More Stability Needed in Space Access, Say Executives
Continued uncertainty in the launch market hurts the satellite industry’s ability to develop strategic business plans for investors, said Michael McDonnell, Intelsat’s chief financial officer. At the Satellite 2010 conference in National Harbor, Md., he joined other CFOs on a panel Monday in saying he hopes Sea Launch can emerge soon from bankruptcy to help keep the launch market competitive.
Because government needs take priority for many launchers, launch opportunities are often subject to long delays, as Intelsat’s IS-14 was last year, said McDonnell. Uncertainty about when a satellite can enter service adds to the trickiness of business-plan timetables, he said. SES World Skies CFO Robert Kisilywicz said, “Access to space is the most vital operational issue we face.” Without more competition in launching, the industry is more vulnerable and so are the companies’ growth plans, he said. SES and Intelsat are going through large launch campaigns to increase capacity and replace aging satellites, they said. Having a launcher going in and out of the market is also unhealthy, said Inmarsat CFO Rick Medlock. Sea Launch received funding from Space Launch Services to stay in operation while restructuring. But Sea Launch has been unable keep a full schedule of launches and when it will come out of bankruptcy remains uncertain. Demand in emerging markets remains strong, said Kisilywicz, particularly in the Middle East, India and South America. SES still needs to add capacity as some regional fill rates near 100 percent, he said. Latin America is a region that Kisilywicz and McDonnell cited as running low on capacity. India, another strong region, retains a healthy appetite for direct-to-home TV, and the recently acquired Protostar 2 satellite will add capacity there, said Kisilywicz. While SES will soon begin testing of 3D TV technologies, McDonnell said, Intelsat will be taking a wait-and-see approach because the demand is untested.
Mobile satellite services/ancillary terrestrial component options remain uncertain, Medlock said: Inmarsat and MSS/ATC partner SkyTerra are “closer” to working with an operational network but the timing remains unclear.
Satellite companies will increase restraint and exercise financial caution in the coming year as they continue to recoup global recession related losses, Xavier Bindle, an analyst at J.P Morgan, said in a session about Wall Street’s view of the industry. Fixed-satellite services have been the brightest light among telecom and satellite businesses in financial markets the past 18 months, said Billy Goldstein, managing director of Macquarie Capital Advisors’ Investment Banking Division. The performance during a time of such volatility shows how “defensible” the industry and its business model are, he said.
Credit has become available again faster than many were predicting, and satellite joined data centers and wireless towers as one of the safest telecom investments during the financial downturn, said Randy Russel, director of media and telecom investment banking at Deutsche Bank Securities. EchoStar’s place in the satellite landscape is complicated and has been difficult to understand, he said. As a set-top box manufacturer without many competitors, it’s “hard to know where it should trade.” As a satellite operator, the company has underused its craft but can rely on long-term contracts with the affiliated Dish Network for revenue, he said.
SES’s $75 million investment in O3b offers the company a chance to expand its presence geographically and in products, said James Murray, managing director in Morgan Stanley’s investment banking division. The company’s stake allows for it to leap from into a business without having to launch new satellites or develop infrastructure while adding revenue growth from emerging markets, he said.