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The past year or two have not been the best of times for satellite operators. In some markets, there has been over-capacity which has led – in some cases – to heavy discounting. In other sectors, it has been government (i.e. military) spending which has been trimmed. One firm of analysts, Northern Sky Research (NSR) which specialises in the satellite market, described 2016 as “lacklustre” and that the industry was “fraught with falling prices and indebted behemoths” [with] satellite operators playing a more aggressive game to find growth. “A shift in emphasis, away from the broadcast-dominated days, into a brave new world of HTS, LEOs and MEOs, with radical and sometimes risky changes that are expected to move operator financials forward,” stated NSR alongside its latest Satellite Operator Financial Analysis report.
“In 2016, top-line operator revenues declined in USD terms by just under 3%, as the Euro-Dollar exchange rate stabilized and emerging market currencies, such as the Brazilian Real, rebounded. (The latter event lead to Star One posting a sizzling 46% USD-denominated revenue growth rate.) A continued downward momentum of revenues per transponder continued as data markets suffered and several operators saw their cash piles wind down due to acquisition or paying down debt.”
NSR says that these overall pressures are seeing operators “making big, potentially risky plays. These moves have been prominent last year and so far in 2017. This shows most clearly in SES’s financials—the company’s EBITDA margin dropped from 74.2% to 70.2% (though 73.7% using same scope)”, notes Blaine Curcio, Principal Analyst at NSR and report co-author. “This was a result of the company making a big bet by acquiring full ownership of O3b, and a less publicized, but perhaps as important move in acquiring RR Media. For an industry that has long-prized its sky-high EBITDA margins, this was quite a bold statement,” adds Curcio.
“Other noteworthy examples of operators upping the ante include Intelsat and OneWeb’s proposed merger, Telesat’s potential LEO-HTS play, and the proposed GEO-HTS mobility constellation spearheaded by Hong Kong-based APT Satellite through a Mainland Chinese J-V. Conspicuously absent from the table is Eutelsat, with the company sticking to its guns of high-margin video hotspots and broadband.”
Other factors coming into the equation, says NSR, include greater competition between operators with “heavy discounts on bulk contracts for customer acquisition”.
The report analyses the state of the industry, and which companies are the likely winners, and losers!