Capacity Demand Outpaces Supply in Middle East and Africa

WASHINGTON — Satellite operators in the Middle East and Africa said it looks like demand will continue to outstrip supply despite the aggressive capital spending plans that almost all of them have announced to add satellite capacity in the region.

In remarks made March 26 here during the Satellite 2009 conference, officials from these companies said the growth in direct-to-home television, both paid and free to air, and in business networks will keep demand for C- and Ku-band satellite capacity high despite the coming flood of new capacity.

Among the most ambitious is the 21-nation Arabsat consortium of Riyadh, Saudi Arabia. With four satellites located at two orbital slots, Arabsat has four more satellites under construction and scheduled for launch between 2009 and 2012.

Arabsat’s
next launch, of the Arabsat 5A spacecraft, is scheduled for late this year. The satellite will enhance Arabsat’s coverage of Africa from its 30.5 degrees east slot, where it will replace the aging Arabsat 2B spacecraft, which was launched in November 1996.

But Arabsat Chief Executive KhalidBalkheyour said demand in the Middle East and Africa is so strong that it will accommodate the new supply without forcing operators to enter a price war.

“Demand is surpassing the supply,” Balkheyour said. “I think that in the medium term, we will see that the growth in demand is not being met by the supply, even though some operators are redirecting their satellites to the region.”

Balkheyour
was referring to plans by Paris-based Eutelsat, Bermuda- and Washington-based Intelsat and SES of Luxembourg, as well as satellite operators in Russia, to direct more of their current and planned satellite beams over the Middle East and certain regions of Africa.

Nilesat
of Egypt is Arabsat’s nearest competitor and is engaged in a long-delayed expansion program of its own. Nilesat Chief Technical Officer SalahHamza said the company now carries some 450 television channels on its two satellites, compared to around 400 in November 2008, despite a price increase put in place last year.

The growth, he said, has transformed the Middle East television landscape from a government-dominated one into one dominated by commercial broadcasters.

“When we started in 1998, 90 percent of our business was government,” Hamza said. “We had a total of 54 channels. Today, government is between 12 percent and 16 percent of our total of 450 channels. We are now targeting new applications with higher bandwidth demand.”

Nilesat’s
two existing satellites, at 7 degrees west longitude, are both full. The company recently agreed to lease capacity on Eutelsat’s Atlantic Bird 4A satellite through 2019, and has ordered a new satellite of its own, Nilesat 201, to be launched in 2010. Atlantic Bird 4A is the new name for Eutelsat’s Hot Bird 10 spacecraft.

The biggest new entrant into the Middle East satellite market is the Al Yah Satellite Communications Co. (Yahsat) of the United Arab Emirates. Yahsat’s first two satellites are under construction and will have a dual-use mission for military communications and commercial sales. Both satellites include large Ka-band capacity for government and consumer broadband communications in addition to providing high-definition television broadcasts.

Yahsat
Chief Executive Jassem Al Zaabi said Yahsat expects it will be able to offer substantially reduced prices for broadband data links compared to the VSAT, or very small aperture terminal, satellite data-transmission providers currently active in the Middle East.

“We can cut those prices,” Al Zaabi said. “We are trying to break the mold in the Middle East. What we are promising is broadband with a terminal price of less than $500 and [a] monthly subscription charge of $30 to $40. This is one-tenth of current prices.”

Rolling out consumer broadband in the Middle East will require a change in the regulatory regime in many nations, but Al Zaabi said national regulators have demonstrated they are willing to adapt to a clearly presented business case. “Regulators try to work around it once they realize the benefit to the society,” he said of any given roadblock in the current licensing regime.

Soheil
Mehrabanzad, general manager for the Middle East and Africa for satellite broadband provider Hughes Network Systems of Germantown, Md., agreed. “Today you have 14 VSAT operators with licenses in Saudi Arabia,” Mehrabanzad said of a nation known for restrictive regulations on satellite gear. “They have found a way. Saudi has been the epitome of what people mean by regulations.”

He said Nigeria is another example of a heavy-handed regulatory regime in which satellite operators and customers have nonetheless found a way to expand business.