It is almost customary for the January edition of a magazine to look forward over the next twelve months and try and predict what trends and topics might shape the year to come. Never one to upset the apple cart, SatelliteFinance has followed suit and…
It is almost customary for the January edition of a magazine to look forward over the next twelve months and try and predict what trends and topics might shape the year to come. Never one to upset the apple cart, SatelliteFinance has followed suit and has spoken to a number of industry experts to get their views on what might lie ahead.
One of the standout subjects was that of satellite broadband and whether its time as a mass market offering is at hand.
Chris Quilty, senior VP of equity research at Raymond James, questioned: “Is this the year the consumer satellite broadband proves its mettle? So far the uptake has been a little disappointing and while I believe the technology has great promise, there is a tremendous lack of public awareness as to its benefits.
“In addition, with a great deal of investment already earmarked for new projects, such as in Australia and Russia, has the market got ahead of itself?”
In-flight broadband was an area that gained a lot of traction in 2012 but faces a similar predicament. Tim Farrar, principal of TMF Associates, argued: “I see continued uncertainty about the best model for providing in-flight connectivity. Providers, such as Gogo and Row 44, will struggle to make money, especially those reliant on satellite connectivity, and won’t be able to justify the high valuations they have been seeking.”
Looking at the wider mobile broadband via satellite market, Farrar suggested there was a growing consensus that Ka-band is not going to supplant Ku-band as the best solution for mobile broadband connectivity. Instead, he argues, that both will play a role for years to come, with Inmarsat and Intelsat going head to head in the fight for maritime and aeronautical partners and customers.
Another expected ‘fight’ will be the one over spectrum in the US. Farrar predicts “even more fights over spectrum, as the FCC looks to make more spectrum available for terrestrial wireless and considers explicitly taking spectrum away from MSS (and perhaps even FSS), after the failure of the ATC ‘sharing’ model”.
Peter Nesgos, a partner at Milbank, Tweed, Hadley & McCloy, saw it from a slightly different perspective: “I expect we will get clarity early this year on LightSquared’s position vis-à-vis the FCC and how that will impact its business plan. That, combined with recent developments with Dish Network’s mobile satellite plans, including the Clearwire auction, will result in a clearer playing field for mobile broadband in the US.”
On the financing side, one banker, who asked not to be named, argued that it will very much be a case of history repeating itself, with 2013 broadly mirroring 2012.
“I don’t see a significant uptick in terms of loan activity with the bond markets, particularly in the US, continuing to be the destination of choice for those that can utilise them. For the rest, the export credit agencies remain a key funding tool and I don’t see this changing much over the next year,” the source said.
“As for equity financing”, the banker added, “from a satellite perspective the potential 2013 IPOs of Intelsat and SpaceX stand out. However, I have my doubts about both. For Intelsat, the issue of its debt remains a huge sticking point. Will investors be prepared to sit through a period of sustained deleveraging to ultimate receive a steady stream of dividends? As for SpaceX, it will need to prove its commercial flight heritage to properly realise its value.”
Indeed, there was a general consensus that 2013 will be a key year for SpaceX. Nesgos said: “A game changing development this year will be the expected first commercial launches of SpaceX’s Falcon 9 launch vehicle. Following on the highly successful NASA resupply missions of last year, the move to commercial operations will further boost SpaceX’s prospects for continuing growth.
“Along the same lines in new space transportation will be awaiting the first commercial flights for Virgin Galactic and the development of an entirely new market in passenger transportation to sub-orbital space.”
This view was shared by Quilty, who believes 2013 will be a formative year for the private space industry. He pointed to Orbital Sciences’ launch of the Antares rocket this year, as well as the emergence of the likes of Skybox Imaging and the interest around the Google Lunar X Prize.
The established launch providers are also set for a pivotal 2013, with one space insurance source commenting: “This is going to be a huge year for the launch services market – all the major players have something to prove.
“For ILS, it is all about how quickly they can return to flight, given their hectic launch manifest for this year. It will also be interesting to see how the market reacts to the recent problems with the Proton. It is a break out year for SpaceX given that they will truly be entering the commercial launch arena. The question will be what happens if such a nascent rocket has a failure?
“With so little contracts in their manifest, I worry about the future of Sea Launch beyond the Intelsat launch, while Arianespace must decide on what’s going on with the Ariane 6 and how to maintain the launch manifest for the Soyuz.”
The commercial space sector has much to look forward to in 2013, with new areas and applications coming to the fore. As always, however, prospects for the industry will be tied to the state of the global economy and hopes that it is on the mend.
