The consolidation of the satellite services sector is likely to continue throughout 2012 with a number of small teleport operators potentially on the block, according to the chairman of the World Teleport Association, Brett Belinsky.
Despite the flurry…
The consolidation of the satellite services sector is likely to continue throughout 2012 with a number of small teleport operators potentially on the block, according to the chairman of the World Teleport Association, Brett Belinsky.
Despite the flurry of acquisitions by the likes of Harris Corp and Encompass over the past year, Belinsky, who is also the market development director of Arqiva, believes that there is more to come. He pointed to the fact that there are still a lot of distressed assets out there, although cautioned that there were still major differences over valuations between the owners and the potential acquirers.
He added that there is a flight to quality, arguing, “The good money will go after the good businesses but there are a lot of rats out there. One or two players are looking at roll-ups but the trick is to do so in order to move into other regions or markets.”
Indeed, Belinsky suggested that one of the main risks that teleport operators face is an over-reliance on providing services to one particular market segment. He said that many smaller operators had gone out of business due to their over exposure to one sector.
Another challenge faced by the teleport industry is the rise in channel conflict due to greater vertical integration by the satellite operators. Belinsky contends that both global and regional satellite operators have increasingly sought to bundle teleport services into their infrastructure offering. This, he argues, is in effect cannibalising many of their existing customers, the satellite service providers who buy much of their capacity.
“Where does a satellite operator start and stop? A clear delineation is needed,” Belinsky stated.
In spite of these challenges, Belinsky remained positive about the growth prospects for the teleport sector. From the broadcast side, he pointed to the increasing deregulation in media ownership, pure channel growth, the continued benefits of broadcast technology and the rise in connected devices and over-the-top (OTT) video platforms.
From a satellite data communications standpoint, the rapid growth in mobile data demands remains a key driver, as do increased global coverage requirements.
As always military and defence demands play a key role in revenue generation for satellite data services. Areas such as network centric warfare and remote intelligence gathering will continue to provide a massive amount of demand that the industry can tap. It is estimated that the US government procures about 100 times more capacity than all the independent teleport operators put together.
With the satellite industry set for a significant increase in capacity following the recent satellite procurement cycle, the teleport providers will be hoping to marry this supply with the governmental demand.