Asian firms Advance While Latin America Faces Unknowns

Intelsat’s buyout by private equity firms is imminent (CD Dec 29 p2) and PanAmSat, which was purchased in a similar way earlier this year, is poised to go public (CD Dec 26 p6). Meanwhile, in the regional arena, “there’s lot of talk of consolidation and talk of increasing competition,” said attorney Peter Nesgos: “These regional operators will need to worry about how to pull together the finances to remain competitive.”

In some instances mergers may seem ideal in theory, but not in practice, said satellite analyst Tim Logue. He and others have predicted since the late 1990s that some regional Asian operators would consolidate, but thus far they've been proven wrong. There have been changes in ownership but the number of operators has remained pretty consistent for what Logue says are predominantly political reasons.

Govt. investment in companies like AsiaSat or Measat prevents them from being sold completely to foreign interests or being absorbed by a global operator, but that home-team control is good for local marketplace and user relationships, said Futron Corp. Technical Dir. Andrea Maleter. “Companies are resistant to a large extent because they're national flag carriers and it’s hard when you're the only satellite company for ‘Country X’ -- the national government’s not going to look very kindly to merging with another company from another country,” Logue said. Nesgos agreed: “Regional players may know their market better and many have the support of a country in which they do business.”

Most successful firms in Japan, Thailand and Korea have managed to survive by focusing on domestic and sub- regional markets, analysts concurred. But a couple of pan-regional operators -- like Hong Kong-based AsiaSat and APT Satellite -- successfully serve a broader region. Additionally, video and VSAT services are increasingly becoming the backbone for many of these companies. Generally speaking, smaller companies may be able to implement business plans more quickly and effectively, Logue added: “These regional systems are more robust than we expected. They seem to be surviving. Most are not bankrolling anything big but they're carrying on.”

The question that remains is what new demand will crop up for regional satellite operators in the near term. If new markets don’t develop and demand doesn’t increase, then the overcapacity that exists in many areas will be the most significant news story in the coming years, analysts said. “If you have overcapacity, there’s an inevitable pressure on price, and price obviously has a direct impact on profit,” Logue said. He said the future may also depend on whether more interest is generated by satellite-based broadband Internet, TV or radio, all of whom will soon be looking for satellite capacity to be able to compete effectively in local markets.

Officials said Asian companies to watch in 2005 include: Malaysia’s Binariang, which recently received a $138 million loan from the U.S. Export-Import Bank (CD Nov 30 p10); JSAT, which plans to launch its Lockheed Martin- built JCSat 9 in the 4th quarter of this year; and Shin Satellite, which is slated to send up its Space Systems/Loral-built iPStar satellite this year. Arianespace said JCSAT 9 and iPStar launch schedules depend on delivery of the spacecraft from their manufacturers and is contingent on the success of the Ariane 5 ECA launch on Feb. 11.

In Latin America, however, “the jury’s still out,” Logue said. A great deal of potential opportunities exist for regional operators but uncertainties brought about by a troubled economy are suppressing that promise -- at least in the short term. Analysts are monitoring the direct-to-home (DTH) market in Latin America, which they believe may become more robust in 2005. In the fixed service arena, StarOne and Satelites Mexicanos, as well as global players like SES and PanAmSat, are the firms that continue to make headlines. StarOne, Brazil’s first consumer 2-way satellite broadband service, has committed to lease capacity on SES’ soon-to-be-launched AMC 12. SatMex had hoped to launch its 60-transponder Satmex 6 in 2005, but the company missed a $188-million govt. debt repayment deadline in Dec. calling into question the company’s ability to complete the satellite under its original timeframe. Satmex didn’t provide an update by press time. Meanwhile, Hispasat’s successful use of capacity on its Amazonas satellite, which was launched last Aug., bodes well for the company in the coming year, Maleter said.

In Europe and the Middle East, Eutelsat and SES are the 500-pound gorillas but Norwegian operators like Nordic Satellite AB and Telenor, as well as Egyptian Nilesat have made great strides, particularly in DTH, analysts said. In the mobile arena, Thuraya has emerged as a regional satellite success story, Maleter said, indicating the use of satellites as a cellular trunking option is a trend that also deserves attention in 2005.