AsiaSat plans to order a new satellite within weeks for a launch in 2008 despite the continued lackluster market in South and East Asia and the likelihood that conditions will not improve anytime soon.
Peter Jackson, chief executive of Hong Kong-based Asia Satellite Telecommunications Holdings Ltd., said the company continues to face pressure on its transponder-lease prices and already has acceded to it by selling capacity aboard its new AsiaSat 4 satellite at prices that are lower than those for two other spacecraft.
“It’s a new satellite in a new orbital position, so we would have done some introductory pricing anyway,” Jackson said in a March 17 interview. “But perhaps in a more robust market, the prices wouldn’t have come down as much.”
The reduced prices on AsiaSat 4 accounted in part for the fact that the company reported a 2-percent decrease in sales in 2005 compared to 2004, but also reported that its satellite-utilization rate increased by 18 percent, to 54 percent as of Dec. 31, 2005, compared to 46 percent a year earlier.
Jackson said most of the new business in 2005 was booked on AsiaSat 4, which ended the year 47-percent filled, compared to 27 percent a year earlier. AsiaSat 2 was 40-percent filled at the end of the year, compared to 36 percent a year earlier, while AsiaSat 3’s fill rate was unchanged at 73 percent, according to AsiaSat figures.
The economic recovery in the Asia-Pacific region and the continued strong economic growth in China have not yet stimulated a rebound in transponder prices, according to satellite operators active in the region.
AsiaSat has had to write off bad debt and set aside provisions for likely future nonpayment by customers. It wrote off 3 million Hong Kong dollars ($387,000) in 2005 and has set aside 11.8 million Hong Kong dollars to guard against similar nonpayments in the future, particularly on the part of one large Chinese customer, Jackson said.
AsiaSat, which is minority-owned by SES Global of Luxembourg, reported a 12-percent drop in sales in 2005, to 880 million Hong Kong dollars.
After excluding a one-time gain for a 2004 customer penalty payment for early lease cancellation, the revenue decline was 2 percent.
EBITDA — earnings before interest, taxes, depreciation and amortization — was 672 million Hong Kong dollars, or 76 percent of revenues. Net profit was 420 million Hong Kong dollars, down 16.7 percent from a year earlier.
AsiaSat, which is traded on the Hong Kong Stock Exchange, had warned invest ors that 2005 would be a difficult year; and when presenting its financial results March 16, the company said 2006 is unlikely to be much better.
Oversupply remains an issue, and Jackson said some nations continue to restrict access to their markets.
“Without immediate changes in some countries’ regulatory environments or the rapid introduction of some of the pending new applications in Asia, we believe that the situation is unlikely to change significantly in the short term,” AsiaSat Chairman Romain Bausch, who is also chairman of SES Global, said in a statement accompanying the AsiaSat financial results.
Despite the market’s weakness, AsiaSat’s board of directors has approved the construction of the AsiaSat 5 satellite, to carry a total of around 38 C- and Ku-band transponders, with a contract expected to be signed within weeks, Jackson said. AsiaSat 5 will replace AsiaSat 2. Manufacturers’ bids have been received and an evaluation of the best technical and financial offer is nearly finished, he added .
Jackson said there are some hopeful signs, including the fact that several regional operators are having second thoughts about replacing their aging satellites given the business prospects.
“These satellites have been considered national assets, and people are thinking that these national assets are expensive,” Jackson said. “And some of the larger operators have taken on debt, so for some of these satellite systems, we’re getting to crunch time. Prices will have to come up.”
One application that AsiaSat said might show promise is video programming to mobile devices. In South Korea and Japan, an S-band satellite system already has debuted such a service, with the principal early market being mobile handsets.