Indeed, Intelsat New Dawn is just the latest example of creative thinking by the satellite operator, although in this case, the satellite is about 90 percent funded from African sources (15 percent equity, and 85 percent debt). Intelsat has provided 74.9 percent of the equity funding, while Convergence supplied 25.1 percent. The debt funding has come from a consortium of African banks, including Nedbank and the African Development Bank.
Telenor Satellite Broadcastings links with Intelsat remain as strong as ever. Gillet explained, Telenor and Intelsat share the 1 degree West orbital slot. We each have rights to certain frequencies, but it is also fair to say that we help one another a lot, leasing capacity from each other. At the moment, the position is enjoying great success supplying DTH over Europe. Telenor also has Occasional Use customers, and maritime clients including a common client for us both in the shape of Marlink Vizada.
A few weeks ago, Telenor confirmed its order for Thor 7, their latest beast at 1 degree West and scheduled to be on station towards the end of 2013 as well as expanding Ku-band capacity for their existing DTH clients, this satellite will also permit Telenor to strengthen its maritime service proposition to the North Sea, Baltic Sea and the Mediterranean.
I asked Gillet if this plan posed a threat to Intelsats own communication clients. We already provide services for most of the major players in the maritime sector. From our standpoint, we are already planning on our next-generation satellite with a bunch of wide beam Ku-band frequencies that will also be focusing on the maritime market. These footprints will start being available from 2012-13 and we believe this capacity will help our customers grow their businesses and serve a growing demand. Whats clear is that Inmarsat is taking another route, into Ka-band, and their service will start becoming available in 2013-14. Telenor works closely with Inmarsat, so we will have to wait and see what happens in this area as to the markets verdict. What we know is that we will be able to provide sustainable services for our customers growth, and ahead of the Inmarsat-Telenor offering. However, the market is also big enough for multiple players, without doubt. We see no problem with Thor 7, but we also see an opportunity in Ku, and it is in Ku that we see the demand today, especially with legacy equipment so widely deployed. Gillet accepted that the future maritime market would most likely split between Ka-and Ku-band.
As far as New Dawn was concerned, Gillet said this provided a new route for its African customers and was good for Intelsat to be seen partnering with a local African company. We like to have as many transponders pre-sold on any new satellite, and New Dawn is mostly pre-sold, thanks to the role already played by G-11 (on station at 33 degrees East for more than two years).
He admitted that, by and large, Intelsat was not in the forefront of DTH delivery in the Middle East, so was not entirely reaping the benefits of the shift to HDTV. We are busy distributing programming out from the region to the rest of the world. Yahsat is going to also enter this market, already dominated by Nilesat and Arabsat, and with Eutelsat and Noorsat also active, and Yahsat will add to the overall complexity within the market.
However, Intelsat does have solid DTH contracts over Europe, especially Eastern Europe and Russia. We are busy and growing from 1 degree West, and we are highly opportunistic in some video markets.
For example, with Vivacom over Bulgaria and using IS-12 at 45 degrees East, we have a very nice customer who is building a strong video neighborhood. It is the same at 1 degree West, again with another extremely strong video neighbourhood, thanks to clients such as UPC and various U.S. broadcasters.
Gillet admits that Central and Eastern Europe has grown to become highly competitive DTH regions, where just about every satellite operator is pitching its best prices and service to match. He says two elements influence transponder rental prices the competition aspect as well as the business model of the potential client.
While the telcos are increasingly looking to launch DTH services, the prospect of a western ARPU level of $60 or so is not realistic. They are looking for a more sensible single digit monthly revenue. Vivacoms basic bundle, for example is just 5 euros. It is much the same in Romania, where a highly competitive environment means revenues are also around that 5 euros mark. We cannot expect clients to pay us millions a year per transponder. When they start increasing their ARPU, and when consolidation takes place, then our customers will be in a better position to make meaningful revenues. We have to be patient. We have to take the long-term view. Our approach is different from our competitors.
For example, our 1 degree West slot is a key neighborhood position for Eastern Europe. But if you are one of our competitors wanting to get into this market, then you might well have to negotiate a deal which is [perhaps expensive] to gain access to that market. We dont need to do that. We always look at the realities in the market and price accordingly, taking account of the competitive position.
Of course, Intelsat is far more than a point-to-point (or even multipoint) operator. It has a sophisticated global fibre network that increasingly drills down closer and closer to a markets users. Gillet explained that almost every market has gone through much the same development cycle.
Look at the Latin American market of a few years ago, where, initially, fibre was expensive then becomes cheaper and becomes more attractive for users. This second phase, (that is the demand for local communications) increases. Different types of clients, with different applications, and a growing demand for satellite and fibre. Today the demand in some Latino countries for communications services is huge. What we see in those countries where fibre has just landed is that IP trunking between Europe and Africa is actually decreasing, while VSAT demand is not decreasing at all. We see many of our customers installing hubs in Africa, and this is new, and expensive. What we know for sure is that demand for connectivity with a region is increasing, and will be the driver for us to add new satellites for our customers.
Chris Forrester is a well-known broadcasting journalist and industry consultant. He reports on all aspects of broadcasting with special emphasis on content, the business of television and emerging applications. This includes interactive multi-media and the growing importance of web-streamed and digitised content over all delivery platforms including cable, satellite and digital terrestrial TV as well as cellular and 3G mobile. Indeed, he has been investigating, researching and reporting on the so-called broadband explosion for more than 25 years. He has been a freelance journalist since 1988.