SES Expansion Program To Raise Capacity 30 Percent

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PARIS — SES, which is in the middle of the biggest expansion program in its history, will be reconfiguring its orbital assets in the next five years so that by 2015 it will have 30 percent more available capacity spread over a fleet that nonetheless will decline to 38 satellites from the 43 in service today, SES officials said.

In presentations made June 1, Luxembourg-based SES told investors that the company would not turn away from new promising satellite projects not on the horizon today. But the company reassured investors that its fleet-renewal and expansion program is almost certain to peak this year at 820 million euros ($1 billion) and then decline sharply.

The company’s detailed year-by-year spending plans depend in part on whether planned satellites are delivered and launched on schedule. Late arrivals also mean delayed payments. In 2011, the company plans to spend 790 million euros on satellites and other capital projects. That figure should drop to below 300 million euros by 2014 and stay there for several years, SES Chief Financial Officer Andrew Browne said.

Browne said that just replacing SES’s capacity as it stood in late 2009 would require an average of 360 million euros to 405 million euros per year in capital spending. The expanded fleet to be in place in 2015 will mean SES will spend between 430 million euros and 495 million euros per year to replace the capacity, without taking into account any further expansion.

SES has 16 satellites under construction including its share of a satellite being built for YahSat of the United Arab Emirates. These satellites are part of a big increase in the company’s overall market presence. SES will have 1,533 transponders on 38 satellites operating from 30 orbital locations in 2015, SES Chief Executive Romain Bausch said.

That compares with 1,173 transponders operated at the end of 2009 spread over 39 satellites and 26 orbital slots. SES has added four satellites to its fleet since then.

Of the 16 satellites, four are for new orbital slots and new markets that SES does not reach today. The 12 others are satellites large enough to replace existing spacecraft while still offering expansion capacity when measured by the number of transponders they will carry.

Increasing the transponder count and the number of orbital slots while decreasing, by one, the number of satellites is done by placing larger spacecraft over certain positions, notably over Europe, where SES has multiple spacecraft.

About 85 percent of the new in-orbit capacity is heading into the emerging markets of the Middle East, Africa, Latin America and parts of Asia.

Bausch said SES forecasts that global demand for C- and Ku-band satellite capacity will increase by 3.1 percent per year between 2009 and 2017. But that average figure hides extreme variations ranging from 5 percent annual growth in Russia and the surrounding region, and in Latin America, to an actual 0.5 percent annual decline in demand in North America.

In his presentation, Bausch said the North American decline in demand is partly because the SES forecast does not take into account direct-broadcast television in the United States. When this market is included, even the North American market shows growth, although nowhere near that of the emerging markets.

The second-weakest region in terms of growth prospects, according to SES, is the company’s biggest cash generator, Western Europe, where SES and its rival, Eutelsat of Paris, have what is probably the world’s most profitable satellite duopoly.

As he has done in the past, Bausch dismissed consumer broadband as a relatively small niche that is unlikely to grow as governments encourage the deployment of terrestrial communications. SES is deploying a commercial service, Astra2Connect, that uses Ku-band capacity available on the company’s Astra fleet in Europe. SES is also adding Ka-band to some of its satellites but, unlike Eutelsat, has shied away from launching a dedicated Ka-band satellite with consumer broadband as its core business.