. Venezuela has its own government telecommunications satellite. Bolivia, Colombia and the Andean group of nations are in various stages of development of their own systems.

But at least so far, the government satellites launched have not dampened demand for commercial capacity even though many Latin American governments have insisted that foreign satellite operators follow landing rights rules that are “among the most complicated in the world,” said Dolores Martos, SES vice president for Latin America and the Caribbean.

“Some countries decided to go on their own for satellite capacity and the private sector thought this would take demand, but this has not happened,” Martos said. “These government systems have had no effect on the market.”

The Brazilian government is currently running an international bidding competition for two satellites carrying X- and Ka-band. Brazil’s commercial fleet operator, Star One, has its own plans in Ka-band, but Star One General Director Lincoln Oliveira said the government initiative could be an opportunity for his company.

“The current government procurement is mainly for government use,” Oliveira said. “Yes, some of our potential Ka-band market could be affected, but it could also be an opportunity for us to complement the government [Ka-band] network.”

Oliveira, whose Star One C3 satellite was launched in late 2012, said Star One C4 will be launched in mid-2014. The company is preparing a bid request for another spacecraft, to be launched in 2015.

Hispasat of Spain is planning the region’s first major supply of Ka-band with the Amazonas 3 satellite, which recently entered service. In addition to its C- and Ku-band capacity, the satellite has nine Ka-band spot beams. A major telecommunications network operator has recently purchased part of this capacity for a Ka-band consumer broadband service, said Ignacio Sanchis, chief business officer for Hispasat.

But the promise of Ka-band still pales when compared with the reality of current demand for direct-broadcast satellite television.

“The fill rates on the satellites [over Latin America] are 80-90 percent, so there is no oversupply of immediate concern,” Sanchis said. “Yes, there are new satellites coming, but demand is set to grow enormously over the next decade. There will be 400-500 new transponders needed in the region to keep up with the demand in the coming years, according to some forecasts.”

Martos of SES said many of the new satellites about to be launched are to replace existing capacity, while others are pure market-growth plays.

“We added 500 [megahertz] in 2012 and it is totally sold out. Our SES-6 satellite planned for launch in 2013, with 36 Ku-band transponders, is also sold out,” Martos said.

Recio of Satmex said his company still has capacity available on the just-launched Satmex 8, which will take over from the Satmex 5 satellite nearing retirement but is much larger than Satmex 5.

“I don’t think there will be an oversupply situation in the region,” Recio said. “It is a cyclical industry, but the operators are now showing fill rates above 80 percent, and in our case it is in the 90s. The new capacity will offer a breather to what is now being charged right now.”

Satmex 8 adds 40-45 percent more Ku-band capacity compared with the Satmex 5 satellite it is replacing. One-half of this additional capacity has already been sold, “so we have 20-25 percent of added Ku-band that is available in addition to the Satmex 5 customers that will be transferred,” Recio said.

Perhaps the surest sign that an oversupply is not on the near horizon is that customers are still grumbling about prices.

“I don’t sell satellite capacity, I buy it,” said Sergio Murillo, director of satellite services provider Red 52 of Mexico. “And each time I ask for more bandwidth, the prices have gone up. This to me is not an indication of oversupply. In fact, we sometimes have trouble finding the capacity that we need.”