Flat Demand, Intense Competition, and Consolidation Trends Directly Impact Operator Profitability and Future
Operating in an industry currently fraught with risks of consolidation in the midst of a global telecom slump, satellite operators are facing a flat, if not declining, demand for their capacities. The intensely competitive nature of the market is affecting profitability. Other issues for operators include problems with launch vehicles, rising insurance rates, stagnant/low prices for satellite capacity, and most importantly, the uncertainty of how the marketplace will look after consolidation.
This Frost & Sullivan study provides an in-depth analysis of more than 20 commercial fixed-service satellite (FSS) operators that collectively hold 80 percent of the total available satellite capacity. It examines the challenges facing the overall satellite operators' market and provides a view of the regional operating conditions. The study compares operators with their peers, analyzes capacities and revenues, assesses each operator's competitive position and explores possible strategies for growth.
Alliances and Mergers to Drive Market
With revenues stagnating, further growth has to come from acquisitions and the reduction of operational expenses. The trend seems strongly toward expansion through partial, not full, stakes in other operators. For instance, Loral Skynet leases and co-owns a satellite with APT Sat, which, in turn, has SingTel Optus as its largest shareholder.
According to the author of the study, "There are very few independent operators and almost everybody is connected to at least one other operator, directly or through semi-formal alliances. The market will soon see formalization of loose alliances and subsidiary holdings that are already in place." As larger operators consolidate, para-regional operators will also try to establish a better footing in their respective regions and improve their competitive position and efficiencies.
Government/Military Usage and Integration with Terrestrial Networks Offer Immediate Opportunities
Fiber has taken over telecom traffic, DTH operators are consolidating in the largest markets, weak economies are slowing down the launch of new TV channels, and Internet traffic growth is stabilizing. The strongest demand for satellite capacity is now likely to come from government and military users. The inherent advantages of satellite systems such as cost-effective, wide-area coverage, secure and hard-to-target networks, and point-to-multipoint applications without additional costs for new users, make it ideal for this segment.
Many FSS operators are also combating competition from fiber by positioning themselves as integrated-solution providers, partnering with fiber companies to offer hybrid solutions, using the strengths of the two technologies to increase market penetration.
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