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![Page 1: Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.1 Satellite Communications A Part 5 The Satellite Business, financing & planning -Professor.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649e0b5503460f94af3069/html5/thumbnails/1.jpg)
Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.1
Satellite Communications APart 5
The Satellite Business, financing & planning
-Professor Barry G Evans-
EEM.scmA
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.2
Contents
1. The players and the business
2. Financial elements of the business
3. Costs and finance –PVC and IRR methods
4. Funding and risk assessment
5. Business planning
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.3
The satellite business
1. The players and the business
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.4
(1) Elements of the business
• Manufacturing/engineering –space, ground, networks
• Launchers –US, European, Chinese, Japanese• Marketing and sales• Operations of satellites• Service provision and billing• Operation and maintenance ground segment• R&D• Regulatory, legal and institutional• Consultancy –coordination, tenders, etc.
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.5
(1)Size of the business
• 180 international operators of satellites
• 3-4000 transponders in Geo
• Global market $200B (2000)
• Satellite industry revenues $83B
• Satellite service revenues $37B
• Revenues will go from $100B in 2001 to $300B in 2010
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.6
(1) The big players
• Manufacturers– Boeing (incl. Hughes)– Lockheed Martin– Loral– Astrium (MMS/DASA)– Alcatel space (Alcatel/Thales/Dassault/Aerospatiale)
• Operators– Intelsat + New Skies– Inmarsat– Eutelsat– Panamsat– Astra Global
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.7
(1) The big players (cont’d)
• Launchers– Boeing– ILS– Arianspace
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.8
(1) Strategic partners
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.9
(1) Does it make money?
Return or Capital %
1995 revenue$M
Intelsat 17 805
Eutelsat 15 67
Inmarsat 24 340
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.10
(1) AsiaSat earnings model 1996-1999
Revenues HK$ million 1996 1997e 1998e 1999e
AsiaSat 1 318 341 39 41
AsiaSat 2 436 585 668 711
AsiaSat 3 0 0 544 581
AsiaSat 4 0 0 0 0
Deferred Revenues 70 31 10 3
Total revenues 824 957 1,261 1,336
Cost of services 43 46 49 53
Depreciation and amortizations 261 277 391 328
Selling, general and administration 69 71 74 78
Insurance premiums 39 39 70 70
Total costs 412 433 584 529
EBITDA 673 802 1,068 1,134
Pre tax profit 399 473 588 716
Net profit 395 464 576 702
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.11
(1) Where does it make money?
• FSS Systems– IP provision (30-40%)– TV distribution
• DTH/DBS– Eutelsat/Astra Europe (80% European digital TV delivered
by satellite)– DirecTV/Echostar in USA (43% digital services and
growing)
• Mobile– Inmarsat –only 200,00 customers- niche market but
successful
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.12
(1)
• Where didn’t it make money– Big LEO’s
• Constellation cost $3-10B• (Iridium/Globalstar/ICO)
– Little LEO’s• Orbcom (<$1B)
• Will it make money?– Geomobiles
• ? Aces/Thoraya $1B
– Multicast/broadcast• ? DMB services
– Broadband• Spaceway }• Skybridge }• Euroskyway }
$1-10B?
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.13
The satellite business
2. Financial elements of the business
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.14
(2) Business plans
• Conditional on funding• Costs and revenues over time• Likelihood of making a profit• Assumptions and sensitivities
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.15
(2) Costs
• Setting up system– Preparation of business plan, co-ordination, regulations,
clearances and licenses– Design, spec, build satellites– Launch and insurance– Design, spec, earth-segment– Installation earth-segment
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.16
(2)
• Operating system– TT&C and operations staff– Maintenance satellite/earth-segment– Billing– Planning– R&D
• Factors– Lifetime 10-15 years– Number of transponders– Satellite coverage/position
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.17
(2) Revenues
• Type of traffic required by market• How well use transponders• How well placed satellites w.r.t. market• Tariffs w.r.t. competition
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.18
(2)
• Example– Typical satellite 85 US$M– Launch cost 85 US$M– Insurance 20 US$M– TT&C 5 US$M– Expenses 5 US$M– TOTAL 205 US$M
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.19
(2)
• Example (cont’d)– Satellite has 30 transponders– Revenues $1-2M per year– Seems reasonable that over 10 year life will make a profit– Costs are up-front; revenues are down-stream.
How can we take account of time values of costs and revenues (money)?
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.20
(2) Satellite project timescale
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.21
(2) Costs and finance
• Capital cost– Satellites– Launch vehicles– Ground segment
• Operating expenses– Transponder capacity– People– Marketing– Depreciation
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.22
(2) Billions out – billions in?
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12
Year
$M
Capital Op Ex Income
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.23
(2) Satellite capacity
• Most projects will not need to procure satellites or launches
• Instead they will lease capacity from existing satellite operators
• You can either negotiate directly with satellite operators
• Or you can utilise one of the new ‘electronic trading floors’ for example…. – http://www.e-sax.com (the London Satellite Exchange)– http://www.satcap.com (SatCap)
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.24
(2) Transponder prices
• Transponder prices are variable and have been falling recently
• Europe Ku-band: ~US$7000/MHz/month– I.e. ~ US$3M per annum per 36MHz
• Africa C-band: ~US$4700/MHz/month– I.e. ~ US$2M per annum per 36MHz
• This probably represents the high end of the market and there will be discounts for bulk and commitment
• There will be much cheaper options!– E.g. Russian satellite capacity (<US$1M per annum??)
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.25
(2) Typical transponder lease charges
Asiasat-1 $2.0M per year 5 year lease with annual increase
C band 36MHz
Asiasat-2 $2.5M per year 5 year lease with annual increase
C band 36MHz
Asiasat-2 $4.0M per year 5 year lease with annual increase
Ku band 36MHz
Intelsat 7 $1.2M per year 10 year lease non preemptible
C band 36MHz Hemi/Zone/Spot
Intelsat 7 $2.11M per year 10 year lease non preemptible
C band Global
Intelsat 7 $1.51M per year 10 year lease non preemptible
Ku band Spot
Eutelsat ECU1.7M 6 month lease non preemptible
Ku band 40MHz
Eutelsat ECu960K 6 month lease non preemptible
Inclined orbit satellite
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.26
The satellite business
3. Costs and finance – the time value of money
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.27
(3) Net present value (1)
• Or the Time Value of Money• Would you rather I give you £100 today or in 5
years time?• Would you rather pay me £100 today or in 5 years
time?
• Cash today has a higher value than cash tomorrow• How to value a long-term project?
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.28
(3) Cost over time
• Telecoms projects have long life times 10-20 years• Large investments up-front £1M-£B• Revenues down-stream over many years• Operating and equipment costs as well as
depreciation spread over life time of project• Need to combine costs/revenues in a single plan• Make decisions on whether to go ahead or which of
several methods to implement project
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.29
(3) Net present value (2)
• The cumulative cash value of a project may be misleading
• “Discount” all income and expenditure back to the ‘present’ (conventionally ‘year zero’ defined as the start of trading)
• The present value (PV) of each income and expenditure allows a meaningful comparison to be made
• NPV is the sum of all PVs of incomes and expenditures.
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.30
(3) Compounding and discounting
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.31
(3) Discounted cash flow
• PV of sum in the future is subject to a discount rate• E.g. in year n (£1is worth)
• Discounting allows cash in the future to be moved backwards in time –discount rate
• Compounding allows cash now to be moved forwards in time –interest rate
• Choice of the rate ‘r’ is crucial and will be a mix of interest/inflation rates
• Projects sensitive to rate chosen –do sensitivity analysis
n r=4% 8% 12% 16%
10 0.676 0.463 0.322 0.227
20 0.456 0.215 0.104 0.051
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.32
(3) Example 1
94.51
)14.01(
100
1
5
nn
nr
SPV
• What is the PV of £100 received in 5 years time if the discount rate is 14%?
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.33
(3) Net present value (3)
• Formula– Present Value of a sum S received at the end of the year
n for a discount rate r is:
– Hence Net Present Value of a sequence of payments at the end of each year 1 …N is:
nn
nr
SPV
1
N
nn
n
r
SNPV
1 1
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.34
(3) Net present value (4)
• Often use “discounting tables” to find NPVor use the Excel NPV() function!
Value in Year 0 of 1 unit in year: 0 1 2 3 4 5 6 7 8 9 10 11 12 13 10 1.00 0.91 0.83 0.75 0.68 0.62 0.56 0.51 0.47 0.42 0.39 0.35 0.32 0.29
R 11 1.00 0.90 0.81 0.73 0.66 0.59 0.53 0.48 0.43 0.39 0.35 0.32 0.29 0.26
a 12 1.00 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40 0.36 0.32 0.29 0.26 0.23
t 13 1.00 0.88 0.78 0.69 0.61 0.54 0.48 0.43 0.38 0.33 0.29 0.26 0.23 0.20
e 14 1.00 0.88 0.77 0.67 0.59 0.52 0.46 0.40 0.35 0.31 0.27 0.24 0.21 0.18
15 1.00 0.87 0.76 0.66 0.57 0.50 0.43 0.38 0.33 0.28 0.25 0.21 0.19 0.16
(%) 16 1.00 0.86 0.74 0.64 0.55 0.48 0.41 0.35 0.31 0.26 0.23 0.20 0.17 0.15
17 1.00 0.85 0.73 0.62 0.53 0.46 0.39 0.33 0.28 0.24 0.21 0.18 0.15 0.13
18 1.00 0.85 0.72 0.61 0.52 0.44 0.37 0.31 0.27 0.23 0.19 0.16 0.14 0.12
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.35
(3) Net present value (5)
• Note that income and expenditure is assumed to come at the end of each year
• If there is any cash flow at the start of the first year (i.e. end of year 0) it is added in ‘undiscounted’
• Choice of discount rate is critical– Dependant on risk– Dependant on inflation/bank interest rate– Traditionally satellite projects have looked for a 14%
return
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.36
(3) Cash flows related to base year
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.37
(3) Cash flow diagram
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.38
(3) Sensitivity analysis
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.39
(3) Costs and revenues
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.40
(3) Internal rate of return
• Allows comparisons of the financial return of multiple projects
• The discount rate at which the NPV=0• Only computable for a project in which there are
both incomes and expenditures– Excel has an IRR() function which is much simpler to use
than trying to iteratively calculate NPVs using PV tables!
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.41
(3) Example 2
• I spend £500 today and then receive £110 at the end of each of the next 5 years; the discount rate is 12%; do I make a profit?
• What is the IRR?• From discount tables, PV multipliers for years 1 to 5
are 0.893, 0.797, 0.712, 0.636, 0.567• NPV= -
500+(0.893x110)+(0.797x110)+(0.712x110)+(0.636x110)+(0.567x110)=-103.45
• IRR=3.263% (using Excel!!)
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Autumn2004 © University of Surrey SatComms A - part 5 - B G Evans 5.42
(3) Comparison projects
• Use Net Present Value (NPV)• Discount each item cost or revenue to base year• To be profitable NPV must be +VE• Project plan with largest NPV is most profitable• Also use ‘internal rate of return’ (IRR)
This is discount rate which makes the NPV=0• Plan with largest IRR is the best• IRR’s range 20-30% acceptable• Also payback period is No. years to NPV=0
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(3) Example of comparison using NPV
• Owning versus leasing– Costs with time (NPV or IRR)– Sensitivity to discount rate and traffic predictions– Security and availability– Politics
• Trade agreements• Alignments• Kudos
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(3)
• Leasing versus purchase
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(3) IRR applied to leased transponder
• Satellite transponder lease $2M per year• Start-up costs $5M• What revenue profile must be targeted to achieve
IRR of 20%?
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• VSAT network Hub + 100VSAT’s• Add 20vsats/year –up-front hub + infrastructure
• NPV and IRR (r’fn NPV=0)• IRR tells you how quickly pay back• Balance revenue profile with build up of VSATS to achieve IRR acceptable to financers• Note revenue in early years dictates IRR
(3) Example of use of IRR to evaluate project
Revenue
Costs
Revenue profile
TimeSat retr..VSATs+0.9M
Hub
Project
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(3) Exercise: Financing
• A developing country wishes to provide telephone capacity over a 5 year period as follows:
• The two options are:– (i) a dedicated satellite system (NEWSAT)– (ii) leasing capacity from INTELSAT
• The characteristics of the two options are as follows:– Dedicated satellite (NEWSAT)
• Transponder bandwidth = 36MHz• No. of transponders/satellites = 24• Transponders are bandwidth limited• Satellite cost = $150M/satellite• Launch cost = $100M/satellite• Insurance cost = 25% of satellite + launch costs• Operations cost = $1.2M per year
– INTELSAT lease• Transponder bandwidth = 36MHz• No. of carriers supported/transp.= 280• Annual lease charge = $1.5M
• The communications are via SCPC carriers with 30kHz allocated bandwidth.
• Assuming a financial discount rate of 14% as follows:
• Determine which solution is to be preferred.
Year 0 1 2 3 4 5
Circuits 2,411 5,125 7,840 10,550 13,270 15,984
Year 0 1 2 3 4 5
Value of 1 Unit
1 0.88 0.77 0.67 0.59 0.52
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The satellite business
4. Funding and risk assessment
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(4) History of satellite financing
• Government established organisations• Purpose was to provide public service obligations• Each government chose a single local
telecom/satellite operator to invest• Investment was made by signatories according to
usage, once established• Example organisations are Inmarsat, Intelsat and
Eutelsat
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(4) Funding
Tax MarketFunding
Consumers
SingleGovernment
GovernmentConsortia
Number ofCustomers
Military
Sputnik
Research
Intelsat
Eutelsat
PanAmSatGlobalstar
ICOIridium
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(4) Inmarsat
• Inter governmental organisation
– Established to provide GMDSS– Operates as sole provider global
mobile communications (prior to Iridium)
– Signatories invest in proportion to usage of the system
– Signatories have unlimited liability– Decisions are made on the basis
of signatory consensus
Assembly of parties
Council
Directorate
84 governments
22 representative signatories (of the 84 signatories)
Management of Inmarsat’s operations
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(4) Need for restructuring
• The primary reasons for the restructuring of these organisations are– Need for investment
• Usage of system is not related to capacity to pay
– Need to move away from consensus management• Owners manage business by consensus
– Political reasons• Pressure to allow competition and open investment
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(4) Inmarsat – post transition
• Unlisted public limited company
– Public service obligations are enforced by IGO through golden share
– Managed by Board of Directors– Shareholders have limited liability– Corporate structure allows more
flexible investment and access to capital markets
Shareholders
IGO
New Inmarsat
84 shareholders
Board of Directors
Golden share
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(4) Types of funding
• Equity– Shareholders– No profit = no return (dividend)– Higher risk– Costs more
• Debt– Banks and bonds– Lower risk– Cheaper– Risk related to level of Gearing– No profit = interest payments
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(4) Types of capital
Typical annual return
Low risk
Debt Bank debt/investment grade bonds
LIBOR
High yield LIBOR+5%+
Quasi debt/equity
Mezzanine financing Interest coupon and equity option
Quoted equity FTSE returns
Equity Venture capital 30%+
Private/seed capital 50%+
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(4) Comparison of capital markets finance
Equity High yield Mezzanine Bank debt
Issue size Effectively unlimited
US$100-500m Up to US$175m Effectively unlimited
Maturity Perpetual 7-10 years 7-10 years 6-9 years
Coupon Dividends Fixed Fixed Floating
Covenants None Moderate Restrictive Restrictive
Security n/a Typically unsecured
Secured Secured
Early redemption features
n/a After 5 years (penalty)
At any time (usually no penalty)
At any time (at a premium)
Principal repayment
n/a Bullet Bullet Amortisation or bullet
Effect on existing equity
Dilutive None May be dilutive none
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(4) Emergence of high yield
• High yield debt is a classification for sub-investment grade bonds (i.e. rated Ba1/BB+ and below Moody’s and S&P)
• Investors in the high yield market do so to achieve returns in terms of– High coupon
– Improvement in credit rating
• Ideally suited for start up companies that are perceived as high risk and wish to minimise dilution
High yield debt insurance by year
440 335 275845
4,700
0
1,000
2,000
3,000
4,000
5,000
1993 1994 1995 1996 1997
(US
$m)
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(4) Process of an Initial Public Offering
Analysis of business plan
Due diligence ValuationDevelop
investment case
Publish research
Pre-marketing to institutional investors
Issue prospectus
Roadshow
BookbuildingPricing/demand
allocation
Trading Day 1Stabilisation “greenshoe”
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(4) Typical satellite project – free cash flows
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(4) Current market conditions
• Recent correction in equity markets has driven investors towards quality earnings and strong brands
• Investors have less appetite for companies with negative earnings
• For future satellite financing to be successful, investors will have to have made money with the current projects
• Any further bad news will seriously jeopardise any future MSS or broadbond satellite financing
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(4) Satellite business risk
• Technical• Financial• Market
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(4) Technical risk
• Identification– Launch vehicle– Satellite– Ground segment
• Mitigation– Early adopter vs. follower– % of new technology– Insurance
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(4) Financial risk
• Identification– Project timetable
• Overruns• System definition to service introduction
– Budget overrun– Sensitivity analysis
• Mitigation– Risk sharing
• Joint ventures
– Experience• People• Strategy• History of results
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(4) Market risks
• Identification– Demand/supply and size of market– Market access– Delay to market– Competition
• Law of unintended consequences…• “every action has an equal and unexpected reaction!”
– Take up rate
• Mitigation– Market segmentation– Conservatism
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(4) Risk vs. reward
Low Reward High
High
Risk
.comStartup
RetailBank
SatelliteProject
?
?
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(4) Dealing with risk
• Be aware of it!• Analyse
– Make a realistic assessment– Sensitivity analysis– SWOT analysis can help
• Manage– Plan for contingencies
• Know when to say NO!– Be prepared not to proceed with a project if the risks are
assessed as too great
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The satellite business
5. The Business Plan
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Idea!
(5) Converting Ideas into Businesses
Technical Regulatory
Market
Finance
Risks
Planning
Environment
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(5) Business Planning Cycle
StrategicDirection
BusinessPlan
Implementation
Monitor &Review
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(5) Strategic Direction
• “Mission statement”– Currently in vogue– Succinct focus on activity
“To be the World’s leading global satellite multimedia network provider offering a full range of high-quality services to our customers worldwide with the financial objective of increasing shareholder value while providing value for money and remunerating our people fairly in line with best practice.”
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(5) Planning
• There are many approaches to planning• BUT really you just need to answer the right questions!• Kipling’s “Six Honest Serving-men”…
– What?– Why?– When?– How?– Where?– Who?
• These questions are an excellent structure for business planning!
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(5) Implementation
• This part is down to you…• You have developed a plan now…• Raise the finance• Find and hire the people• Develop and sell your product or service
• Make money!
Hopefully!
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(5) Monitor and Review: Objectives
• Monitoring is crucial– How else do you know if you’ve succeeded!
• Planning objectives should be:
SMART• Specific• Measurable• Achievable• Realistic• Timed
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(5) Developing the Business Plan
• Developing the business plan is probably the most critical element of the planning cycle
• The plan will tell you how to implement your objectives in an organised way
• The remainder of this lecture will study the preparation of the details of the business plan
• Focus will be on tools and techniques
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(5) The Project
• Five interlinked parallel processes:– Technical
– Regulation
– Finance
– Corporate
– Market
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(5) Technical
SatelliteCustomer Terminals
Ground NetworkLaunch VehiclesInterconnections
Gateway Terminals
Capacity
Build or buy?
Qualityvs.
Cost?
Newvs.
Tested?
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(5) Regulation
International (ITU)and Domestic
RegulatoryFramework
SpectrumLicence
Spectrumand Orbit
Availability?
Service Licence
(landing rights)
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(5) Finance
Strategic Alliances
Joint Ventures
Partners
Equity
Quasi-Equity
Debt
Cash Flow
Risk
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(5) Corporate
CorporateGovernance
LocationTax
Structure
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(5) Market
Solution
CustomerRequirements
MarketSize
Marketing
Price
Competition
Distribution
Billing
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(5) Five Interlinked Parallel Processes
SatelliteCustomer Terminals
Ground NetworkLaunch VehiclesInterconnections
Gateway Terminals
Capacity
Build or buy?
Newvs.
Tested?
Qualityvs.
Cost?
International (ITU)and Domestic
RegulatoryFramework
Spectrumand Orbit
Availability?
SpectrumLicence
Service Licence
(landing rights)
Strategic Alliances
Joint Ventures
Partners
Equity
Quasi-Equity
Debt
Cash Flow
Risk
Solution
CustomerRequirements
MarketSize
Marketing
Price
Competition
Distribution
Billing
CorporateGovernance
LocationTax
Structure
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(5) The Market
• Understanding the market is a key part of the planning process
• Analysing the market means understanding:– The demand for your product or service– Your ability to satisfy the market demand– The competition– Your expected share of the addressable market– Price sensitivity– Launch timing
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(5) Market Analysis Steps
• Marketing audit– Internal factors – the company environment– External factors – market research
• SLEPT analysis• SWOT analysis• Strategic marketing plan
– Product performance– Pricing and profitability– Product positioning– Launch activities and timing– Advertising and promotion
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(5) SLEPT Analysis – The market environment
• Social and cultural– Structure of society– Family life, education– Demographics, language, values, beliefs
• Legal and institutional– Operating restrictions– Licensing regulations– Spectrum allocation policy
• Economic– GDP, state of economic development– Per capita income, disposable income– Currency & exchange rate stability
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(5) SLEPT Analysis (2)
• Political– Political risk factors (e.g. stability of government… very
important)– Trade barriers– Tariff barriers– For satellite projects local sensitivities to non-domestic
broadcasts are very important
• Technical– How the service will be used– Infrastructure support– Specific local conditions
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(5) SWOT Analysis
• Strengths– The internal strengths of the organisation
• Weaknesses– The internal weaknesses of the organisation
• Opportunities– The external opportunities of the business
• Threats– The external threats to the business
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There are many marketing tools…
• Balanced score cards• Benchmarking• BCG matrix• Competitor profiling• Concurrent engineering• Core competencies• Customer satisfaction surveys• Discounted cash flow• Delphi techniques• Dynamic simulation models• Environmental scanning• Experience curves• Gap analysis• Integrated value chain analysis• Kaizen and Kanban• Learning organisation• Life cycle analysis• Market value added
• Mission statements
• Nominal group technique
• 4-Ps
• 5-Forces (Porter)
• 6-Sigma
• 7-Ss
• PIMS analysis
• Portfolio analysis
• Psychographics
• Quality circles
• Re-engineering
• Scenario planning
• Shareholder value analysis
• Strategic planning
• SWOT analysis
• Technology S-curves
• Value chain analysis
• Visioning
Source: Management Tools & Techniques, Bain & Co. & Strategic Planning Society, 1994
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(5) Creating Market Space
Present Needs
Latent Needs(customer unaware)
Future Needs
Manifest Needs(customer aware)
Lead UserStudies
SatisfactionSurvey
ObservationalStudies
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(5) Putting it all together…
• Having done al this analysis and work sit down and write the…
Business Plan
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(5) The Business Plan (1)
Typical Business Plan headings…• 1. Introduction • 2. Business objectives
– 2.1 Have all the relevant factors been considered and has the business been defined in a sufficiently specific manner?
– 2.2 Can the business compete in the marketplace? – 2.3 Can operations be initiated in a timely fashion to
meet the aspirations of the most attractive markets?
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(5) The Business Plan (2)
• 3. SWOT analysis • 4. Strategic marketing plan
– 4.1 Market drivers and inhibitors • 4.1.1 Market drivers - supply side
• 4.1.2 Market drivers - demand side
• 4.1.3 Market inhibitors - supply side
• 4.1.4 Market inhibitors - demand side
– 4.2 Target addressable markets – 4.3 Market size and trends – 4.4 Market assessment assumptions / total addressable markets – 4.5 Competition, satellite addressable markets and market share
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(5) The Business Plan (3)
– 4.6 Estimated market share achievable – 4.7 Strategic marketing plan
• 5. Summary of service and network definitions – 5.1 Traffic models – 5.2 Total traffic estimates – 5.3 Space segment resource estimates
• 6. Financial analysis – 6.1 Highlights – 6.2 Projected capital requirements – 6.3 Pricing – 6.4 Projected gross annual revenue, costs, profit and loss
• 6.4.1 Projected gross annual revenues 6.4.1.1 Cost of Revenue 6.4.1.2 Gross margin
• 6.4.2 Projected gross annual operating expenses
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(5) The Business Plan (4)
– 6.5 Price flexibility – 6.6 Projected cash flow statements, NPV and
IRR – 6.7 Sensitivity analyses
• 7. Overall conclusions and recommendations
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(5) Conclusions
• Planning is the key to success
• Make use of relevant and appropriate tools and techniques
• BUT be aware of their limitations
• Develop plans appropriate to your needs
• Be aware of and plan for the risks
• Follow the planning cycle
• Keep plans up-to-date
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Exercise C – Business Case
• A developing country wishes to provide telephone capacity over a 5 year period as follows
• The two options are– (i) a dedicated satellite system (NEWSAT)– (ii) leasing capacity from INTELSAT
• The characteristics of the two options are as follows:– Dedicated Satellite (NEWSAT)
• Transponder bandwidth = 36MHz• No of transponders/satellite = 24• Transponders are bandwidth limited• Satellite cost = $150M/satellite• Launch cost = $100M/satellite• Insurance cost = 25% of satellite + launch costs• Operations cost = $1.2M/year
Year 0 1 2 3 4 5
Circuits 2,411 5,125 7,840 10,550 13,270 15,984
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Exercise C – Business Case (cont.)
– INTELSAT Lease• Transponder bandwidth = 36MHz• No of carriers supported/transponder = 280• Annual lease charge =$1.5M
• The communications are via SCPC carriers with 30kHz allocated bandwidth.
• Assuming a financial discount rate of 14% as follows:
• Determine which solution is to be preferred.
Year 0 1 2 3 4 5
Value of 1 unit 1 0.88 0.77 0.67 0.59 0.52