Positive Predictions

This week, the annual World Satellite Business Week has been taking place in Paris. Organised by Paris-based research and analyst firm, Euroconsult, the event is priceless for those who need to keep track of the financial health of the industry, what lies ahead and the challenges it faces in the near, medium and long term. It is an opportunity to hear what the CFOs and CEOs think and to find out what the financial services industry has to say about the satellite sector.

There can be no doubt that the whole planet is going through a financial shake-up like never before but, certainly for the time being, the satellite industry is holding its own with FSS and MSS showing growth which is expected to continue in 2009. According to Pacome Revillion, CEO of Euroconsult, a slowdown is to be expected as a result of the economic crisis but 2009 should turn in a growth of approximately 7 percent and, looking further ahead, could even reach 5 percent in 2010. That is encouraging considering the impact that the crisis has had across multiple industries.

The satellite industry relies heavily on high investment in long-term projects and, as we all know, funding is something that has not been easy to come by. Some operators are finding it very difficult to raise the financing that they require to develop new projects for replacement or expansion of satellite fleets. Looking ahead, this difficulty in access to funding will inevitably delay the fruition of projects and some may even have to be shelved. As a result, in the medium term, there could be a limit in the addition of new capacity to the market but this could offset a possible slowdown in transponder demand that may come to pass as a result of the financial situation.

So what do operators have to do to obtain credit to help keep their plans in place? The world of private equity has changed significantly. It is all down to how the investor sees the risk. Many of the larger operators with proven technology and business models have been able to achieve re-financing – even in the worse period of the recession they could still obtain credit. However, there has been a need to go back to basics, to ensure that they appeal to investors by presenting them with a proven track record, a quality customer base, opportunities for growth and predictable Free Cash Flow. They also have had to improve fleet efficiency and concentrate on breaking into new markets. It is the smaller operators, or those presenting new technology with unproven business models that will find problems with obtaining finance. For example, companies in satellite radio or for some MSS firms, funding may be difficult to secure.

That said, the financial fraternity sees the satellite business as being fairly recession resistant and expects most companies to survive. They expect to see well-capitalised companies diversify and move into new areas, providing service across technologies. However, they urge operators to be careful not to diversify too much and to remain within their core competencies and pushing their business into emerging markets. Further consolidation is also expected, especially in the MSS sector and in the FSS sector, where there is still room in the market.

As newspapers across the world claim that the end of the recession is in sight, a sensible approach to business is what is required. The days of easy credit are gone but the satellite sector appears to be in a good position to emerge from the recession with minor injuries. There will be casualties along the way but with predictions of growth sounding out in precarious times, the industry definitely has cause to face the future with optimism.

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What did the Top Executives say at CommunicAsia 2009? now!