In Reporting Quarterly Results, SES Says Astra 2G Cleared for Shipment to Russia for Launch

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PARIS — tellite had received the required U.S. shipping license and was ready to be sent to Russia’s Baikonur Cosmodrome for launch, but that the liftoff had been delayed from June until sometime between July and September.

The launch has attracted interest because of industry concerns that U.S. sanctions on Russia in response to Russia’s dealings with Ukraine might spread to the broader satellite sector, including commercial launches of satellites with U.S. components. Russia’s Proton rocket is a major commercial launch provider.

Astra 2G was one of the first satellites whose shipping licenses needed action by the U.S. government since the Russian sanctions were put into place.

In a conference call with investors, SES Chief Executive Karim Michel Sabbagh said Astra 2G’s manufacturer, Airbus Defence and Space — whose telecommunications satellites have multiple U.S. components — has all the needed paperwork from the U.S. government to proceed to the Baikonur spaceport.

The launch delay, Sabbagh said, was due to the Proton rocket’s overall 2014 manifest, which includes several Russian government launches as well as a full commercial backlog.

Luxembourg-based SES said revenue from its North American business in the first three months of 2014 was hurt by nonrenewals of certain U.S. government contracts at the SES Government Solutions division.

But Sabbagh said the division booked 20 percent more new orders from the U.S. government in the first three months of 2014 than during the same period a year ago, suggesting that government budget cutbacks will not cause serious further dips in the division’s overall revenue.

One of the reasons for the shortfall in the first three months was the nonrenewal of a U.S. contract to operate a hosted payload on the SES-2 satellite stationed over the Americas.

SES Chief Financial Officer Padraig McCarthy said the SES Government Solutions division will face continued pressure throughout 2014 as the effects of government spending freezes and budget reductions make themselves felt. But the harvest of orders so far this year, he said, bode well for the division in the future.

SES’s North American division revenue dropped by 8.5 percent, to 84.2 million euros ($116 million), for the three months ending March 31 compared with the previous year after accounting for currency exchange-rate effects. The North American market has been the slowest-growing of the company’s three geographical reporting areas in recent years.

Both the European and International regions — SES uses the International designation for all business areas outside North America and Europe — more than made up for the decline in North America.

European revenue increased 12.8 percent, to 254.4 million euros after removing currency-fluctuation effects. During the quarter, SES sold four transponders to rival Eutelsat of Paris following a settlement of their dispute over frequency access at 28.5 degrees east.

Another eight transponders will be sold to Eutelsat under the settlement. McCarthy declined to disclose the value to SES of the settlement.

SES’s International division revenue grew by 11.8 percent, to 127 million euros compared with the same three-month period a year ago. It is this division that is now receiving most of SES’s investment. The growth this year was due in part to Brazilian direct-to-home channel services provided by the SES-6 satellite, launched in 2013.

Telefonica Global Solutions is leasing C-band capacity on SES’s NSS-7 satellite for mobile voice and data services in northern Brazil, a contract that also contributed to the revenue growth.

SES recently won, at auction, rights to two additional orbital slots over Brazil, at 48 degrees and 64 degrees west longitude. Sabbagh said the company would make use of its 50-satellite fleet to move an existing spacecraft, the NSS-806, into the 48 degrees west slot before deciding when and whether to build a dedicated satellite for the business.

Sabbagh declined to disclose SES’s plans for the 64 degrees west position, but suggested that here too, the company would use an existing satellite to fill the position.

Some industry observers question whether Brazil and Latin America will continue to grow fast enough to absorb the capacity from satellites currently covering the region and those on the way.

Sabbagh said being able to use in-orbit resources to expand to new regions reduces the expenditure needed to open new orbital slots and test new markets.

One market development that all satellite-television providers are awaiting is the move toward ultra-high-definition television, which requires more bandwidth than HDTV and is viewed as a growth vector for the industry.

When ultra-HD will make itself felt in the market is a subject of debate. Sabbagh said 2016 will be “an inflection year” both for the Olympics, to be held in Brazil, and because the price of ultra-HD television sets is already falling.

Between April 2013 and April 2014, he said, the average price of an ultra-HD-compatible television screen has fallen by 36-41 percent. He said early indications are that the broad market’s adoption of ultra-HD may occur more quickly than the transition from standard digital to HDTV.

 

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