Satellite operators are becoming more aggressively competitive and are seeking to diversify away from broadcast to invest in high-throughput satellites and low and medium-Earth orbit constellations as capacity prices tumble and debts continue to mount, according to a new report by Northern Sky Research (NSR).
According to NSR’s Satellite Operator Financial Analysis 7th edition, top line operator revenues declined by just under 3% in US dollar terms last year. Operators saw revenues per transponder fall, driven down by a declining market for data in particular, while operators ate through their cash reserves to pay for acquisitions or wind down debts.
The declining prices for traditional capacity sales are leading operators to adopt higher-risk strategies by investing in HTS, LEO and MEO projects, according to NSR. SES, for example, took full control of O3b Networks and RR Media, moves that contributed to a four-point decline in its EBITDA margin, according to the research group.
Other operators looking to diversify include Intelsat, which is planning to merge with OneWeb, Telesat, looking to invest in LEO and HTS projects, and APT Satellite, which is planning to create a GEO-HTS mobility constellation through a Chinese joint venture.
According to NSR, Eutelsat stands alone, maintaining its focus on video hotspots and satellite broadband.
”2016 also saw operators becoming more competitive in their respective international data/mobility markets, with heavy discounts on bulk contracts for customer acquisition. This was well complemented with an emphasis on curbing CAPEX and OPEX to offset pressure on top line revenues, and, more importantly, checking their debt profiles with majority of them undertaking partial or full debt refinancing,” said Gagan Agrawal, analyst at NSR and a report co-author.
“This cost savings trend is expected to continue, giving leeway to operators to manage their cash flow better and hedge against lower EBITDA margins arising from service oriented businesses un-commoditising capacity, which itself became necessary due to downward pricing pressures in data and mobility markets. It’s truly a paradigm shift, as satellite operators look for growth in other parts of media and connectivity value chains.”
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