2007 - The View From Europe : SatMagazine

2007 - The View From Europe
Year In Review
by Chris Forrester

A year ago, we headlined our European end-of-the-year review as being ‘Europe’s action packed year’. Well, guess what? The Europeans have done it again! Europe has enjoyed a blisteringly good year, with significant increases in revenues, margins and transponder rental prices. Moreover, we have also seen peace ‘break out’ between SES and Eutelsat in the shape of co-operation for a planned pan-European DVB-H broadcasting-to-mobile project.

“Our joint venture takes care of the satellite side of things,” said Volker Steiner, Marketing Director at Eutelsat Deutschland. “On the terrestrial side, we’re still looking for partners, including mobile communications companies, broadcasters and corresponding industry consortiums.”

SES Astra and Eutelsat agreed, in October 2006, to develop this promising new market through a joint undertaking in which both sides would hold a 50 percent stake. Using a hybrid satellite and terrestrial based network TV channels, multimedia content will be relayed directly via satellite, or indirectly via terrestrial repeaters, to mobile devices such as laptops, PDAs, mobile phones and car stereos. Steiner is anticipating strong demand for the service, which will be deployed via satellite frequencies using the S-band. “Mobile communication is one of the industry’s key developments and offers expanded opportunities for the satellite industry. All over Europe the demand for transmission possibilities for TV content, multimedia services and data to mobile devices is growing.”

SES romain Bausch Eutelsats Giuliano Berretta

SES' Romain Bausch & Eutelsat's Giuliano Berretta signing the JV Arabsat's footprint According to Steiner, a single TV channel designed for mobile reception requires a data rate of around 256 to 384 Kbit/s. Every 5 MHz of bandwidth enables 8 to 10 channels. Additionally, a further 20 to 30 terrestrial channels will be made available with the introduction of the hybrid solution. “S-band is new territory for both companies and, in comparison with our core business fields, an absolute niche market. After detailed analysis we arrived at the conclusion that to unite forces for the development of a solution for this new communications market in Europe was the most sensible option. We can work with a single technical standard, establish a uniform infrastructure and jointly introduce the solution.”

Steiner stressed that the planned platform was not intended as competition for DVB-H. “To put it simply, our initiative is an optimised version of DVB-H for satellite. The new standard DVB-SH (satellite to handheld), which the DVB Committee plans to approve in March, enables a combination of both networks and is compatible with mobile phones. The deployment of S-band supplements the available transmission capacity for potential service providers.” As the first satellite, W2A will offer S-band capacity for the hybrid network.

The Eutelsat satellite, which European manufacturer Alcatel Alenia Space has been commissioned to construct, will be launched at the start of 2009 and positioned at 10° East. The S-band capacity is connected with six regional beams, which will completely cover Germany, France, Italy, Spain, Poland, Great Britain and Ireland,” explained Steiner. He added that the service would concentrate on two to three markets during the initial stages. He underlined that the satellite operators will not directly target end consumers with their solution. “We are addressing regional service providers such as mobile broadcasters and pay-TV platforms, which will offer services in their individual markets. These providers can order the required capacity from us and the operators of the terrestrial networks.”

In every other respect, of course, the rivalry between SES and Eutelsat is as great as ever, especially over developing markets… more on that in a moment. However, SES managed one major coup over France when, on January 19th, pay-TV operator Canal Plus signed a new long term contract for its existing Astra capacity (15 transponders) and announced that Canal+ would take a further 5 transponders, all of which should be in use by the end of 2008. This was excellent news for SES, which meant that viewers in France would no longer be left confused as to which DTH system to support. The absorbed TPS system’s viewers will be “invited” to switch dish system from the second half of 2007, at Canal’s cost. The combined DTH offer is now delivered to more than 7m subs, and with confusion removed, there is hope that DTH can start moving positively forward.

“SES becomes the dominant force in direct to home satellite distribution in France. As well as being a feather in SES’ cap, this also means the group is exceptionally well positioned to benefit from the growth in demand for high definition services, which are likely to be most prevalent in pay-television.” Morgan Stanley report “Arc de Triomphe”, Jan 22

The prize for SES is truly enormous. It means that SES now, more or less, exclusively supplies DTH signals for Germany, the UK and France and has a more than useful foothold in Spain. As an SES insider told us: “This opens the way for expanded HD services from 19.2 degrees, as Canal Plus over time migrates more of its channels into high-definition.” Ferd Kayser, president/CEO of SES Astra, in a statement added: “With this contract, we significantly enhance our position in the French market and further strengthen our relationship with Canal+ as one of our most important European customers.”

But if there’s a winner, there has also to be a loser, although Eutelsat remains a strong client of Canal+ in other markets, such as its relationship supplying DTH programming to Poland. “Canal has made its decision and we see this being a slow migration,” said a Eutelsat spokeswoman. “It isn’t quite as radical as switching off overnight. Our TPS capacity is contracted until 2014. We worked hard with TPS over the years to develop the French satellite market and we’ll continue to work closely with Canal Plus on its other markets where we have strong relationships.”

Atlantic Bird 3 Besides Poland, Eutelsat is carrying C+ signals into its Indian Ocean markets. Eutelsat is also carrying the established French national analogue networks on its Atlantic Bird 3 craft, estimated at supplying some 1.9m homes by DTH and not likely to be switched off for some time. Eutelsat also carries signals for the French DTT system. “Within the framework of our overall video business into France, the loss of TPS is unfortunate but far from catastrophic,” said Eutelsat.

A few days later, as if to stress its undoubted power in the marketplace, Eutelsat revealed its Hot Bird cluster of satellites had topped the 1,000-channel mark. Eutelsat manages to beam well over 1,000 digital video channels into an audience of 121m homes, representing more than 50 percent of all TV homes across Europe. It is two years since the last survey, and the 42-country study shows significant growth right across the region in this period.

“Satellite and cable penetration increased by 13 percent to 170m homes from 150m, while television homes expanded by 6 percent to 333m homes from 314m. Satellite and cable reception has consequently passed the tipping point of 50% of television homes,” read Eutelsat’s release.

Hot Bird’s audience also grew, says Eutelsat. “[Our] audience at end 2006 had progressed from 111m to 121m homes, of which 40 percent (47.5m) are equipped for DTH satellite reception. This growth took place in parallel to a steady increase in channels broadcast, which grew by 273 channels over the same period to over 1050 at end December 2006.” Italy saw the greatest individual expansion (up 280,000 homes) and Poland (up 211,000).”

Abertis Telecom Logo

January also saw Eutelsat’s new 32 percent shareholder, Abertis Telcom, take up their seats on the Eutelsat board. The consequences of that appointment have been far reaching. In October this year, Abertis said it has bought a 28.4 percent stake in satellite operator Hispasat, paying $287.5m (€199m). Abertis used its Abertis Telecom division and acquired the stake from Ensafeca Holdings (a consortium of BBVA and telco Auna).

Hispasat Logo

This means Abertis will now in effect control 37.3 percent of Hispasat because of Abertis’ existing 32 percent stake in Paris-based Eutelsat. Eutelsat itself holds a 27.7 percent stake in Hispasat. The Abertis/Hispasat agreement has to pass examination by Spain’s competition and governmental offices. There’s a long way still to go but a merger, or closer link, between Hispasat and Eutelsat is now a much more likely prospect. Spanish infrastructure and telecoms conglomerate Abertis says it has bought a 28.4 percent stake in satellite operator Hispasat. It paid $287.5m (€199m). Abertis used its Abertis Telecom division and acquired the stake from Ensafeca Holdings (a consortium of BBVA and telco Auna).

Abertis—or Eutelsat itself—has to build its stake in Hispasat in order to facilitate a merge between Eutelsat and Hispasat. With Abertis and Eutelsat working in concert, this should not be too difficult to engineer. Of course, the Spanish are ultra-sensitive about “their” satellite system falling to the French—but it ought not to be beyond the wit of Abertis to structure any eventual merger as a reverse take-over by the smaller Spanish business of Eutelsat and thus win government approval.

This approval is crucial. Earlier this year the Madrid government made its point clearly saying it was not in favour of any sort of dilution of Hispasat to foreign owners, a position it repeated again in November. The government wants to prevent one company controlling the Spanish satellite system. After opening the doors to the new shareholder, the Spanish government has shut it down again, fearing the possibility that Abertis might achieve as much as a 46.62 percent in the Spanish satellite company. Now it seems the government does not want Abertis to go further than the 28.84 percent it has recently taken in Hispasat.

The government can also veto this current operation but local political sources say it will give the go ahead to Abertis’ current plans, but no further. But those responsible for Abertis Telecom are said to still be working on how they might take a higher percentage in Hispasat.

But a Paris HQ for Hispasat/Eutelsat, and flying a Spanish flag above the door, is not an impossible thought. The second key element in the decision-making process is French state bank CDC Infrastructure (a subsidiary of Caisse des Depots et Consignations), which also has a large stake in Eutelsat (25.5 percent) acquired from Eurazeo in December of 2006. CDC needs to support any move by Abertis, which has previously stated it had no “current” intention of mounting a full take-over bid for Eutelsat. That was earlier this year. Today the situation is a little different, and well worth following closely.

Eutelsat has much to be proud of, not the least of which is their canny development of capacity over the Middle East. The two established Mid-East competitors Arabsat and Nilesat have seen the pan-Arab market go absolutely crazy with about 370 free-to-air channels added to the available 100+ pay-TV services. And transponder capacity was very tight, which was where Eutelsat came in to play. For a couple of years, Arabsat had leased a Eutelsat satellite (EuroBird 2) as a replacement for one of its problem satellites at Arabsat’s Mid-East ‘hot spot’ at 26° E, with EuroBird 2 sitting at 25.8° E. The contract came to an end in March this year. The problem is that since March 5, and for much of last year, Eutelsat has been marketing capacity from their co-located Arabsat position as Noorsat 1—and seemingly with some success. Noorsat 1 is a virtual satellite, given that it just sells Eutelsat capacity. Eutelsat considers they have a right to occupy 25.5°—slapped right up against Arabsat’s 25.8° position.

The issue at 26° E is simple,” said our source. “The BSS frequencies are entirely ours, and cannot be contested. At FSS, however, it is somewhat complicated. When we used EuroBird 2, which we called Badr 2 (and Noorsat now brands as Noorsat 1) some of the frequencies are in a disputed area. A year or so from now we’ll have Badr 6 on station and that will give us plenty of BSS frequencies to serve our customers.”

“Demand in the region for FSS capacity has exploded, not just for broadcasting, but for trunking, VSAT and IP-based services. The recent loss of NSS-8 has not helped, and the market has been converging to us, with a huge increase in capacity demand. We see the next year as being interesting, legally, technically and commercially.”—an Arabsat source

Which is not to say that Arabsat is spending all of its time in discussions with its lawyers. It is also looking at Value Added services, “where they make commercial sense”, and this includes partnering and joint-venture investments in play-out, studios and facilities, and other aspects of the broadcasting chain.

Arabsat Ku Coverage Map Mohamed Youssif, ArabSat’s recently appointed VP/Sales & Marketing, speaking exclusively to Inside Satellite TV, says: “We want to come further along the value chain, which is why we have this initiative with Jordan Media City. We have recently opened uplink facilities in Jordan, Cairo, Kuwait, Dubai, Beirut, Tunis, and we are looking at Algeria and Morocco, as well as Europe. We are expanding, and are open to offers for partnerships, and closer relationships with broadcasters, and are prepared to make investments in studios, playout and other facilities. ArabSat is prepared to put its cash into such joint ventures where it makes commercial sense. We are very excited by these prospects, and they will lead, I believe, to ArabSat’s golden years. The new Board of Directors have a fresh view, they have cut it loose from the old methods and it is now free to act and move commercially.”

Youssif’s strategy also embraces HDTV. “We are excited about (HDTV’s) prospects. I’d say the HDTV stars are very definitely in alignment, and we’re looking to proactively take advantage of that. We don’t just want to be a supplier of capacity.

“We feel we are in a good position to be the premier supplier of HD services over the Middle East,” said Youssif. “HDTV needs capacity, and we have capacity today and have ample capacity coming on stream. We have to take this initiative and propel the HD concept to the consumer. We have a number of options and are not sitting back waiting for the market. Many broadcasters are sceptical over HD. They are worried about the extra costs of HD, and we have to overcome this hurdle. Even those who have started thinking constructively about HD, and even making HD programs, as yet have nowhere to showcase their efforts. And showcasing those programmes is also expensive given that the price of capacity is about triple the price of an ordinary SD channel.

“We have to break this cycle,” adds Youssif. “So we have said to broadcasters that we want to help, to take some of this burden and anxiety from them, and help them promote themselves and HDTV, without too much extra cost and bankrupting them into the process. The Middle East is the only region in the world, which is totally dominated by free-to-air. People will not pay for TV the way they do almost everywhere else.”

“New” ArabSat’s market position*

	2005	2007
Satellite TV penetration of MENA population	58.2%	85.7%
Digital homes amongst Sat TV	79.4%	93%
Digital TV amongst population	46.2%	79.7%
ArabSat viewership	129.5m	163.8m
ArabSat digital viewership	90.6m	150.7m
% viewing ArabSat exclusively	-	30%
% of Sat TV homes receiving ArabSat	-	56.9%

*MENA: Middle East, North Africa
Data: IPSOS survey, Dec 06-Mar 07; sample: 10,425 HH

One of the concerns in the market is the proliferation of set-top boxes. “In order for HD to succeed everyone has to chip in: broadcasters, satellite operators, set-top box suppliers, uplinkers, play-out facility houses…everyone has to play its part. We are trying to use ArabSat’s name as the umbrella, which everyone will come under and thus eliminate the need for worry. One of the immediate benefits could be the elimination of multiple set-top boxes, already a concern in some homes. If Orbit, ART and Showtime, the three pay-TV operators, were to go high-def, then this would force viewers to have a set-top box for each of them. This will deter people from making any investment. With an ArabSat ‘umbrella’, we would make it easy for them, easy for consumers and propel their take-up in the market.”

And NileSat is also busy adding capacity with its NileSat 103 satellite, due on station in about two years. And this seems to be the mantra for all operators, with SES and Eutelsat both adding orbiting assets. This also applies to SES subsidiary Sirius which is due to orbit a new Scandinavian satellite in late November, and arch-rival Telenor launching their Nordic alternate this coming February.

In other words, rivalry, competition and hard work are at play—but that’s what satellite broadcasting has always been about.

London-based Chris Forrester is a well-known entertainment and broadcasting journalist. He reports on all aspects of the TV industry with special emphasis on content, the business of film, television and emerging technologies. This includes interactive multi-media and the growing importance of web-streamed and digitized content over all delivery platforms including cable, satellite and digital terrestrial TV as well as cellular and 3G mobile. Chris has been investigating, researching and reporting on the so-called ‘broadband explosion’ for 25 years.

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