Saudi Arabia-based satellite operator Arabsat surprised some in the space sector when it emerged the victor for Greece’s Hellas-sat earlier this year. The asset had also attracted heavyweights SES and Eutelsat.
But acquiring the group was part of…
Saudi Arabia-based satellite operator Arabsat surprised some in the space sector when it emerged the victor for Greece’s Hellas-sat earlier this year. The asset had also attracted heavyweights SES and Eutelsat.
But acquiring the group was part of Arabsat’s ambitious growth strategy, and SatelliteFinance’s Jason Rainbow spoke to CEO Khalid Balkheyour to find out more.
Jason Rainbow: Two years ago Arabsat laid out plans to move from regional to global and become one of the top five satellite operators in the world by 2020. Where is it on that journey today?
Khalid Balkheyour: Arabsat is right on track. Our plans were based on two parallel working streams:
Organic, by expanding our satellite fleet and serving new markets while utilising new technologies that boost growth – in this working stream, the 6th satellite generation programme was commenced incorporating the design and manufacturing of three new satellites.
The second working stream was in-organic, through joint ventures and M&A activities. Arabsat concluded the acquisition of 97% of Hellas-sat in April of this year.
JR: How has the unrest in the Middle East affected the company? Has it impacted your revenue forecasts and clarity in your backlog?
KB: It had both positive and negative effects. Positive, because the activities during and post the Arab spring increased the demand for satellite capacity for telecom and video contribution and distribution. The negative effect however was because of two main issues: Firstly the cut-off of existing services for governments, and secondly the increased jamming activities.
JR: Earlier this year the company agreed a hosted Ka-band payload deal on Badr-7 with US-based Emerging Markets Communications (EMC). How does this partnership work?
KB: Arabsat and EMC have worked together to design a special multipurpose Ka payload on the satellite in a way that serves customers’ requirements. This payload covers over 24 markets in the Middle East and Africa.
JR: Will you use it to offer satellite broadband services alongside your traditional video and communications offering?
KB: One of the services is going to be broadband from our 26E hotspot, which will provide excellent opportunities for different user services
JR: Do you see this new Ka-band technology as a key growth driver in the MENA region?
KB: Certainly, however, the idea is to know the right service for the right region or market. We have witnessed in the past few years a strong wave of Ka satellites designed and currently under manufacture. This needs to be treated with the upmost diligence.
JR: Will hosted payloads play an increasing role in your company’s overall strategy or was this a one off?
KB: The concept is accepted, however, it all depends on the business case.
JR: What is the competitive landscape currently like in MENA, with rivals such as Nilesat and Yahsat?
KB: Arabsat is a key player in the MENA region, and Arabsat 26E has been and still is one of the premium hotspots in the area with over 170 million viewers and 35 million households connected. Arabsat welcomes the competition that brings a better service for customers in the end.
JR: Have you ever considered a partnership with a global operator akin to Astra and Yahsat for Yahlive, or ICT QATAR and Eutelsat?
KB: We are open to any partnership that makes business sense and is a win-win for all partners.
JR: In February, Arabsat acquired Hellas-sat in its first significant expansion outside the company’s core Middle East and African markets. Is this a stepping stone for further inorganic European growth?
KB: The cornerstone is acquiring more resources and access to new markets. Hellas-sat is a major player in a niche market in Europe that has good room to expand. Indeed, the European coverage will provide us a means to also expand our offering even to our existing base of customers. We are currently utilising other European satellites for the euro coverage.
JR: What opportunities are out there for Arabsat to expand in Asia and the Americas?
KB: We have established a certain investment criteria against which we measure available opportunities. If an opportunity arises we will implement those criteria.
JR: And what are the challenges?
KB: Arabsat is in a growing phase, it has big opportunities and strong prospects. Arabsat sees the major challenge is to protect its core business and market while expanding to new ones.
JR: Arabsat was said to be among the prospective buyers for Measat in Malaysia, which has still not been sold. Is this the type of asset that your company would consider acquiring – if so, why?
KB: Measat represents a good fit with Arabsat culture and business, and that’s why Arabsat considered buying it to begin with. Service lines can be easily extended with a wide blanket coverage.
JR: Did your company look at Optus in Australia, which is attracting interest from global satellite operators as well as private equity firms?
KB: No, not at the time being.
JR: Geographically, where is the most interesting market for Arabsat at the moment?
KB: Arabsat’s core market will always remain in the MENA where we continue to see growth. Arabsat’s 5th generation programme has offered a great deal of capacity to Africa, where we have grown a respectful network of affiliations and partners. Arabsat plans to expand more in Asia and Europe.
JR: How does Arabsat plan to fund its expansion plans?
KB: Arabsat has strong financial positioning. In addition to its generated cash from the business, Arabsat has preferable debt facilities from the big international and regional banks.
JR: Arabsat is owned by member states of the Arab League, but could it consider a privatisation as it expands globally?
KB: Studies have been conducted on the subject. Arabsat has been operating on a full commercial basis since 2003, and being an IGO doesn’t hinder its operations at this stage. However everything is possible at the right time.
JR: What other opportunities are there for organic growth in the countries Arabsat is already present in?
KB: We see huge opportunities in both telecom and broadcasting services. We see governments pushing for broadband more and more for educational needs. The defence sector is demanding more satellite capacities for monitoring and on the move. Broadcasting networks have started to adopt HDTV with clear plans – overall, a promising industry landscape or Arabsat.
