Advanced Television

SES explains O3b plan

May 3, 2016

Karim Michel Sabbagh, CEO at satellite operator SES, speaking to analysts following the company’s Q1 results, explained how the company was embarking on new and “unprecedented opportunities” by taking a 50.5 per cent controlling share in O3b (up from 49.1 per cent). The extra investment takes SES’ overall cash commitment into O3b to $323 million (€257m).  O3b currently has debts and borrowings of $1.2 billion.

O3b is the Medium Earth Orbiting (MEO) constellation of satellites designed to serve the ‘Other 3 billion’ unconnected and underserved broadband consumers.

SES is paying $20 million to improve its stake in O3b, and while O3b – which has other shareholders in the form of Google, Liberty, Allen & Co and HSBC – has some key options including an evaluation as to whether to mount its own IPO, it seems likely that one way or another SES will consolidate O3b by October this year.  The likely cost of absorbing O3b is (“not exceeding”) $710 million.

Sabbagh told analysts that the move into O3b was a “game changing global solution” for SES. “Unlike all other [speciality satellite] systems, O3b delivers up to 1.6 gigabit per second of throughput per beam, with no latency of less than 150 milliseconds. Equally important, this is the only proven scalable constellation serving data-centric market verticals.”

“O3b, along with SES, are best positioned to seize this growth potential, particularly in light of its global spread. And when all is said and done, O3b will be in unrivalled positioning in more than 20 per cent of this market, where low latency is absolutely critical. As we execute on our strategy in comparing SES and O3b, we are putting in place a growth engine that will deliver unprecedented momentum over the course of 2016 to 2021. Starting with the addition of SES capabilities, which are aligned to our four market verticals, namely, SES-9, SES-10, SES-12, SES-14, SES-15, and SES-16, we envisage steady-state incremental yearly revenues of €250 million to €300 million by 2021. Along the same time horizon, O3b will serve the three data-centric market verticals we are targeting, and could realize, on a steady-state, €400 million to €450 million annualised revenues by 2021. Now, to put these growth engines in perspective, they represent an increment up to €750 million annualised revenues, equivalent to over 35 per cent increase to fiscal year 2015 revenue base.”

O3b currently has 12 satellites in MEO orbit, and this will expand to 20 satellites at a rate of $80 million per satellite, over the next 5 years. Four of these new satellites will be launched in 2018, and another four towards the end of 2019.

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