Profile: Mideast Satellite Start-Up Aided by Timing, Location

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  Space News Business

Profile: Mideast Satellite Start-Up Aided by Timing, Location

By PETER B. de SELDING
Space News Staff Writer
posted: 17 December 2008
03:23 pm ET






Jassem

Mohamed Al Zaabi

Chief Executive Officer, Al Yah Satellite Communications Co.

Start-up satellite projects everywhere are facing tough questioning by investors and more-difficult access to debt, assuming they can find lenders. But Al Yah Satellite Communications Co. (Yahsat) of
Abu Dhabi
,
United Arab Emirates
, helped in part by its chosen market area, its backers and a dose of good luck with timing, is a striking exception.

Backed by Mubadala, the investment arm of the government of
Abu Dhabi
, Yahsat was able to secure $1.2 billion in bank financing late last summer, and even had the luxury of an oversubscription to its offer. To top it off, investors were confident enough in Yahsat, despite the company’s start-up status, to make the 14-year loans nonrecourse to Mubadala.

Yahsat
has two large satellites under construction by European contractors Astrium Satellites and ThalesAlenia Space and set for launch in late 2010 and mid-2011 by an Arianespace Ariane 5 and an International Launch Services Proton-M rocket, respectively. Both will carry large Ka-band payloads, with Yahsat 1A also carrying a Ku- and C-band payload for commercial services.

The company is reserving much of its Ka-band capacity for military use, and the United Arab Emirates Armed Forces signed up last April as a 15-year customer for Yahsat satellite capacity and for ground terminals and gateway Earth stations.

But the company also is eyeing Ka-band to deliver consumer broadband and possibly high-definition television in the
Middle East
and
North Africa
. Yahsat has announced its YahClick consumer and corporate broadband service for a market area including
Southwest Asia
,
Southwest Africa
and sub-Saharan
Africa
as well as the
Middle East
and
North Africa
.

In addition to a challenging global economic climate, Yahsat is entering a market that is the focus of expansion plans by regional and international satellite-fleet operators already there.

Yahsat
Chief Executive Jassem Mohamed Al Zaabi cautioned that the company does not expect to dethrone the Arabsat organization as the regional market leader, or to put the smaller, but now expanding, Nilesat of Egypt out of business. But as Yahsat secures agreements with popular video-content providers, he said, the company should be able to secure at least a No. 2 position in some key markets.

Al Zaabi spoke with Space News staff writer Peter B. de Selding about the company’s status and prospects.


The global financial turmoil and economic contraction have not spared the

Middle East
. Have you been forced to modify your project in response?

No, the project is on schedule both financially and technically. We were fortunate in that we secured our debt before the crisis hit. But our situation is not only the result of timing. It is also an endorsement of the way we conducted our project finance. So I can assure you we have no problem with our debt facilities.

And the schedule for the launch of the two satellites?

That, too, remains on track for late 2010 for the first satellite, and 2011 for the second satellite.

Your two-satellite system is dual-use. Is there a precise amount of capacity reserved for government customers, and an amount specifically available for sale on the open commercial market?

We cannot disclose how much is available for government users, or discuss the military throughput capability of the system.

Your Yahsat 1B satellite’s business model has been revised recently. What is the status there?

The 1B satellite is all Ka-band and we are looking at a large market for end users of broadband links in the region. We had considered a hybrid satellite with both C- and Ku-band capacity, as for our Yahsat 1A, which has Ka-band capacity for government use and C- and Ku-band capacity for commercial users. We look at the commercial service as something independent of the government service. There are thresholds to assure that the commercial service does not interfere with the government service.

For the 1A satellite, what is your Ku- and C-band capacity?

We have 23 Ku-band transponders on Yahsat 1A, and we have not announced details yet on the C-band capacity, but it’s fair to say we have more than 15 C-band transponders on board.

What persuaded you that there is such a large commercial Ka-band broadband market waiting to be tapped in your coverage area?

In some ways we believe the market is already proven as a business model. The technology exists; there is nothing new in that sense. We have a cutting-edge system, but you have seen the success of Ka-band consumer broadband in the
United States
, where they are already talking about second-generation systems; and in
Europe
, where Ka-band is also being rolled out.

Who is providing your broadband consumer-premises equipment?

We have not made final decisions, but we have short-listed a group of potential Ka-band partners.


The

Middle East
is seeing a lot of satellite development now, both from regional fleet operators Arabsat and Nilesat, and from international operators including Eutelsat, SES and Intelsat. Is there room for another player?

In our view you need to be a regional player to be successful. You do not need to be No. 1, but you do need to be one of the top two in your market. That is what the content providers are looking for. It’s not about capacity that is available; it’s more content-driven. Our first satellite is going to be unique in its program content.

Despite the announced expansion plans at Arabsat and Nilesat, is there still a lack of capacity to provide television programming in the region?

We don’t think we are going to instantly be a hot spot for the region, and that all of a sudden everyone will shift their antennas toward our satellite. We are aware that we are in a very competitive market. But for now, the existing players cannot satisfy the demand.

What special advantages do you bring?

One advantage is our location in the
United Arab Emirates
, which is becoming a media and content hub in the region. We know that in most markets, just 20 percent or 30 percent of the broadcasters really control the market. The rest of the channels follow their lead. Once you attract these lead broadcasters, we believe the demand for capacity is huge.