Satellite Industry in Transition - Amazon...
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www.nsr.com © 2016 –NSR
September 13, 2016
Satellite Industry in Transition
VSAT 2016
Christopher Baugh
President
NSR
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Industry Benchmark
Where Are We Now?
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The Satellite Industry Today- What Do We Know?
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400
800
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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
$2,000
$2,500
$3,000
$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
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• 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?
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The Trend of Consolidation
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Looking Forward
What Does Data Say About Tomorrow?
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What Will Supply Look Like Moving Forward?
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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
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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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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
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$0
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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
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• 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
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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
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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
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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?
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0
3,000
6,000
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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
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