Latin America’s largest satellite fleet operator, the Embratel-owned Star One, is warning that the gold rush mentality of some satellite owners is at risk of causing a repeat of the bandwidth overcapacity and price collapse that stigmatized the market in 2003.
Star One President Gustavo Silbert is not forecasting an immediate problem. For now, he says, satellite bandwidth supply and demand appear to be in good balance. But as several large satellite fleet owners seek areas of higher growth now that the North American and Western European markets are facing what may be a prolonged period of single-digit growth, the robust Latin American market has obvious appeal.
They are not alone. Government and private-sector ventures in Mexico, Argentina, Venezuela, Colombia and Bolivia either have entered the satellite market in the past couple of years or are preparing to do so.
In Brazil, the government has indicated it may wish to purchase its own spacecraft for uses including universal-service broadband provision for rural areas.
Star One is not sitting on its hands. The company recently won access to frequencies at two orbital slots in an auction organized by the Brazilian telecommunications regulator. Star One agreed to pay a total of $46.6 million for Ku- and Ka-band rights at 84 degrees west and Ku-, Ka- and X-band rights at 70 degrees west, the latter already a key Star One broadcast position.
Star One grew its revenue by nearly 16 percent, in U.S dollar terms, to $319.2 million in 2010. Silbert discussed the company’s current outlook with Space News staff writer Peter B. de Selding.
What is the biggest near-term driver of growth in your coverage area?
Broadcasting applications are the major growth drivers in our region. In Brazil, the major market of the region, the number of high-definition channels is growing rapidly and the major broadcasters are providing their main programs in that technology.
The pay TV operators, both cable and direct-to-home (DTH) satellite, are significantly increasing the number of HD channels in their offers. Also, considering the Nipo-Brazilian Digital terrestrial TV system adoption by several countries in Latin America, we expect growth in the number of HD channels throughout Latin America.
Regarding satellite television, we are observing a strong demand for capacity in the region caused by its growing penetration in Brazil and in other countries of Latin America. Much of the demand is coming from incumbent telecommunications carriers aiming to expand their services portfolio with video. Star One is providing capacity in Star One C2 at 70 degrees west, our “hot position,” for Via Embratel, a recent and successful DTH player in Brazil.
What is your active transponder count today, and where will it be in five years?
Star One is the largest satellite player based in Latin America and No. 6 in the global ranking of fixed satellite services providers. We look forward to continuing our expansion as a regional player, as opposed to remaining just a Brazilian domestic player. We successfully started this strategy several years ago, with the launch of Star One C1 and C2, and will consolidate it with the Star One C3 launch in 2012. These three satellites form our new generation and provide excellent power and coverage throughout Latin America, as they were designed specifically for this region.
Regarding transponder count, Star One has been growing its offer in a consistent way. In 2012, with the launch of Star One C3, we will reach 171 commercial transponders, a supply increase of more than 50 percent in the last 10 years. On the top of this number, we shall add 56 transponders in inclined orbit. We recently won rights to two slots following a bidding competition by Anatel [Brazil’s telecommunications regulator]. These will provide the necessary bandwidth for our future growth. I emphasize that the company is always working on new opportunities.
What is your assessment of your DTH market share in the region you cover from 70 degrees west?
From 70 degrees west we serve our customer Via Embratel, which has been a very successful operation. From publicly disclosed data, one can see that in less than three years of operation, Via Embratel has attracted 1.7 million subscribers, which represents approximately 30 percent of the market for Brazilian DTH. It is worth noting that from this same orbital slot we can also serve around 20 million C-band dishes in Brazil, in a free-to-air model.
Many new satellites are arriving in Latin America in the next couple of years as satellite operators seek to capture the strong growth there. Overcapacity has been an issue in the past. Is it once again a threat?
Yes, a major challenge is to avoid a new cycle of oversupply in this region. Most operators are announcing new satellites or replacements for the region because other regions of the globe seem to be less attractive at this moment. There is a potential risk of oversupply within the next two or three years, just as we saw happened in 2003 and 2004.
Is there any downward pressure on pricing now?
We see prices currently stabilized, as supply and demand are balanced in the market.
Have there been any changes in the way you operate since Embratel became 100 percent owner?
Embratel is a very strong shareholder, backed by America Movil group. In addition, it is our anchor customer and a key element in Star One’s successful history, which began inside Embratel as the company’s satellite division. In other words, there are no changes at all in our operations.
There is speculation about a Brazilian government satellite for digital divide, Ka-band and universal-service purposes, with a military payload. What is your understanding as to the status of this project?
Our company policy is not to comment on any governmental initiative.
Do you see possibility for partnerships in your region, or with a larger global operator?
Yes. A challenge faced by any operator is related to the increasing cost of building and launching a satellite. It makes a lot of sense to reduce risk and capital expenditure by partnering with other operators. We have successfully in the past shared a satellite — the NSS-10 spacecraft, shared with SES of Luxembourg — and we will evaluate any opportunity that brings value to the company.
In your opinion, will some of the smaller operators in Latin America be willing to consolidate? Not necessarily by selling their businesses, but perhaps by undertaking condosat arrangements to share satellites?
Each case is unique, but, in general, I don’t believe so, as most of the smaller operators are related to government initiatives.