Hong Kong-based satellite operator AsiaSat is counting down to the separate launches of two spacecraft this year on SpaceX’s crowded manifest. SatelliteFinance’s Jason Rainbow caught up with CEO Bill Wade as the group scans the market this year for…
Hong Kong-based satellite operator AsiaSat is counting down to the separate launches of two spacecraft this year on SpaceX’s crowded manifest. SatelliteFinance’s Jason Rainbow caught up with CEO Bill Wade as the group scans the market this year for M&A opportunities to gain scale.
Jason Rainbow: During AsiaSat’s full year financial results in March, the company said it is on the hunt for acquisition opportunities this year to help grow the business. Have you found any potential targets and what kind of deals would you consider?
Bill Wade: We’ve been looking at both buying assets as well as acquiring complete operations, but so far have not come up with anything that is of interest.
We are also in discussions about cooperation opportunities. We think our recent deal with Thaicom is an interesting model, and we are exploring some other potential opportunities. The criteria for us is really along three lines: If we can gain access to markets that we don’t presently have good access to, if we can gain access to an existing revenue stream, and if we can acquire orbital slots that give us growth opportunities. Obviously pricing and valuation are keys, but these are the overriding factors we’re really looking for.
JR: So you’re really concentrating on other operators to build scale at this point and I suppose that’s what drew you to look at Israel’s Spacecom. Why didn’t you go through with that deal?
BW: We did have a hard look at it and we were originally very keen as we saw it as an interesting opportunity that would give us access further West into Africa and the Middle East. Though it looked like a good opportunity, it proved too difficult for us to close the business case.
JR: Are there a lot of other opportunities out there for you at the moment? I mean, are you confident of anything else coming up before the end of the year?
BW: I think there are a couple of opportunities coming down the road. Though it’s unlikely that these will happen before the end of the year, there are rumblings that there may be some action early next year.
JR: And you’re looking for those opportunities in the west?
BW: When we look at expansion through acquisitions, we’re focusing on how we can improve our Asian business. Moving a little bit further West gives us better connectivity from Asia into Africa and the Middle East. That’s all a natural fit.
I don’t think Latin America, Europe or North America really makes much sense for us. There are already well-established operators in those markets and we prefer to stay where we have the strongest skill-set, which is Asia.
JR: What’s the latest with the AsiaSat 9 satellite you’re building for a 2017 launch? GeoMetWatch recently scrapped plans to put a weather payload on it, but are you in talks with other potential partners or is it now too late?
BW: AsiaSat 9 is a replacement for AsiaSat 4, so we were under some time constraints as to when we needed to finalise the design and start building the satellite. That was why we had to back away from the weather payload, as adding it to the satellite would have delayed its delivery. We still think it’s an interesting concept, and we have not completely walked away from the idea. We’re still in discussions with many of the players – not only with GeoMetWatch. Although it is too late for AsiaSat 9, we are still exploring the possibility of adding it to one of our other future satellites.
JR: And what is business like in Asia at the moment? Your company recently helped Indonesia’s Digital Media Asia launch DTH services in the country. What growth opportunities are there for Indonesia’s increasingly crowded market – and Asia in general?
BW: Indonesia is an interesting market. Just its geography shows it is a great satellite market. Also, rising disposable incomes, increasing demand for content and the issuance of new DTH licences are driving demand for satellite in the video market. In addition, there are data and telecommunications requirements in the areas of connectivity and VSAT distribution, as well as cellular backhaul.
Indonesia is also a challenging market as there are well entrenched domestic operators. Nevertheless, given its large population and attractive economic growth, there is plenty of room for future expansion and development.
In addition, we also see interesting growth potential in other less developed markets. New entrants such as Nepal, Bangladesh, Myanmar and Cambodia are all talking more and more about DTH services while issuing licences to expand their internal communications infrastructure. We see general growth across Asia in terms of video services. Even in the established markets there is an increasing requirement for more content distribution, whether it’s for local viewers or for distribution outside their local markets, or even outside Asia.
And in terms of upgrading from SDTV to HDTV, Asia still has a long way to go, compared to Europe and North America. I think there is a significant capacity requirement to support that shift over the next few years.
There is also the next step which is 4K, though I don’t think this is something we’re going to see significant penetration in for a number of years unless there are major developments in new compression technology and equipment costs.
JR: If I was to push you to pick just one Asian market to look out for in terms of the most rapid growth potential for AsiaSat, what would you say?
BW: From our perspective, with two new satellites coming online this summer, we have two key markets, India and China. In China, although a highly regulated and restrictive market, we see some interesting growth opportunities. Through CITICSat, a subsidiary of one of our major shareholders, we have a licence to operate in China and the upcoming AsiaSat 6 will provide new capacity which we expect will enable us to get back into the distribution of video services for broadcasters in China.
JR: About those two satellites you have coming up for launch this summer with SpaceX – AsiaSat 6 and AsiaSat 8 – do you have any concerns about the launcher’s crowded manifest, given the frequent delays its customers have been subjected to this year?
BW: Yes, they do have a very ambitious manifest, but for us once they can get the pending Orbcomm launch off the ground, we’re up next.
Basically we are very pleased with the progress SpaceX has made technically, and they’ve shown themselves capable of launching to the International Space Station and satellites to LEO and GEO.
JR: Has the delay as it stands at the moment impacted your business at all, has it caused you to revise any plans?
BW: Yes, it does cause us to back-pedal and make adjustments to some of our plans. But delays in satellite launches are certainly not unusual. It’s interesting that while SpaceX is having some launch delays even the established launch providers are running into problems. Arianespace has delayed their launches and announced they will be pushed back to the fall, while Proton is going through a failure review that pushes them back as well. All the main launch providers are experiencing some delays right now.
JR: AsiaSat attempted twice to privatise a couple of years ago in what many saw at the time as a precursor to a wider merger or sale. Is this something you could revisit in the near term, or has this been ruled out by regulatory issues or other factors outside its control?
BW: In Hong Kong, if you have a failed privatisation you can come back and try again in 12 months. However, this is really something driven by the shareholders who would need to look at it and decide whether or not it made sense to try again.
JR: What are the main benefits and drawbacks of having state entities in your shareholder structure at the moment?
BW: We are a publicly-traded company with GE and China’s CITIC, a state-owned enterprise, as our two major shareholders. Both of them are very cooperative and supportive of our business, and we see real value there. For example, CITIC helps us with a licence to operate in China. As far as drawbacks, being a publicly-traded company in Hong Kong requires compliance with the various listing and disclosure requirements of the stock exchange, which adds a layer of regulation and complexity to our business.
JR: And this clout they give you also helps when you look to raise debt and finance growth plans
BW: Yes but we haven’t done too much debt raising because we’ve generated enough cash in the past that we’ve funded our satellites through internal cash flow.
We just recently took out our first loan since the late 90s with Ex-Im bank for AsiaSat 6 and AsiaSat 8. That was a great opportunity for us to take advantage of competitive financing terms and help look at restructuring our capital situation.
Although AsiaSat has a very strong reputation in the market, it’s nice to have strong shareholders behind you because they add a little bit of extra clout when you either need to raise funds or buy new satellites.
JR: Looking ahead, how do you see the potential for High Throughput Satellites in Asia? I’m sure you’ve seen Eutelsat’s recently-announced triple mission satellite that it claims will host the first HTS payload to cover the Pacific Ocean. Could AsiaSat consider ordering an HTS bird?
BW: I think we’ll eventually go that way, but we won’t put up an HTS satellite just because people say it is interesting. We think it is premature to just build a satellite and hope that someone will come with a solution to use it. Initially, we believe it should be driven by a specific application or project that requires we design a separate HTS payload for one of our planned satellites.
The existing broadcast and telecommunications markets are areas where we’re pretty comfortable and we know how to utilise our existing capacity to support those applications. The HTS market is a little bit different. The HTS satellites in the US used by ViaSat, Wildblue, Hughes, etc are servicing a DTH-type of consumer broadband. I’m not so sure that model works in Asia. We’re going to be a bit more cautious and look to implement HTS on a more gradual scale.
Eutelsat is different with what they want to do as they have an orbital slot over the Pacific Ocean and are looking to serve mobile, maritime and aviation services. For those types of services, HTS satellites offer an ideal solution so I can understand why they would look at an HTS satellite over the Pacific Ocean.
