Find us on Google+

Intelsat says lower Epic satellite prices offset by higher demand

Stephen Spengler, CEO, Intelsat. Credit: SpaceNews/Kate Patterson.

PARIS—Satellite fleet operator Intelsat on May 24 said pricing pressure on its new high-throughput Epic satellite was stronger than forecast but was being compensated by higher-than-expected volume demand.

Intelsat Chief Executive Stephen Spengler said a data-services contract renewal from a customer previously on an Intelsat wide-beam satellite was now being concluded for about 20 percent less in revenue, on average, on the Epic spacecraft, which features smaller spot beams that allow radio frequency to be reused.

But with new customers contracting for greater amounts of bandwidth, the net effect is minimal.

Spengler said that, as a result, the company now forecasts that the expected Epic satellites’ fill rates will reach the upper end of its previous forecast of between 40 percent and 60 percent within three years.

He said between 20 percent and 30 percent of the total traffic on Intelsat’s first Epic, the IS-29e now in orbit, is comprised of customers that were moved from an aging Intelsat satellite to the new spacecraft. The rest of the forecasted 60 percent will be new customers, mainly in growth markets, including the aeronautical and maritime mobility sectors.

Intelsat 29e entered commercial service at the end of March and has already been credited by competitor Eutelsat for stealing business from Eutelsat’s conventional satellites in Latin America.

“The volume is picking up more than we anticipated. Maybe the pricing is a little bit lower than anticipated, but we still have solid returns,” Spengler said at a J.P. Morgan investor conference.

The demand for bandwidth for in-flight connectivity and maritime connectivity is so strong, he said, that these should no longer be considered as niche markets. “They are going to be volume drivers,” he said.

He said the average Epic contract duration is 5.5 years, less than media and broadcast customers but more than the company’s suffering Network Services business.

Spengler said Intelsat was not surprised by Eutelsat’s revenue and profit warning, issued May 12. Intelsat, being more exposed to the data market, had been warning investors for a couple of years that the data services markets were under heavy pressure.

“There is a supply/demand imbalance in those markets,” Spengler said. But taking the global view, he said the data services business was not continuing to fall, but stabilizing despite continuing weakness in certain markets, including Africa.

Minimizing threat from cable companies’ ‘super head-ends’

Intelsat’s media business – direct-to-home television and beaming programming to cable networks’ head-ends – continues to feature stable pricing. Spengler said the “super head-end” phenomenon in the United States is neither new nor a threat to Intelsat’s existing media business.

It is now easier for a cable company to consolidate satellite head-end installations and link more of its total network by fiber. Fewer head-ends would mean less revenue for Intelsat.

Spengler said the current installed base of about 5,000 head-ends served by satellites in the United States will not shrink as cable operators will need the direct satellite feed at rural installations.

He conceded that some broadcasters are consolidating their satellite demand as they move from multiple broadcasts of the same programming in different formats – standard-definition, high-definition and, in a few years, ultra-high-definition – to a single feed using MPEG-4 compression of high-definition video.

The broadcasters then can down-convert that signal to standard definition on the ground rather than having two separate satellite feeds.

Intelsat has told investors for several years that its point-to-point Network Services business would erode to near-zero with the migration to fiber. The other half of the Network Services division’s problem is the drop in overall satellite pricing, which is keenly felt at the time of the contract renewal.

Intelsat’s pitch to investors is that its future fleet, with both Epic high-throughput and conventional wide-beam satellites, will compensate for the drop in revenue from some data applications by selling the lower-cost capacity into new markets.

Epic satellites broadcast in Ku-band and their capabilities are often compared to other high-throughput satellites using Ka-band. Intelsat’s argument is that the huge installed base of Ku-band equipment will make a Ku-band high-throughput offer more attractive to customers as it requires less equipment replacement.

Spengler said that holds true for its U.S. government customers as well, which he said gradually would be moving their business to Epic satellites.

Third time around on U.S. Navy satellite services contract bid

In the short term, Inmarsat is fighting to remain the service provider to the U.S. Navy under a five-year Commercial Broadband Satellite Program Satellite Services Program, or CSSP. The U.S. Defense Information Systems Agency (DISA) is managing the contract for the Navy.

Inmarsat lost the contract to London-based Inmarsat. Intelsat protested DISA’s handling of the competition and won. Intelsat protested a second DISA request for proposals and received a favorable response, resulting in a third competition, now ongoing.

“The third RFP we were OK with,” Spengler said. “We bid that third RFP the 1st of April and it’s going to be six months, maximum, before they make a decision. In the meantime our service has been extended on the current contract, for a period of months, until the decision is made.”

Inmarsat recently downplayed its chances of winning the contract in a conference call with investors, and Spengler also openly evoked the possibility that Intelsat, despite the modified contract rules, would not come away a winner. Whatever the outcome, he said, the contract cannot immediately be transferred from one operator to another.

“It’s a complicated network with services from a couple of dozen satellites – not just Intelsat satellites,” Spengler said. “It interacts with six or eight Earth stations around the world, with fiber connectivity back to the Naval Operations Center. It’s not something that can be turned around and changed overnight.”

 

 

 

 

SpaceNews.com

Source: Here you’ll find lots of information about International Space Station and the Space Shuttle. Also we have facts about the the planets, solar system, and planets in our solar system. Learn about new planets and outer space Space News

by
Intelsat says lower Epic satellite prices offset by higher demand

Posted in Space News and tagged by with no comments yet.

Leave a Reply

Your email address will not be published. Required fields are marked *