As part of Euroconsult’s important Satellite Business Week, investment bank Jefferies hosted their own one-day ‘Satellite Summit’ where 7 satellite operators or capacity re-sellers supplied one-hour Q&A sessions for market analysts.
Giles Thorne of Jefferies summarised the day by saying that despite there being “healthy scepticism towards the sector” today’s debate on the impact of the growing number of High Throughput Satellites (HTS) was much more balanced than a year ago.
“The event gives an immersive snapshot of the health and investor attitude toward the sector. In seven hours of meetings, there is inevitably a huge amount of ground covered,” said Thorne.
Indeed, Thorne stresses that a ‘hot topic’ for the past few years was the risk of capacity over-supply. “This year the debate was focused on the real challenge, namely execution – do you know who your HTS customer is; what the application is; how much they’ll buy and how much they’ll pay for it? Progress, in our view – though there still remain evident challenges! We note Eutelsat’s comment that its fixed data business “has yet to lose a single customer to O3b” is consistent with our view that mass cannibalisation of widebeam by HTS is unlikely.”
As to the industry’s all-important Video divisions, Jefferies says: “We note, as ever, a robust response: despite the [fact that the] financial health of the European broadcasters is deteriorating, the low cost / high technical reach of satellite remains compelling; Eutelsat’s [recent] expansion of capacity with Cyfrowy Polsat at Hotbird is important as it proves much of what Eutelsat has been saying for some time – European video is stable and there will be growth in volumes – the contract has higher revenue on a “well orientated price” and an increase in volumes; Eutelsat’s shift in pricing from MHz to Mbps will allow for a greater value capture – “we are currently capturing DVB-S2 modulation efficiencies at Eutelsat”; on the long tail of channels with lower viewership (that otherwise could go to OTT delivery) Eutelsat believes that pay-TV operators aren’t incentivised to reduce the appeal of their bundles given the risk from Netflix – SES argued that where these channels have been trimmed, the pay-TV operator has reinvested the capacity in HD.”
There was also favourable comment on the September 11th announcement from SES that they would be investing in 7 LEO ‘super-satellites’ for its O3b division. Jefferies said: “Given SES only announced its major new investment programme 24 hours earlier, it wasn’t a surprise to see the topic repeatedly referenced. A year ago, such a scale of investment (albeit, the absolute size of the investment has actually brought SES’s capex down) in data applications would have yielded outright cynicism – the track record of O3b gives some comfort that SES may yet be on to something. Indeed, the message from SES that mPower will expand the addressable market fivefold carries greater credibility than it did a year ago. SES were keen to highlight the rational and disciplined approach to investment.”