Grounded in broad­band, the satel­lite in­dus­try soars

Com­mu­ni­ca­tions and Web traf­fic are fu­el­ing de­mand for launches Satel­lites are “hands down the best op­tion for our cus­tomers”

Bloomberg Businessweek (Asia) - - CONTENTS - Kyunghee Park, with Chris Cooper and Jun­gah Lee

When Elon Musk’s Space Ex­plo­ration Tech­nolo­gies (known as SpaceX) set a rocket down on a barge float­ing in the At­lantic Ocean on May 6, many cheered it as the lat­est sign man is quickly mov­ing to­ward be­ing able to ex­plore brave new worlds. Yet the more im­me­di­ate ben­e­fi­cia­ries of SpaceX’s satel­lite-fer­ry­ing rock­ets will be busi­ness­men check­ing e-mails from Sin­ga­pore Air­lines flights above the South China Sea or teens post­ing pho­tos on Face­book from In­done­sia’s jun­gles.

While the global satel­lite in­dus­try brought in $203 bil­lion in rev­enue in 2014, the lat­est year for which Satel­lite In­dus­try As­so­ci­a­tion data are avail­able, only $5.9 bil­lion of that came from launches. Half of satel­lite rev­enue, $100.9 bil­lion, came from con­sumer ser­vices, such as trans­mit­ting TV pro­gram­ming or cell phone calls, or pro­vid­ing broad­band In­ter­net via satel­lite.

The de­mand for con­stant In­ter­net con­nec­tiv­ity is fu­el­ing a surge in satel­lite launches by rock­e­teers such as SpaceX, Ari­anes­pace, Eu­tel­sat Com­mu­ni­ca­tions, and SES. Liftoffs may in­crease 30 per­cent dur­ing the next five years as air­lines, phone

com­pa­nies, elec­tron­ics mak­ers, and car­mak­ers seek band­width. Satel­lite de­mand in Asia is fur­ther boosted by ef­forts to bring ser­vice for the first time to peo­ple in places such as In­dia and In­done­sia. The two na­tions are home to 20 per­cent of the world’s pop­u­la­tion, but most peo­ple there are off­line.

That por­tends good busi­ness for satel­lite builders such as Air­bus Group,

Boe­ing, and Lock­heed Martin as an­nual pro­duc­tion of the ma­chines is ex­pected to quin­tu­ple, to 50, says Richard Bowles, man­ag­ing di­rec­tor for Ari­anes­pace’s Asean re­gion. “Satel­lites are show­ing to be a large part of the com­mu­ni­ca­tions in­fra­struc­ture,” he says.

There were 208 satel­lites launched in 2014, up from 107 a year ear­lier. SES plans six launches through 2017, and Eu­tel­sat plans five dur­ing the next four years. Ari­anes­pace’s back­log for launches topped 50 at the end of last year. And SpaceX plans 18 this year—triple last year’s num­ber. The com­pany put a Ja­panese com­mer­cial com­mu­ni­ca­tions satel­lite into or­bit dur­ing its May 6 launch. “We’re ex­pect­ing by maybe the third or fourth quar­ter that we would be do­ing a launch ev­ery two or three weeks,” Musk said dur­ing an April 8 brief­ing.

Trans­port busi­nesses are spurring de­mand. Sin­ga­pore Air plans to have high-speed Wi-Fi on its planes in the sec­ond half of 2016. It signed with

Honey­well Aerospace in Novem­ber and will use In­marsat satel­lite ser­vice.

Pas­sen­gers on more than 2,000 com­mer­cial planes con­nect to the In­ter­net us­ing SES satel­lites, Chief Ex­ec­u­tive Of­fi­cer Karim Michel Sab­bagh said on a Feb. 26 earn­ings call. It leases band­width to air­borne Wi-Fi providers Global Ea­gle En­ter­tain­ment, Gogo, and Pana­sonic Avion­ics.

Pana­sonic Avion­ics beams Wi-Fi to more than 3,000 air­craft and ex­pects to add 12,000 more within a decade, spokesman Brian Bard­well said in an e-mail. “We be­lieve that just about ev­ery nar­row­body air­craft will at some point be equipped with broad­band

con­nec­tiv­ity,” he said. “Satel­lite-based ser­vice is hands down the best op­tion for our cus­tomers.” Sin­ga­pore Telecom­mu­ni­ca­tions

re­cently took more ca­pac­ity on a Eu­tel­sat satel­lite to im­prove net­work con­nec­tiv­ity in South­east Asia, and in April it part­nered with In­marsat to pro­tect data in ships’ bridges from hack­ers. O3b Net­works has en­abled

Royal Caribbean Cruises ships to have high-speed con­nec­tions.

“There are cer­tainly more and more satel­lites go­ing up, and it’s go­ing to grow,” says Shiv Putcha, as­so­ciate di­rec­tor at mar­ket re­searcher IDC in Mum­bai. “The po­ten­tial is more pro­nounced in Asia. There is a higher need for this in this part of the world.”

The bot­tom line Half of the $203 bil­lion in satel­lite in­dus­try rev­enue in 2014 came from con­sumer ser­vices such as TV shows and broad­band.

“Satel­lites are show­ing to be a large part of the com­mu­ni­ca­tions in­fra­struc­ture.” ——Richard Bowles, Ari­anes­pace


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