Consolidation at the Top Does Not Equal Stagnation

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  Space News Business

Consolidation at the Top Does Not Equal Stagnation

By PETER B. de SELDING
Space News Staff Writer
posted: 27 June 2007
12:10 pm ET










As Satellite Prices Decrease Smaller Buyers and Sellers Continue to Proliferate







PARIS —


The long-anticipated




consolidation of the fixed satellite services industry has been about completed in the top two-thirds of the market. But the number of satellite-fleet operators at the bottom part of the market, as measured by revenues, is going in the opposite direction.

In the past two years, telecommunications satellite programs have sprung up in nations whose domestic demand would appear to be incapable of sustaining a business case. In some cases, the goal is not to craft a sustainable business model, but to advertise a nation’s regional clout –




just as was the case in the 1980s.

Whatever the motivation, national satellite programs have sprung up in Vietnam, Venezuela, Nigeria, Azerbaijan, United Arab Emirates and Kazakhstan. Most recently, the Libyan-backed Rascom satellite project, started well over a decade ago, has been resuscitated for a launch scheduled late this year. Struggling operators in Latin America and Asia, meanwhile, have found the means to hang on despite financial difficulties.

Government backers of these projects usually justify the new programs by saying a national satellite system will save tens of millions of dollars per year now spent on leasing capacity aboard the larger –




foreign –




satellite fleets.

The longer-term survivability of these start-up companies may be open to question, but they are arriving at a time when the cost of entry appears to have hit a plateau.

Industry officials say that after several years of sharp increases, launch-service prices are leveling off. Aided in part by the arrival of small-satellite manufacturers, satellite prices also are




flat, judging from reports from operators that have been in the market more than once in the past three years.

Satellite insurance, typically the third




largest cost item for satellite operators, in 2006 continued its price drop as underwriters accepted lower premiums following several profitable years. Some operators say they have been able to secure coverage of a satellite’s launch and first year in orbit for less than 13 percent of the insured value.



Insurers so far in 2007 expect to collect satellite insurance premiums of around $600 million. As of mid June, confirmed claims have been no more than around $300 million.

This generally favorable insurance picture hides occasionally big differences in premiums paid depending on the satellite’s owner, the launch vehicle and the specific characteristics of the satellite.

It’s worth noting that the most technically interesting satellites in the past several years have been ordered by start-up satellite operators, especially those planning mobile communications networks. The larger companies have been more conservative, selecting satellites with a minimum of new technology.

In a development that would have been difficult to imagine five years ago, the biggest small-satellite customers now have been Intelsat, SES, Eutelsat and JSAT Corp. –




three of the five largest players.