Highlights and Observations from SATELLITE 2014
Going into the SATELLITE 2014 conference we were eager to hear the perspectives of key industry players on the outlook for the Government satellite market. However, as we roamed the floor and listened to various industry panels it was clear many attendees were equally focused on other key trends impacting the industry.
The broad sentiment among attendees and presenters is that the U.S. Government market is at or near the bottom, but there is cautious optimism for the future. Congress continued to show its support for the commercial satellite industry through the 2014 National Defense Authorization Act, which directed the DoD to create a strategy to “enable the multi-year procurement of commercial satellite services.” With a budget in place, there is finally some clarity that is providing some semblance of stability in the near-term, and with commercial SATCOM bandwidth currently supplying approximately 80% of military satellite communications, the Pentagon is likely to continue to rely heavily on the commercial sector for support.
Despite the continued demand for SATCOM by the DoD, many conceded that the growth rates experienced from the U.S. defense market over the last decade will not be seen for several years, driving many to look to international markets for opportunities. The question of international growth was posed directly to a panel of the CEOs for the “Big 4” satellite players (Eutelsat, Intelsat, SES, and Telesat). Michel de Rosen, CEO of Eutelsat, pointed out that 80% of future growth in satellites is anticipated to come from the southern hemisphere, which was a key driver for their acquisition of Satélites Mexicanos S.A. de C.V., as their company previously did not have a meaningful presence in Latin America. The panel also highlighted Asia Pacific and the Middle East as other key regions they are focused on.
All-in-all, the tone of the conference was positive with many excited about the innovation occurring in the launch space and new architectures for satellite designs to help drive down costs. Notably, SpaceX continues to promote its belief that it can reduce the price of satellite launches to increase demand for satellite services and additional launches, and ViaSat believes it will be able to drive down the price per bit of satellite capacity by offering a fiber-to-the-node network (“FTTN”) equivalent broadband service after the launch of Viasat-2.
Another key topic that is being closely monitored and continues to be a major concern for satellite service providers is the push from the mobile community to obtain C-band spectrum at the World Radiocommunication Conference (“WRC”) in November 2015. The conference is held every three years and spectrum is one of the primary topics to be discussed. The satellite industry is ramping up efforts to prevent the mobile community from obtaining authority to use wireless broadband over extended C-band. While it will likely take several years for this to play out, the satellite industry is nervous about the precedent of sharing or giving up spectrum, as other frequencies could later be at risk. Mr. de Rosen said that “[the industry] must think ahead. If we are to be passive about C-band or L-band the threat would be on Ku and Ka.”
From an M&A perspective, many industry participants anticipate consolidation activity at all levels in 2014, including the CEOs of the “Big 4” which all stated that they expect to be active in the M&A market, with Telesat’s owner, Loral Space & Communications Inc., having already publically announced that it is pursuing strategic alternatives for Telesat.
In the end, the conference did not disappoint in giving us many things to watch for until we reconvene for SATELLITE 2015.