Sleepless Satellite CEOs Count on Drones to Tackle Record Capacity Growth By Chiara Remondini Bloomberg News
Sep 8, 2011 http://www.bloomberg.com/news/print/2011-09-08/sleepless-satellite-ceos-count-on-drones-to-tackle-record-capacity-growth.html Satellite operators SES SA (SESG) and Intelsat SA, dubbed “market darlings” for some of the highest profit margins in the technology industry, are pushing services such as military drones in preparation for the biggest increase in satellite capacity in at least 10 years. More than 200 commercial communication satellites will be launched by 2020 as a surging number of television stations boosts demand for broadcasting services, Euroconsult estimates. The increase in capacity will accelerate to 7 percent annually in the next three years, from 3 percent in the five years through 2010, said Chief Executive Officer Pacome Revillon. SES, Eutelsat Communications (ETL) SA, Intelsat and Telesat Holdings Inc., the biggest fixed-service satellite companies, say the flurry of launches is necessary to meet demand and address capacity bottlenecks. CEOs gathering at the World Satellite Business Week conference in Paris next week will debate how they can draw on emerging markets and new services to safeguard profit margins and boost their stock prices. “There is a statistical risk of 4 percent to 5 percent failure for a launch,” SES CEO Romain Bausch said in an interview. “That’s what literally keeps me up at night, as an extra satellite makes such a difference in terms of revenue.” SES has embarked on the biggest expansion in the industry. The Luxembourg-based company plans to increase capacity by 23 percent through 2014 compared with the end of 2010. Eutelsat is adding 20 percent in the same period, while Intelsat will put on 4 percent incremental space through 2013. Including Telesat, which declined to comment on potential capacity increase, the operators plan to launch about 27 satellites. Margins About 290 commercial satellites are in orbit, 36,000 kilometers (22,400 miles) above the equator and 153 of them are used for TV broadcasting, according to estimates by Will Smith, a London-based analyst at Jefferies International Ltd. SES’s profit margin, based on earnings before interest, taxes, depreciation and amortization, reached 74.7 percent in 2010, while Eutelsat had a margin of 79.3 percent in the 12 months through June. That compares with 32 percent for Vodafone Group Plc, the world’s biggest mobile-phone operator, and 29.8 percent for Apple Inc., the world’s largest technology company, according to Bloomberg data. The high profitability and stable business made satellite operators safe investment targets as the sovereign debt storm is battering Europe and global markets. Few Sells Eutelsat has risen 14 percent this year and SES has gained 5.1 percent, compared with a 15 percent drop in the Bloomberg European Communications Index, which includes 50 companies ranging from phone operators such as Telefonica SA, TV company British Sky Broadcasting Group Plc and network makers including Ericsson AB. German pay-TV operator Sky Deutschland AG was the best performer with a 30 percent increase. Today, Eutelsat rose 0.7 percent to 31.07 euros as of 11:23 a.m. in Paris trading. SES gained 0.5 percent to 18.72 euros. Of 24 analysts covering Eutelsat, two had a “sell” rating in the past year. One out of 23 advised selling SES shares. To keep the support of investors, operators need new services and continuing strong demand to manage the increase in capacity, says Richard Speetjens, a fund manager at Robeco Groep NV, which oversees about 150 billion euros ($211 billion). “Supply may temporarily outstrip demand and this may cause some issues,” said Speetjens. “But they’ll continue to be market darlings.” One significant growth market for satellite operators are unmanned drones, Intelsat CEO David McGlade said. “There will very strong growth as there will be less and less pilots around the world.” Robot Submarines U.S. defense officials and contractors are pushing for drones that are more autonomous than today’s models, including airplanes that fly their own missions, driverless trucks that follow troops into battle and battery-powered robot submarines. The global unmanned aerial vehicle market will probably almost double over the next decade to $11.3 billion, according to Teal Group Corp., a Fairfax, Virginia-based consulting firm. The U.S. government is Intelsat’s biggest client, and the Department of Defense represents a large portion of that business, McGlade said. Unlike military drones commonly used in Afghanistan, such as the Predator made by San Diego-based General Atomics Aeronautical Systems Inc., technology may enable future versions to survey targets, assess threats and even attack on their own. ‘Bandwidth Hungry’ “Longer term, unmanned aerial vehicles will become fully ingrained into the modern military,” Jefferies’s Smith said. “These applications are bandwidth hungry as they involved the transfer of large data files, video, and imagery.” The push into new markets is already having an impact on prices, according to Futron Corp. analyst Ian Christensen. Capacity pricing in Africa is projected to fall 5 percent to 20 percent in the coming years, as prices in Europe and North America remain stable, with a “slight downward pressure” in the U.S., he said. Intelsat’s McGlade says the challenge is to fine-tune the launch schedule to avoid an oversupply that would hurt profit. “Too little capacity is no good and too much is no good either,” McGlade said. “There are times when you’d like to have extra capacity ,but if we were flooded with it there would be spiraling declines in returns.” -- ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Mail: antunes at uh dot edu University of Houston Houston, TX 77204-3011 _______________________________________________ Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
