Updated July 27 at 7:25 a.m. Eastern.
SINGAPORE — Many of the world’s largest satellite operators are struggling to generate anything more than flat or modestly growing revenues. South Korean satellite operator KT Sat is no different. The company generated 140 billion won ($120 million) in revenue last year, about 6 billion won less than it pulled in four years earlier.
With a comfortable business supporting 4.4 million television subscribers for parent company KT Corp., the largest telco in South Korea, KT Sat hasn’t been very aggressive in pursuing new sources of revenue. That is changing.
In an interview with SpaceNews, Won-Sic Hahn, CEO of KT Sat, laid out a multipronged strategy to propel KT Sat from a small, regional operator to one of the world’s largest by revenue in seven years.
That goal “might seem a little bit absurd,” Hahn acknowledged, speaking through a translator, but is one the company views as achievable even in the midst of declining capacity prices. Untapped international business, government programs and “inorganic growth” opportunities — all things KT Sat paid little attention to in the past — are now front and center as the company seeks to boost revenue 270 percent to 380 billion won by 2025.
Hahn declined to go into the inorganic ways KT Sat intends to expand, saying it is too soon for the company to reveal its plans. Industry observers have noted that acquisition activity among Asian fleet operators faces many challenges, chief of them being government ownership of many operators, though other downstream purchases have proven possible. Last year Indonesian fleet operator PT Telkom acquired a majority stake in TS Global Network, a Malaysian provider of very small aperture terminal networks.
KT Sat launched two satellites last year — Koreasat-5A on a Falcon 9 and Koreasat-7 on an Ariane 5 — expanding its fleet to five satellites. Koreasat-5A replaces the 12-year-old Koreasat-5, which now operates as a backup, while Koreasat-7 is a growth satellite. Both new satellites have coverage across large swaths of the Asia Pacific and steerable beams that can reach additional markets such as the Middle East.
“We have beams in Indochina, Pakistan, India and Southeast Asia, so geographically we hope to expand in these areas,” he said. “Before we had limited coverage, but now we hope to expand in these regions.”
Today only 15 percent of KT Sat’s revenue comes from outside of South Korea; by 2025 that should be 46 percent, Hahn said. Last year the company inked new deals in Mongolia and Japan, demonstrating newfound international ambitions.
KT Sat’s success relying mainly on South Korea is notable — in 2016 South Korea was the world’s most connected country, according to the International Telecommunication Union. An estimated 99.2 percent of households for South Korea’s 50 million citizens have internet access, and there are nearly five phone subscriptions for every four people.
Often, where fiber and other terrestrial connectivity infrastructure abound, satellite does not, but KT Sat has maintained its business in South Korea, supporting KT Skylife, the country’s largest direct-to-home broadcaster. KT Sat declined to state what fraction of its revenue comes from television broadcasts.
Hahn said government programs both military and nonmilitary present a large opportunity to grow domestic revenue further.
“Before we were a bit passive in taking part in these projects, but we tend to be more active and we would like to take a leading role,” he said. “We have made some attempts in these projects, and we are receiving some good feedback and success, so we believe that will jump our revenues drastically.”
Moving away from pure transponder-leasing model
Hahn said the global decline in capacity prices is making it a requirement for satellite operators to provide more than just raw capacity to their customers.
How far “downstream” satellite operators should go is a question with no agreed upon answer. The more fixed satellite services operators engage directly with end users, the more it causes friction with satellite network operators who worry that their capacity suppliers are turning into competitors.
Hahn said the story for KT Sat “is a bit different,” because the added-value services the company is planning are in the emerging fields of quantum encryption and blockchain.
Quantum encryption secures data by using particles of light as “keys” that, even when separated, are linked at an atomic level. Any disturbance with one entangled photon affects the other, revealing attempted interception.
“It is known that quantum encryption is difficult to apply in fixed-line networks,” Hahn said. “There is a physical limitation to it, but in satellite networks, we can apply this … In this aspect, the [information and communication technology] customers could have a secure and added value service through the satellite network. It’s an added supplement service that we could provide and also create some revenue.”
Implementing quantum encryption is a long-term goal that could happen “within about five years,” he said. Luxembourg-based SES, one of the world’s largest fleet operators, is also studying space-based quantum encryption with the European Space Agency.
Hahn said satellite-enabled blockchain, leveraging investments from KT Corp., could start within a year. “We have discussed this already with KT,” he said.
Future satellite preparations
Hahn said KT Sat is open to sharing satellite buses in “condo-sat” arrangements, though the company has no immediate plans for new satellites.
“Due to our limited frequency filing resources, a condo-sat is something we would always consider to further our expansion of our services,” he said.
KT Sat is not planning new satellites until 2024 or 2025 when Koreasat-6 will be due for replacement, Hahn said, but the company is already “doing a lot of study” for the successor spacecraft. Technologies of interest include high-throughput payloads and switchable transponders, he said.