Competition in Asia-Pacific Transponder Market Still Strong

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The Asia-Pacific satellite-communications market remained bruisingly competitive in 2004. With as many as 10 satellite operators fighting for each new contract, prices remain under heavy pressure, Asia Satellite Telecommunications Holdings Ltd. (AsiaSat) said.

The Hong Kong-based company reported March 17 that it was nonetheless able to keep sales in 2004 about equal to 2003’s level, mainly because of business booked on the company’s AsiaSat-4 satellite, launched in mid-2003.

AsiaSat reported sales of 1.005 billion Hong Kong dollars ($128.8 million), a 12 percent increase from 2003 that was inflated by a one-time payment of 123 million Hong Kong dollars from a customer that ended a transponder-lease contract early.

Eliminating that sale, AsiaSat, which is partly owned by SES Global of Luxembourg, reported 2004 revenues of 898 million Hong Kong dollars, virtually unchanged from 2003.

Shareholder profit, also after excluding the one-time payment, was 340 million Hong Kong dollars, a 20 percent drop from 2003 caused by the ongoing transponder-price wars.

The pressure on prices in AsiaSat’s coverage areas can be measured by the fact that the company in 2004 increased its satellite occupancy rate by 16 percent and yet could not generate more revenues. The increase was largely due to the steady growth in fill rate on AsiaSat 4, which was 27 percent filled as of Dec. 31, 2004, compared to just 10 percent a year earlier.

AsiaSat Chief Executive Officer Peter Jackson said the company has been offering introductory prices for AsiaSat-4, a common practice in the industry when a new orbital slot is inaugurated.

AsiaSat’s three satellites are now 46 percent filled, compared to 39 percent a year ago. “For us, 46 percent is good, it’s not a big issue for us,” Jackson said March 18. “AsiaSat 4 is less than two years old, and a 27 percent fill rate is perfectly acceptable at this stage. We knew there were going to be a couple of bad years in front of us and we prepared for them.”

Jackson said AsiaSat’s backlog is an example of how the company is coping with a market that he said “looks like it might have hit bottom and now is stabilizing. Either that or it’s a dead-cat bounce.”

AsiaSat’s backlog on Dec. 31, 2004, stood at 2.9 billion Hong Kong dollars, nearly 22 percent below the level of a year earlier. But Jackson said this is in part due to the increased number of short-term contracts.

“We’re not doing a lot of 15-year deals at these pricing levels,” Jackson said. “I had one customer come in and say he wanted a 20-year deal. I take that as a sign that people realize these prices aren’t going to stay where they are forever.”

In the meantime, AsiaSat must watch some customers sign with competitors willing to price at rock-bottom rates. Are some satellite operators selling capacity below cost? “Absolutely,” said Jackson. “Any time you see a transponder being priced at around $1 million or less for the equivalent of 36 megahertz for a year — that is below cost. We’re not in that game.”

He declined to name names, saying that each company’s pricing policy depends on the satellite being offered, contract length and other terms.

For any given request for proposals for satellite capacity in East and Southeast Asia, 10 separate companies could respond. Some are owned by governments, others are privately owned. Some are healthy, others less so.

In addition to AsiaSat, operators active in the Asian market include Shin Satellite of Thailand, Eutelsat S.A. of Paris, JSAT Corp. of Japan, Loral Skynet of the United States, the Indian Space Research Organization , Intelsat Ltd. of the United States, Measat Satellite Systems of Malaysia, New Skies Satellites of The Netherlands, APT Satellite Holdings of Hong Kong and PanAmSat Corp. of the United States.