www.nsr.com © 2016 –NSR
September 13, 2016
Satellite Industry in Transition
VSAT 2016
Christopher Baugh
President
NSR
Industry Benchmark
Where Are We Now?
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The Satellite Industry Today- What Do We Know?
0
400
800
1,200
1,600
2,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gb
ps
Global Satellite Supply & Demand, 2006-2016Commercialized Supply (Gbps) Total Demand (Gbps)
Softening
of Gov & Mil Market
Demand
Glut of Capacity-
HTS Looming Large
Supply
Energy Market
Collapse
Demand
Service Provider &
Vertical Consolidation
Supply + Demand Brazil and
Russia Economic
Issues
Supply + Demand
And MORE…
2016 & Beyond
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Pricing recently has been flat to slightly negative, but these
forces are accelerating
Pricing pressures have not been felt equally across regions, but all regions have seen recent declines
4
Pricing Pressures Are Not New…But They Are Accelerating
$2,000
$2,500
$3,000
$3,500
$4,000
2010 2011 2012 2013 2014 2015
US
D p
er
MH
z
C-band Data Pricing by Region, 2010-2015
NAM LAM WEU CEEU MEA APAC
$2,000
$2,500
$3,000
$3,500
$4,000
2010 2011 2012 2013 2014 2015
US
D p
er
MH
z
Ku-band Data Pricing by Region, 2010-2015
NAM LAM WEU CEEU MEA APAC
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FSS Has Seen Peak Growth
$0
$500
$1,000
$1,500
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$2,500
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$3,500
$4,000
$4,500
2006 2008 2010 2012 2014
Millio
ns
of R
ep
ort
ing
Cu
rre
ncy
Top-Line Revenues by FSS Operators, 2006-2015
5
• Top-Line revenue growth has leveled off
• Current business model running out of steam in face of Moore’s Law
• Downward pressure on data is greater than upward growth for video in developing world
• Developing world sees stronger demand for video, but also more acute pricing pressures for data
Others
Intelsat
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“Big Four” EBITDA Margins
Telco Players EBITDA Margins
And What’s the Impact on Bottom Line?
10%
20%
30%
40%
50%
60%
70%
80%
2011 2012 2013 2014 2015
EB
ITD
A M
arg
in
EBITDA Margin by Telcos & Big Four, 2011-2015
AT&T BT Deutsche Telekom Telefonica T-Mobile USA Vodafone Verizon Big Four
6
Telco business model is…
• High CAPEX
• High data throughput
• Relatively high OPEX due to distribution network
Satellite has remained
“special”.
This will change to some
extent, and EBITDAs will
fall because of evolving
business models
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• Launch failures notwithstanding, how many companies have been acquired, or are known acquisition targets today?
• AND what are the ramifications?
7
The Trend of Consolidation
Looking Forward
What Does Data Say About Tomorrow?
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What Will Supply Look Like Moving Forward?
9
Overall capacity to increase by ~4X in GEO
Majority is lower-cost GEO-HTS capacity,
needing new applications to soak up supply, or lead to a ”sky
falling scenario.”
Non-GEO HTS > 50% of total capacity by 2025
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Gb
ps
Global Capacity by Type, 2015-2025 (Gbps)
C-band Ku-band Ka-band GEO-HTS C-band GEO-HTS Ku-band GEO-HTS Ka-band Non GEO-HTS
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About the ABC’s For Growth: Aero, Backhaul, Consumer Broadband
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400
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800
1,000
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2015 2017 2019 2021 2023 2025
Gb
ps
Satellite Capacity Demand by Application (Excl. Broadband), 2015-2025
Video FSS/HTS Mobility FSS Data HTS Data
10
$0
$2
$4
$6
$8
$10
$12
$14
$16
2015 2017 2019 2021 2023 2025
US
$ B
illio
ns
Satellite Capacity Revenues by Application (Excl. Broadband), 2015-2025
Video FSS/HTS Mobility FSS Data HTS Data
22x Increase in HTS
Demand Yields….
4x Increase in HTS Revenues….
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And Prices Drop and Converge
27
• Large price drops for FSS, and more generally, pricing convergence
• But this need not be the end of the world
• Cost per Gbps to orbit dropping as fast or faster than capacity pricing
• And thus lower prices need not equal lower cash flows
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
US
D
Average Cost per Mbps per Month by Application
FSS Enterprise Data HTS Enterprise Data
FSS Commercial Mobility HTS Commercial Mobility
$1
$10
$100
$1,000
1990 1995 2000 2005 2010 2015 2020 2025
Co
st
pe
r G
bp
s i
n-O
rbit
, $
M
Launch Year
Evolution of Cost per Gbps in Orbit
Traditional FSS Hybrid FSS-HTS HTS
Source: NSR
Looking Forward
So, Where Do We Go From Here?
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Where Do We Go From Here?
Generate $M
Make Mbps
Sell MHz
13
Service
Providers
SATCOM v1.0 Model
Yesterday: The SATCOM v1.0 Model
• Largely an FSS-centric Industry, everyone has their own ‘gears’
• Satellite Operators sell MHz to generate Revenues
• Service Providers sell Mbps to generate Revenues
• Video is Dominant
• High CAPEX, Low OPEX
End-Users Think:
“Do I Really Have to Use Satellite?”
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Where Do We Go From Here?
14
Generate $M
Make Value
Sell Mbps
Service
Providers
SATCOM v2.0
Tomorrow: The SATCOM v2.0 Model
• Only the Best/Good (And likely Cheapest) survive
• Satellite Operators sell Mbps to generate Revenues
• Service Providers sell Value to generate Revenues
• Infrastructure is Marginalized
• Hardware is commoditized
End-Users Think:
“Satellite… You Sure it’s Satellite?”
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Answering the Elasticity Question
15
Elasticity will depend on the Market AND the Specific End-user – No “One Curve Fits All”
Does Lower Pricing =
More/New Demand ?
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Someone Needs to Build It:
• Ground equipment yet to see revolutionary progress
• We are seeing more bits per hertz and lower prices, but not of the same magnitude as we have seen in the sky with FSS to HTS
• What happens when we do? Does 5 bits per hertz = a huge addressable market, or does it spell a plummet in cost paid per MHz?
16
What About Ground-Segment Markets?
2015-2025 Ground Equipment Revenue
Growth by Segment
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Going Flatter Key to Getting Bigger?
17
0
3,000
6,000
9,000
12,000
15,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sh
ipp
ed
Un
its
Global Flat Panel Antennas- Shipped Units by Vertical Market - Mobility
Aero Commercial Maritime Commercial Land Commercial Land Govt.
Source : NSR
Go Light, Go Flat- The need for COTM without
slowing down troops.
Flying Out?- $391M in revenues expected
by 2025.
Sailing Away on the Oceans- The maritime industry a profitable
launchpad for electronically steered
flat panels.
Once Bitten, Twice Shy?- The commercial land-mobile market
has the potential to drive FPAs.
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Bottom Line18
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Bottom Line
19
Welcome to the data-centric telco world!
All about the ABC’s and the 3-C’s: Aero, Backhaul, Consumer optimized by Cost,
Coverage, Capacity
Be early to market with GEO-HTS
Build out distribution chain to allow for one-
stop-shop business model
Invest in new ground equipment to get
more bits per hertz, cheaper customer TCO,
etc.
Get closer to the customer and reduce
friction
Northern Sky Research, LLCOne Mifflin Place, Suite 400
Cambridge, MA 02138
www.NSR.com@NSR_SATCOM
[email protected]+1 617 674-7743
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