Chief Executive Officer, JSAT Corp.
SAT Corp.’s purchase of its domestic competitor, Space Communications Corp. (SCC), this spring has consolidated JSAT’s position as the world’s fifth-largest satellite-fleet operator by revenue and the dominant satellite telecommunications provider in Japan. Under the transaction, valued at 28 billion yen ($265.5
million) plus the assumption of 26.5 billion yen in SCC debt, SCC will remain a distinct operating entity before being fully merged into JSAT
JSAT Chief Executive Kiyoshi Isozaki said the enlarged JSAT will be better able to strike strategic partnerships in Asia and perhaps elsewhere as it moves into governmental services, maritime telecommunications and other areas that up to now have not been JSAT priorities.
JSAT also is expected to expand its consulting business both domestically and overseas.
Including the SCC satellites and satellites it co-owns with others, JSAT now has 12 satellites in orbit and four satellites on order including the Intelsat 15 satellite owned by Intelsat of Bermuda and Washington. JSAT has purchased five transponders on Intelsat 15 and co-owns the Horizons-1 and Horizons-2 satellites with Intelsat.
JSAT’s core Asia-Pacific market is a rough neighborhood for satellite-fleet operators. There are several one- and two-satellite operators who continue to pull down average transponder prices, but whose long-term viability is questionable.
In addition, the two biggest markets in Asia – China and India
�- do not make it easy for foreign satellite owners to gain access to their markets. Isozaki discussed his company’s strategy with Space News staff writer Peter B. de Selding.
What was the 2007 revenue
�and Space Communications Corp., which JSAT just acquired?
JSAT revenue for the year ending March 31, 2008, was about 39 billion yen [$393.2 million at March 31
�exchange rates]. SCC revenue for the same year was about 17 billion yen.
What synergies do you expect to realize from combining JSAT and SCC operations, and when?
Synergies will emerge over the next three years. We expect the cost synergies to be between 1 billion and 2 billion yen per year starting in 2011.
What is the timetable for merging the two companies’ ground operations?
Currently we have four satellite control centers between the two of us. We expect to
�consolidate these facilities into two centers within a few years.
Will SCC continue to be operated as a separate entity?
For the time being, JSAT and SCC will operate as separate entities under the holding company. However, we are considering a full merger within six months. We will
coordinate the sales teams in order to avoid unnecessary competition and overlap, and then follow that with a consolidation of the equipment and operations divisions in the mid
How have JSAT and SCC employees reacted to the merger?
At first they had some worries of course. But we gave them a clear explanation of the reasoning behind the move and gradually they understood that this decision gives us an opportunity for further expansion, and gives them a better use of their skills.
JSAT is in a very competitive environment in Asia, and China
has recently consolidated its satellite operating entities. Do you see further consolidation in Japan with B-SAT?
JSAT and B-SAT will launch a co-owned satellite – a broadcast and communications hybrid – in 2011 under the name of BSAT-3c/JCSAT-110R. We plan to select the satellite and launch vehicle in the current fiscal year. The satellite will be owned 50-50 by the two companies. While this event will be important for both companies, we have not discussed a possible merger with them and it is not in our mid
term plans. The priority will be to launch this satellite. Then afterwards we may discuss other possibilities.
What kind of leverage with customers or suppliers will the merger give you as a bigger company?
In our view the combination of the two companies gives us an important advantage. Now we are clearly in the No. 1
position for satellite telecommunications in Japan. B-Sat is a special-purpose company for broadcasters. Under the new space law in Japan, we will be able to consider offering more services for business and for government – for national security, bridging the digital divide, emergency recovery and other services. We believe it will be very easy for SCC and JSAT to merge their strategies. SCC has been more oriented to governmental business than we have, but there has been competition between us and we can now avoid unnecessary competition.
JSAT has expanded internationally, in part through the Horizons venture with Intelsat, in which you co-own spacecraft. What is the next step in this joint venture with Intelsat?
We have agreement to use five Ku-band transponders on Intelsat 15, which will operate in an orbital position of 85 degrees
east longitude and is scheduled for launch in early 2009. In addition to this, we are seeking the opportunity for the next Horizons project with them.
Are you looking at other possible partnerships?
We are seeking opportunities for
joint satellite projects like Horizons in Asia and Oceania.
What is your assessment of the near-term market in East Asia for satellite transponder leases?
Our overall view is that the market is expanding gradually, but that competition in the region remains severe. India is a booming market for new direct-to-home television projects and they have strong demand for satellite transponders. However, they give priority to their domestic satellites.
China also has growth in direct-to-home television, but they only use Chinese satellites. So both these big markets are hard to enter. Although their regulations permit the entry of foreign suppliers, it is actually quite hard to get into these markets.
Price competition for C-band transponders has been moderated. However, it is certainly true that the business market in Asia remains challenging.
Consolidation in Asia is hard to accomplish because each nation wants to keep its flag in space. Do you see any changes that would permit consolidation?
Due to the national flag policy in Asian countries, mergers and acquisitions and other types of consolidation are never easy. We are seeking joint satellite projects.
M&A [merger and acquisition] or consolidation is not easy.
Vietnam now has become a satellite operator with the launch of its first spacecraft. How do you view this development?
Our impression is that Vietnam’s Vinasat satellite is a flag carrier for Vietnam and will be used mainly for domestic demand. I don’t know if they will be expanding much beyond their borders.