Is the Sub-Saharan African satellite capacity market headed for oversupply

In the last two years, much has been made within the satellite industry of transponder shortages and higher capacity pricing impacting the Sub-Saharan African market. Evidence from NSR's Global Assessment of Satellite Demand, 5th Edition study details the current capacity issues facing this regional market, and numerous operators have already responded. Some additional capacity on existing satellites has been relocated to the Sub-Saharan Africa market, and a number of recently launched satellites have already increased supply with more to come in the next several years.

It has even been argued that the recent high demand coming from the sub-continent has led satellite operators to over-invest in new capacity for the region following the classic over/undersupply cycle that is so common within our industry. To make matters worse, others are contending that the potential oversupply situation may be compounded by the global economic downturn that could slow, at least temporarily, transponder demand growth in Africa.

NSR is indeed focused on this satellite supply imbalance in Sub-Saharan Africa, but would argue that a closer look at the details of the situation is in order. As can be seen from the below chart for station-kept supply and demand, NSR projected in its GASD 5th Edition study that demand for commercial C- and Ku-band satellite capacity will almost double between 2007 and 2017. Leading the drive will be substantial transponder leasing gains coming from the video distribution and DTH markets in the region. African television households continue to have relatively limited programming choices, especially for locally produced content, and the region is aching for low cost DTH services. Not every venture will succeed, as illustrated by the untimely demise of GTV in early 2009, yet NSR is confident that over the long term the various video and DTH services will come to account for 60% to 80% of total transponder demand in the region, just as is found elsewhere in the world.

Traditional telephony & carrier services, as well as international trunking for ISPs in Sub-Saharan Africa, will continue to come under pressure from new undersea cables arriving in the continent, expanding terrestrial fiber routes as well as the possible emergence of competitors like O3B. However, NSR anticipates applications like cellular and broadband wireless access network backhaul as remaining solidly in the satellite camp, and these markets should outperform in the region making up for any losses from telephony and trunking. Further, NSR is seeing evidence of substantial expansion of broadband VSAT networking services in the region. While this last market segment is most susceptible to the high capacity pricing in the region and global economic conditions, it is NSR's opinion that the overwhelming demand for connectivity will continue to lead to growth here over the long-term.

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