According to Euroconsult’s newly-published report, FSS Operators: Benchmarks & Performance Review, FSS industry revenues declined by 7 per cent in 2015 and have continued to deteriorate through the first half of 2016. Headwinds in the FSS industry have raised significant cause for concern in the last year or so, as highlighted by the lower stock valuations of leading FSS operators and the bearish sentiment in the sector among the investment community.
“At the half-year mark of 2016, FSS revenues were falling by 4 per cent year-over-year with two-thirds of operators reporting lower revenues and global FSS operators particularly impacted,” said Dimitri Buchs, Senior Consultant at Euroconsult and editor of the report. “Intelsat, SES and Eutelsat are all forecasting a decrease in revenues in FY2016 in their financial guidance.” The impact on pricing has accelerated in recent months, especially in data-driven markets, where pressure from HTS systems and terrestrial networks is highest. This is set to lead to lower operating margins, forcing the industry to adapt to a new environment where satellite operators have no choice but to lower their pricing and increase their commercial flexibility.
A more positive outlook for the FSS industry is foreseen after 2017 as players are expected to have progressively adapted their strategy to a changing landscape. The overall market direction is towards greater satellite cost-effectiveness through larger payloads, lower launch costs and other cost-optimisation options offered by recent innovations. In the coming years the increasing competitiveness of satellite infrastructure, with HTS benefiting from a much lower break-even point than regular payloads, should allow operators to maintain decent returns on investment despite lower pricing. The number of FSS operators providing HTS capacity is expected to grow to 25 by the end of 2019; this implies that half of FSS operators will still not have any available HTS capacity in-orbit in 2019.