Astra vs Eutelsat Ka-band dispute continues

Three weeks from now, just before the Christmas holiday, will see a Russian rocket launching Eutelsat’s Ka-Sat, a wonderful piece of satellite engineering complexity that will provide copious two-way broadband connectivity to Europe, North Africa and the Middle East. At 6.1 tonnes in weight it is one of the heaviest satellites ever launched and will be the backbone of Eutelsat’s bandwidth capacity expansion, especially in terms of internet access for the regions’ ‘unconnected’.

But the satellite represents a major difference of view between Eutelsat and SES Astra. And the difference – politely – boiled over at a EuroConsult conference on Nov 24 in a platform discussion between Michel de Rosen, Eutelsat’s CEO, and Ferdinand Kayser, president of Astra. “Questions remain open on Ka-band,” Kayser said, explaining that its strategy was to add incremental Ka-band capacity to new satellites, as demand grew. “We are in the business of operating satellites that last for 15 years in orbit,” Kayser added. “We must be able to prove to our shareholders that these will be profitable each time we launch. We have been more prudent, or less courageous perhaps, than our competitor Eutelsat.”

Mr de Rosen immediately interjected with an implied ‘No you haven’t!’, saying “That’s interesting, we think it’s you who are the most audacious, or courageous, by investing in a Ka-band constellation. It’s called O3b is it not?”

De Rosen is right. While Astra’s philosophy on its European fleet has been to take a cautious approach to Ka-band capacity for broadband-by-satellite, it is nevertheless backing O3b, a low Earth orbiting satellite constellation designed to serve “the Other 3 billion” of unconnected people living more or less in the tropics in about 150 countries either side of the Equator – and representing 70% of the world’s population.

Indeed, on November 26 investment bankers Morgan Stanley issued a note to investors suggesting an initial valuation of $4bn for the – as yet – unlaunched system – and saying that SES’ modest €150m stake in the project is worth about €3 a share for shareholders. “We expect initial demand for O3b’s Ka-band bandwidth to be very strong, particularly from telcos looking to extend 3G wireless coverage,” says the bank. “The last recorded backlog of $600m is now likely higher given several announced deals. We expect this to ramp up as the first launch in 2012 approaches. Given the provision of fibre is often prohibitively expensive O3b provides a low-cost (50-80% below current wholesale prices), faster and more practical solution for IP trunking.”

It is, perhaps, a case of ‘you pays your money and takes your chance’. Eutelsat is backing its local market for this considerable expansion in available bandwidth, while SES is looking to participate in a significant expansion in its services and fresh coverage to new markets. Time will tell as to who’s vision is sound.

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