In February 2012, General Electric sold its satellite communications service provider GE Satcom to serial entrepreneur Robert Kubbernus. It marked the next chapter in the 40-year history of a company that has been owned by some of the industry’s…
In February 2012, General Electric sold its satellite communications service provider GE Satcom to serial entrepreneur Robert Kubbernus. It marked the next chapter in the 40-year history of a company that has been owned by some of the industry’s biggest players and yet for large swathes of its life has been loss making.
Formerly known as Satlynx and renamed Signalhorn by Kubbernus, the company was part of the €1.2bn split-off transaction in early 2007 that saw GE swap its 19.5% holding in satellite operator SES for a new company, SES International Holdings, which comprised €588m in cash, 100% of Satlynx, the AMC 23 satellite and its related business (now owned by Eutelsat), and minority stakes in AsiaSat, Star One and Orbcomm.
As GE subsequently sought to exit its satellite holdings in 2011 and 2012, Kubbernus moved quickly to snap up GE Satcom. The question is why?
Kubbernus explained: “The why was that I found it a very interesting company to acquire. This is a company that has been owned by some of the best businesses, in General Electric and SES. It has a 40-year history and what I found was that because it was always corporate owned, every one of those organisations had left some sort of fingerprint in here. From having fully integrated SAP in the back office to more than US$200m having been spent on the infrastructure between our Swiss and German operations. So the things that take so much time and investment to get to a certain place, the infrastructure, the technologies, the facilities, were all done.
“It was an amazing history that I found inside this organisation and along the way they had accumulated some fortune one thousand customers that have been with the company for 10, 15 years. On top of that I found a completely committed and dedicated employee base with a tremendous amount of corporate memory.
“It had all those things you find attractive, long contracts, a huge customer base – all things I could leverage and do something with. But it had never been owned by an entrepreneur, by someone coming in and trying to drive results.”
As an entrepreneur, though, Kubbernus admitted he could not afford for Signalhorn to sustain the continued losses that it had done for periods under the previous blue chip owners.
“There were two major problems,” Kubbernus explained, “issue number one was that we had to rationalise our networks and our space segment spend. They were running at around 55% of their annual revenue being spent on the space segment. We are targeting below 30%.
“They also had a tremendous amount of unused and underutilised spectrum and had a number of contracts that were due in 2013, so there was an opportunity to sit down with our major suppliers and strategically plan out the next three to five years. With their help we have rationalised our networks and reduced our cost. As such, we have gone from 55% to 34%, which has made a huge difference to the company’s profitability.
“The second issue was to look at our staffing plan, the next biggest expense. There were far too many employees for the amount of revenues and customers. So last year I had to do a reconciliation and we are at the right size now.”
Having reduced the cost base, the newly ‘empowered’ management, as Kubbernus describes them, had to indentify how to bolster growth at the company.
“The company did not have a clear strategy around their customers. So we carried out a deep study into these customers and realised that we could grow our business with the 120 excellent customers that we already have, not just through new business. That was one of the legacies of this company: they had premium triple A customers but were selling so thinly into them.
“We need to be part of the whole environment, not just the edge. So we now offer them end-to-end communications rather than just satellite – offering terrestrial side-by-side with our satellite offering: a one-stop shop for our customers.”
Signalhorn is currently funded by Kubbernus, who sold his majority stake in government-focussed satcom services provider TrustComm to investment firm Global Secure Networks in April 2013.
As to whether Signalhorn will need further funding to facilitate its new business plan, Kubbernus explained that any new financing would be used to support its inorganic growth plans.
He said: “We are looking at a couple of interesting acquisitions that could quite conceivably double us in size, and with that I have a banker relationship with which we will probably do some debt to finance those acquisitions. We are in discussions with both the acquisition targets and the bank right now. We are going to make some announcements on these in the next 60 days.
“The bigger acquisition that we are looking at has some clear advantages in Africa that we are interested in. So we look at that as a real strategic merger with a lot of synergies between the companies.
“Another potential acquisition target is a virtual network operator with no infrastructure. This works for us as we have so much infrastructure here that we have virtually no capital expenditure plans for the next three years. So we are not necessarily out in the marketplace looking for infrastructure heavy acquisitions, we are looking for customer and revenue heavy acquisitions.”
If these acquisitions are successful, Signalhorn’s turnaround over the past two years will have been dramatic. For Kubbernus, the platform was always there. It just needed an entrepreneurial edge.
“I think the prospects for this company are fantastic. I believe it has been one of the best kept secrets out there. It came with solid revenues, solid customers, solid infrastructure and it just needed somebody interested in giving some TLC and take it to the next level.”
