The competition amongst satellite operators for new and renewing business has never been tougher. Where once there were extremely long-term contracts for capacity, even extending to the ‘lifetime of a satellite’. Now contracts are measured in a few years, and sometime even in months.
These contractions have meant prices come down, and profitability margins squeezed. These trends are confirmed in Northern Sky Research’s (NSR) latest report (Satellite Pricing 6th Edition) which finds capacity pricing declines decelerating in 2020, with the global mean price index declining by ~13 per cent in Q1 2020, in contrast to ~17 per cent in Q1 2019.
NSR forecasts this decline to slow further this year. It says there are signs of stabilization across some regions, bands, and applications to come by 2021 in advance of large waves of both GEO and Non-GEO capacity entering the market.
“Competition to grab market share has slowed considerably compared to 2017-18, as operators look to touch base with P&L fundamentals by tiering capacity. Maritime is witnessing a boost in demand, while Aero looks to post the highest growth in the segment, bringing much-needed pricing stability, and a return to double-digit growth for network wholesale revenues,” stated Gagan Agrawal, NSR Senior Analyst and report author. “NSR forecasts Consumer Broadband and Backhaul to exhibit declines of ~15-20 per cent due to highly CAPEX efficient capacity coming online in 2021. Mobility and Government-Military segments will provide much more stability.”
NSR says satellite operators are accepting the trend of price declines, offsetting losses via increasing contract volumes and choosing specific regions to grow. “Duration of contracts has consistently decreased, and with it, the bargaining power of operators. Though, increasing ground efficiencies and ARPUs in the service segment has prompted several operators to pursue managed services to arrest wild swings in pricing and revenue.”