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On September 22nd, the Financial Times published a piece that – in so many words – spelled ‘doom and gloom’ for the satellite industry as a whole, and suggesting that the “golden age” for satellite operators was well and truly over. The article linked the recent explosion at the SpaceX as “heightening a sense of dread across the industry” and that the satellite was in a similar position to that of the infamous ‘dot-com’ bubble of the late 1990s.
The article propelled an immediate slump in the share prices of most of the major industry players. Eutelsat of Paris has fallen from €18.19 to €17.60 since the report. SES of Luxembourg has fallen back from €22.16 to €21.25 over the same period. London-based Inmarsat also suffered, dropping from 707p to 664p, although recovered 8 per cent on September 27th to 688p.
Karim Michel Sabbagh, CEO at SES, issued a strong counter-argument to the what he described as an “oversupply” of [industry over-capacity] stories, and argues: “Maybe it is time to step back and think through some important questions.”
He states bluntly: “Our industry can evolve for the better, not because of oversupply and not because of deep pockets. It can evolve because some of the players will adapt their business to the fascinating new markets that are emerging, transforming and innovating along the way, and they will play the long game far away from the headline-grabbing mega-constellation announcements and oversupply confusions.”
He says that some commercial satellite operators have framed their business in terms of new satellites they build and deploy over regions for too long. “This enables stakeholders to view the business through the simple lens of connectivity, and to focus solely on capacity demand and supply along with the associated price points. This may have worked for some time, but this lens is ill-suited to the multiple applications, technologies, and business models that are shaping the present and future markets. Failing to fathom these dynamic and highly adaptive market developments has led the public discourse in our industry to zoom in on an over-simplistic explanation of oversupply in capacity and increasing price competition.”
Sabbagh admits that some of the overall confusion is self-inflicted, and admits that some senior industry execs defined success as pure-play capacity build-up. “There is simply no place or rationale in the aforementioned logic for grandiose plans about new constellations.”
“Each new development project, and SES has had its fair share of these, must start with a statement of the markets we both want to and can best enable, the differentiated capabilities we can build to do so, and the evolutionary and scalable path we can embark on. Short of these three ingredients a development project will run into a combination of three problems: underestimating overall timelines, underestimating resourcing required, and underestimating the evolution of markets and alternative offerings. The flip side is that, when done right, new developments in our industry can have a transformative effect. But to do that the model has to be adaptive and scalable, both technologically and operationally, focused on market enablement, and patiently managed. There are simply no shortcuts.”
Sabbagh adds that the satellite industry will – and is – evolving: “There will be a growing pull to aggregate capabilities at a global level either through tie-ups, acquisitions or mergers. And there will be an increasing need to focus on specific market segments, building capability based systems around them and throughout the value chain, either through tie-ups with industrial partners or the development of downstream competencies. This position dates back to 2014 when I first addressed the SES investors, and is a very different logic from the one presented in recent months around the consolidation of generic infrastructure plays which will only perpetuate the oversupply discourse.”