WASHINGTON — Wall Street analysts, looking past the multiple equity-market failures that have marked the satellite industry in recent years, on March 15 gave a bullish assessment of the sector in general and of the established fixed-satellite services (FSS) industry in particular.
The analysts even found good news in the auction of the two satellites owned by ProtoStar Ltd., a startup direct-broadcast satellite television operator that failed when it could not secure regulatory rights to the orbital slots into which it had launched the spacecraft or to the necessary broadcast frequencies.
The two satellites, both in orbit, were auctioned to established FSS operators Intelsat and SES for a combined $395 million.
“Investors didn’t lose their money” in ProtoStar, said Omar Jaffrey, managing director of UBS Investment Bank, which coordinated the auctions. “They got very close to par” on their bonds. “It sets an example of where things are in the industry. The outcome of zero [return on investment] is unlikely.”
James Murray, managing director at Morgan Stanley, conceded that ProtoStar’s equity investors nonetheless were wiped out in the process, and that this could have “a chilling effect” on the equity markets’ view of future startup operators.
Speaking at the Satellite 2010 conference in Washington, analysts were even sanguine about the mobile satellite services business. With the notable exception of London-based Inmarsat, mobile satellite services providers have struggled since they first entered the market more than 10 years ago.
Besides Inmarsat, none has demonstrated an ability to sustain a profitable business model including the replenishment of in-orbit infrastructure. Several appear to be hanging on uniquely in the hope that a wireless network provider will step in to spend several billion dollars to build out a ground-based network to ensure signals are received in areas difficult to reach with satellites.
“There is a little more clarity coming into the [mobile satellite services] sector,” said Billy Goldstein, managing director at Macquarie Capital Advisors. “Overall, [mobile satellite services] will do better.”
All the analysts agreed the major FSS operators — Intelsat and SES of Luxembourg, Eutelsat of Paris and Telesat of Canada — all have done well in the past two years even as much of the rest of the economy in Europe and North America has suffered.
Goldstein said the publicly traded FSS operators have seen their stock prices rise by 21 percent since the financial crisis hit in September 2008. The Standard & Poor’s index is down 11 percent for the same period. “They beat every major telecom sector, including wireless towers,” Goldstein said.
Over the past five years, Goldstein said, FSS operators’ stock is up 107 percent.
