HDTV Demand Drives Telenor Business Strategy

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  Space News Business

HDTV Demand Drives Telenor Business Strategy

By PETER B. de SELDING
Space News Staff Writer
posted: 01 June 2007
12:12 pm ET





OSLO, Norway —


Telenor Satellite Broadcasting forecasts that it will be able to increase revenues by up to 13 percent in 2007 despite the fact that its current satellites are already nearly filled to capacity and the first of two new spacecraft on order will not be available until early 2008.

The company, which operates three satellites at




1 degree west longitude, including one owned




with Intelsat on a 50-50 basis, said the expansion of




high-definition television (HDTV) broadcasting in Europe, and broadband in the Middle East, will drive growth in the coming years.



The promise of pent-up demand for HDTV persuaded Telenor management to agree to order its second satellite in two years.



StigEideSivertson, chief executive of Telenor Broadcast – which owns Telenor Satellite Broadcasting – said committing to the new hardware was nonetheless unnerving.



“A satellite stands a 9 percent chance of failing,” Sivertson said here May 16. “That’s not a small number. With a second satellite, we are basically placing our bets on where the market will be. We commit to paying the money up front for something that’s going to be with us for 20 years. That’s a bit frightening.”



Oslo-based Telenor is paying 1.2 billion Norwegian kroner ($198.7




million




)




for the construction, launch and first year’s insurance for the Thor 5 satellite, being built by Orbital Sciences Corp. of Dulles, Va. The satellite is scheduled for launch in November aboard an International Launch Services Proton-M rocket.

Thor 5, which will carry 24 Ku-band transponders, will replace the Thor 2 satellite, to be retired in 2010. In addition to replacing Thor 2’s 15 transponders for the Nordic region, Thor 5 will use its nine additional transponders to win business in Europe and the Middle East.

Telenor
already services Middle East




customers with the Intelsat 10-02 satellite, co-owned with Intelsat of Washington. But Cato Halsaa, chief executive of Telenor Satellite Broadcasting, said demand in the region




remains strong, especially after the January launch failure that destroyed




the large SES New Skies NSS-8 satellite.

“Capacity for satellite broadband is at a premium,” Halsaa said. “The loss of NSS-8 has caused the whole satellite industry to review its plans. The picture is basically one of soaring demand and limited supply.”



In April, Telenor ordered a Thor 6 satellite from ThalesAlenia Space of Cannes, France, an investment of 1.4 billion Norwegian kroners, including launch and insurance.

Thor 6 will carry 36 Ku-band transponders and is slated




for launch aboard a European Ariane 5 rocket in mid-2009 – a demanding schedule that Halsaa said was one of the key factors in its




contractor selection.

“Two years after our Thor 5 competition, we ended up with the same two finalists for Thor 6,” Halsaa said. “In fact, we signed the launch contract for Thor 6 before we signed the satellite construction contract, which means we had weight limits that the satellite bidders had to cope with.”

Halsaa
said the Thor 6 contract includes stiff penalties for late delivery given the company’s concerns about the need to replace Thor 3, which is scheduled for retirement in 2010.

Telenor’s
thinking as it prepared its major capital expenditure was that if Thor 5 fails, Thor 6 will be ready in time to replace the capacity to be lost with the retirement of Thor 2. If Thor 6 is lost during or shortly after launch, the company




will have nearly two years before Thor 3 is taken out of service – just about time enough to order a replacement satellite.

Once the two new satellites are operational




, Telenor’s fleet capacity will swell to 70 commercially available transponders, compared to 40 today.



Telenor Satellite Broadcasting reported revenues of about 663 million Norwegian kroner in 2006. Halsaa said that by virtue of replacing a few expiring contracts with higher-priced services, the company has targeted 2007 sales of up to 750 million kroner.



Sivertsen said that in addition to its 3 million television viewers in the Nordic region, Telenor Satellite’s 1 million viewers in central and eastern Europe give the company a bigger satellite-television audience there than anyone, except in Poland. 

By Telenor Satellite’s count, Eutelsat Communications of Paris has 1.52 million television subscribers in Poland using




Eutelsat
satellites at 13 degrees and 16 degrees east longitude. SES Astra of Luxembourg has 310,000 subscribers in the region using its




satellites at 19 degrees east, SES Sirius of Sweden serves about 64,000 subscribers using capacity at




5 degrees east, while Spacecom of Israel at 4 degrees west and HellaSat of Greece at 39 degrees east have lower numbers.

Telenor
Satellite currently carries five high-definition television channels and will expand that to nine by the end of this year, Sivertsen said. Canal Digital, a broadcaster owned by Telenor ASA, Telenor Satellite’s corporate parent, has positioned itself to be a major broadcaster of high-definition sports. Canal Digital is Telenor Satellite’s biggest customer.