A San Francisco-based company trying to penetrate the Asia-Pacific market for direct-to-home (DTH) satellite television and broadband-Internet services has landed its first round of financing from a pair of venture capital firms.
New Enterprise Associates and SpaceVest will provide the initial tranche of funding for ProtoStar, which plans to launch its service by mid-2006 using its own satellite and eventually operate three satellites , ProtoStar said in a March 14 press release. The company has expressed interest in purchasing a satellite thatof Palo Alto, Calif., has been unable to export to a Chinese customer, according to an industry source.
“Asian markets are deregulating in order to meet market requirements for DTH services,” Philip Father, ProtoStar’s chief executive officer, said in a statement. “ProtoStar is well positioned to offer optimized DTH capacity to its operator customers, meeting critical broadcast needs.”
Father was unavailable to be interviewed for this story, said Reid Stephenson, a spokesman for ProtoStar. He referred inquiries to SpaceVest and New Enterprise Associates, both of Reston, Va.
John Higginbotham, chairman of SpaceVest and chairman of ProtoStar’s board, said the Asia-Pacific market is ripe for expansion in DTH services. “We think the ProtoStar business plan is particularly responsive to that demand and we are very excited about the potential for this undertaking,” he said.
Higginbotham also serves on the board of New York-based Imaginova Corp., parent company of Space News.
Peter Barris, managing general partner of New Enterprise Associates and a ProtoStar board member, said ProtoStar’s target market is underserved today. “When you see what is happening in the region with mobile expansion, cellular expansion and entertainment expansion, you see a great opportunity, or we certainly do,” he said
Neither Higginbotham nor Barris would quantify the initial financing being provided to ProtoStar, but launching a DTH satellite business is a major financial undertaking. According to industry analysts, building and launching a single DTH satellite costs around $200 million.
Barris said the first round of financing will keep ProtoStar operating “through the foreseeable future. The grander vision will require some additional funding,” he said, adding that New Enterprise Associates “has $6 billion under management and is totally committed to this project.”
SpaceVest also is committed , Higginbotham said. “The company will be expanding its capital base quite significantly on a timely basis to support at least a three-satellite system.”
According to ProtoStar’s Web site, the satellites will carry high-power beams capable of delivering 50 to 160 channels, including high-definition signals, to dishes as small as 50 centimeters across.
Barris said ProtoStar has contracts for the satellites, but declined to be specific.
According to one industry source, ProtoStar has approached New York-based Loral Space & Communications and asked about buying the ChinaSat-8 satellite . ChinaSat-8 has been stuck at Loral’s production plant in Palo Alto since 1998 because of the U.S. government’s refusal to grant a license to export the satellite to China.
In February, Loral announced an agreement with the ChinaSat-8 customer, China Satellite Communications Corp. of Beijing, on the fate of the spacecraft . The deal allows China Satellite to seek another buyer for the spacecraft, although Loral estimates that it would cost between $30 million and $40 million to reconfigure the hardware .
Loral spokesman John McCarthy declined to comment on any potential sale of ChinaSat-8.
ProtoStar, which is registered in Bermuda but has the bulk of its operations in San Francisco, is targeting markets in India, Indonesia, China, Taiwan, the Philippines and Southeast Asia, according to the company’s Web site.
The area is suffering from severe transponder overcapacity, but most of those transponders are designed to provide services other than DTH television, said Pacome Revillon, managing director of Paris-based Euroconsult, a market research firm.
The number of satellite-delivered television channels in Asia was around 960 at the end of 2003 and had grown to 1,150 by the end of 2004 , Revillon said. “Growth potential remains quite high in the region,” he said. “Overall, we expect continuous growth in transponder demand in the region.”
ProtoStar does not plan to provide television content, but will offer the capacity for third-party content providers, Barris and Higginbotham said.
While Asian countries are deregulating their markets, ProtoStar will face a challenge in trying to establish partnerships with content providers in countries with a government-affiliated national satellite operator, Revillon said.
“The key issue for ProtoStar or any new satellite operator is to know where they can find one or several anchor customers,” Revillon said. If they can establish those deals with domestic companies in the region , then ProtoStar may be able to turn a profit with very little market share, he said.