Solid growth for satellite operators, Euroconsult maintains positive outlookTuesday, July 27th, 2010
Changes ahead in the competitive environment
PARIS — Euroconsult, the leading international research and analyst firm specialized in the satellite and digital broadcasting sectors, announced today that, despite a limited market slowdown, the fixed satellite market reached a new high in revenues last year. According to Euroconsult’s soon-to-be-released report “Satellite Communications & Broadcasting Markets Survey, Forecasts to 2019,” the fixed satellite sector grew both in terms of transponder demand (+5.3%) and revenue reaching $10.3 billion revenue in 2009. The company maintains a positive outlook for the future of the industry. Television broadcasting and emerging markets continue to be the primary growth drivers, with satellite broadband service (“BBS”) systems contributing to growth as well.
“Operators’ revenue grew in 2009 — albeit at a slower pace than the previous year, — due to sustained capacity demand in emerging markets” said Pacôme Revillon, CEO at Euroconsult. “This combined with an average operating margin for the industry that increased to 35% last year and a global fill rate of 77% underscores the good health of the satellite sector, and we forecast 6% revenue growth in 2010.” Despite these positive results, growth last year was still somewhat constrained (especially compared to record revenue growth in 2008) due to modest capacity additions, high fill rates and the impact of the economic crisis.
Cycle Of High Investment For Both Global And Regional Operators Last year was a record year for satellite procurements by FSS operators, with over 30 new satellite orders. More than 30 operators have at least one satellite under procurement for either replacement or expansion. The largest procurement campaigns are currently coming from industry leaders Intelsat, SES and Eutelsat with a total of 22 satellites ordered. However regional operators are trying to challenge this dominance. Last year capacity leased by the four leading operators totalled around 3,725 transponders, for a market share of 65% and a net increase of 150 transponders. By comparison, regional operators added approximately 300 transponders for a total of over 2,000 transponders leased – increasing their market share from 33% to 35% in two years. Fast-growing regional operators such as Arabsat, Spacecom, RSCC, Star One and Singtel Optus benefited from the strong dynamics in their respective emerging satellite markets.
Many established and aspiring operators have been seeking financing for their new satellite projects, either to leverage the benefits of new satellite designs or to focus on certain vertical markets. With financing remaining a challenge for many but the most established operators, satellite companies will likely continue to rely on export credit agencies such as Coface in France and the Export-Import Bank in the United States, as they have done heavily over the last two years.
Digital TV Broadcasting Remains The Cornerstone Of Industry Growth
The broadcast of TV channels continued to drive growth for satellite operators last year, representing roughly 42% of net additions in capacity usage and contributing to an estimated 50% or more of revenue increases. Close to 27,000 channels were broadcast by satellite in 2009 with a net increase of approximately 3,000 channels last year. When excluding channels broadcast on proprietary systems of the TV companies DirecTV and Dish Network in the U.S., the fastest growing markets last year were Latin America, Central Europe, Russia, Central and Southern Asia (mostly India), with growth rates ranging from 9% to 17%.
The number of high definition TV channels worldwide more than doubled in 2009 to 1,913 HD channels (excluding local networks in the US). While 70% of HD channels broadcast are currently concentrated in the North American market, strong increases were reported in almost all markets.
Overall 47 of the 113 satellite pay-TV platforms offered HD channels in 2009, compared to 36 in 2008. The nascent market for 3D broadcasting could see up to 50 channels introduced in 2010 worldwide, both for trials and commercial operations. 3D is however not expected to have a major impact on FSS operators before 2014 and 2015, when the equipment and content should be sufficiently developed to allow for large commercial initiatives.
Broadband Requirements Supporting Satellite Usage
Whether for traffic trunking, enterprise networks, military communications or consumer Internet access, the move towards broadband communications is also supporting satellite usage. Examples currently range from the transmission of data by unmanned aerial vehicles (UAVs) for military users to the need to carry data transmissions for both GSM and new 3G networks in emerging countries.
This trend currently has three consequences for the sector. First, it supports overall growth in capacity usage for telecom applications, with a 6% compound annual growth rate (CAGR) between 2005 and 2009 compared to market stagnation in the early 2000s. Second, it encourages the optimization of transmission techniques through current satellites, resulting in the growing attractiveness of satellite solutions. Finally, it creates a positive environment for investments in new generation broadband service (“BBS”) satellites operating in Kaband. While the bulk of investments are focused on geostationary satellites offering broadband communications in a given regional market, at least one system backed by the company O3b aims to provide capacity for traffic carriage through a dedicated constellation.
Prospects To 2019
Euroconsult expects the global market value of capacity used for the traditional FSS market to reach around $14.8 billion in 2019, or $18.8 billion when including the wholesale market value of capacity used through emerging BBS systems dedicated to broadband traffic. This is an overall upward revision of our previous forecasts, resulting from a review of both capacity usage and prices.
Capacity usage on traditional satellites should continue to grow by at least 4% per year over the next ten years, with much faster growth expected in emerging markets compared to that of more mature markets. The main growth driver should be digital TV broadcasting, well ahead of telecom applications. BBS systems should represent a growth driver for the sector, with close to twelve million individual broadband access customers and over three million corporate sites expected to use those systems by 2019.
Industry consolidation is expected to continue but will be offset by the emergence of new regional public and private satellite systems. Partnerships between operators should also multiply as they try to access scarce orbital resources or gain a foothold in specific local markets. The competitive landscape could also shift significantly as operators may differ widely in their level of investments in BBS capacity in the medium term.
Now in its 17th edition, Satellite Communications & Broadcasting Markets Survey, Forecasts to 2019 is the definitive business planning tool supporting investment decisions in the satellite industry. Released annually, it provides the most complete and accurate picture of market conditions and extensive, insightful analysis of market trends. The report includes analysis of all fixed satellite communications applications, an in-depth strategic review of satellite operators’ business models and financial performance; and a 12-region breakdown of the world including transponder demand trends and ten year forecasts by application and by region. The report also looks at transponder pricing trends, supply and demand match by region and frequency band, and operators’ market share by region and by application.
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