Despite the ongoing impact of the Arab Spring protests and a dramatic re-ordering of political affairs still reverberating, the Middle East region remains a key growth area for commercial satellite industry.
This was the assessment of Gordon McMillan, Director of Government Services for global satellite network provider Inmarsat, who projected that the global government and military communications will rise to US$9 billion by 2018 with the Middle East becoming a key growth region for the commercial satellite industry because of the exponential demand for greater bandwidth.
“As military budgets come under increasing pressure, the commercial satellite industry fulfils an increasingly greater proportion of the communications needs of government and military customers,” said McMillan, who spoke at Milsatcom Middle East held at Abu Dhabi on January 24, 2012.
McMillan said that in the future, fewer dedicated military satellite communications systems will be launched, and military forces will need to augment military systems with greater use of commercial satellite communications networks.“Commercial satellite communication systems that are designed with military and government users in mind will provide these users with a greater degree of flexibility in how they fulfil their communications requirements, for land, sea and air operations.,” he added.
New Satellites for the Region
Proof of the growing confidence on the continued growth of the satellite industry in the region is the number launches scheduled for 2012. Global satellite operator SES S.A. is set to launch this first quarter SES-4, a 20-kilowatt satellite with 52 C-band and 72 Ku-band transponders. SES-4 will have C-band beams that will serve the eastern hemisphere of Europe and Africa, full coverage of the Americas, and a global beam to support mobile and maritime customers. Four high-power, regional Ku-band beams will provide service to Europe, the Middle East, West Africa as well as North and South America with extensive channel switching capability between C- and Ku-band transponders for enhanced connectivity.
The new satellite is based on Space Systems/Loral’s 1300 platform and designed to deliver services for 15 years or more. In a further show of confidence in the MENA region, SES moved its SES –3 satellite from its postiion in North America to the Middle East and South Asia in January.
Al Yah Satellite Communications Company (Yahsat) will launch its second Yahsat satellite in early April from Baikonur. Yahsat 1B will be placed at 52.5° East on a geo-stationary orbit and will operate for no less than 15 years. It will provide broadband satellite communication, Internet and corporate data transfer services to military and civilian customers in the entire Middle East, Africa, Europe and Southwest Asia.
The first Yahsat satellite was successfully launched by Arianespace on April 22 last year, alongside Intelsat’s New Dawn satellite. Both Yahsat satellites are based on Astrium's Eurostar-3000 models and carry Ka-band communications payload, a launch mass of 6,000 kg, and an electrical power of 15 kW.
Yahsat, a wholly owned subsidiary of Mubadala Development Company, the Abu Dhabi Government’s investment arm, signed in August 2007 an agreement with a European consortium comprising of EADS Astrium/Thales Alenia Space to manufacture the two-satellite system worth US$1.66 billion.
The Yahsat venture is the latest phase in Abu Dhabi’s strategy to become both a regional telecommunications and media hub. The move forms an important part of its plan to diversify its economy away from its current reliance on oil, under its ‘Economic Vision 2030’.
The Gulf emirate of Abu Dhabi already has a majority stake in the region’s Thuraya mobile satellite communications venture, while the Abu Dhabi government-owned Aabar Investments also holds a 32 percent stake in Virgin Galactic, the first commercial space flight initiative from British entrepreneur Richard Branson.
Eutelsat Communications is also set to loft W6A, a 40-transponder Ku-band satellite, in the third quarter of 2012. W6A, to be built by Thales Alenia Space, will enable a 50 percent increase in capacity operated at 21.5° East, where it will be located in geostationary orbit. W6A satellite will replace Eutelsat‘s W6 craft at a core neighborhood anchored for data, professional video and government services across Europe, North Africa, the Middle East and Central Asia.
In the meantime, Israel-based Spacecom Satellite Communications Ltd.’s Amos 5 communications satellite began commercial operations during the last week of January after it was lofted on December 11 last year after lengthy delays.
Amos 5 is Spacecom's first satellite that was not built by Israel Aerospace Industries Ltd., a former Spacecom shareholder, but was built instead by Russia-based JSC Information Satellite Systems-Reshetnev Company, which had to reportedly pay fines of $13.5 million for late delivery from the Amos 5's US $200 million cost.
Amos 5 is aimed at Africa’s emerging satellite services market, taking position at the new 17 East location. The satellite features a fixed pan-African C-band beam and three steerable Ku-band beams – all covering Africa with connectivity to Europe and the Middle East and supporting multiple transponders in both C-band and Ku-band.
Together with the Amos 2 and the Amos 3 satellites co-located at Spacecom’s 4° W orbital “hot spot,” the Amos 5 satellite will give the company’s customers coverage over many of the world’s fastest growing and highest-demand satellite markets in the Middle East, Central and Eastern Europe, Central Asia and Africa. With an expected lifetime of 15 years, Amos 5 sports 18 Ku-band and 18 C-band transponders, providing a variety of coverage, including Direct-to-Home) DTH broadcasting services.
Also on October 13 last year, Arab Sa-tellite Communications Organization (Arabsat) successfully launched Arabsat 5C, its third satellite of the fifth generation, from French Guyana in South America by the Ariane-5 Rocket. Arabsat-5C is a multi-mission satellite which now provides satellite capacity in both C-band and Ka-band frequencies at 20°E, for a wide range of satellite communications services over a coverage area including the whole of Africa and the Middle-East. The satellite is based on Astrium’s Eurostar E3000 product line, with a launch mass of 4770 kg and a spacecraft power of 10 kW at the end of its 15 year design lifetime.
Arabsat owns an integrated fleet of satellites that provides all communications and TV satellite broadcasting services with a full pack- up in orbit on all Arabsat positions 20, 26 and 30.5 degree East.
Middle East Pay-TV Springs to Life
The Middle East and Africa (MENA) have the fastest-growing pay-TV markets in the world with subscription rates expected to treble between 2011 and 2015. In 2000 there were just over 2.5 million pay TV subscribers across the region. But by the end of 2010 that total had more than trebled to 9.2 million and expected to have hit the 9.6 million mark by the end of 2011.
According to a recent research from Informa Telecoms and Media, record numbers of households across the Middle East and Africa are signing up for pay-TV and subscribers will surpass 10 million this year.
“Until now, pay TV has been very much targeted at affluent demographics, either wealthy locals or well-paid foreign workers” says Adam Thomas, Informa’s Media Research Manager. “But services like Al Jazeera Sport are increasingly putting the cost of pay-TV within the grasp of the mass market. If you add to that the Arab Spring movement, with one of its aims being to close the income disparity gap, then you have a situation that is increasingly positive for pay-TV.”
A Pyramid Research study confirms the healthy growth of pay-TV in the Middle East and predicts that subscription rates are expected to treble between 2011 and 2015. The study said subscriber numbers will achieve a compound growth rate of roughly 11 percent a year over the next five years.
Revenues for the sector will double, while overall penetration will achieve a compound annual growth rate of 9 percent, with pay-TV services reaching 16 percent of homes in the region by 2015.
Many in the pay-TV industry have long been pointing out that still more "aggressive" increases were possible if certain barriers to growth —including weak "last mile" infrastructure, a lack of competition and a lack of content — were overcome.
Although pay-TV services currently experience high costs and limited reach in the region, satellite experts point out that infrastructure problems can be sidestepped by mobile networks replacing fixed-line networks in some areas.
“The lack of fixed infrastructure and the dominance of mobile access in most African countries constitute a huge opportunity for mobile operators to become the main pay-TV providers in Africa in the long term,” says Mehdi Ben Said, senior analyst of Pyramid.
TV via Satellites Dominate
Satellite, both pay and free-to-air (FTA), remains the dominant platform in the region and there has been only limited cable and IPTV activity although IPTV, in particular, is growing fairly quickly, although from a very low base. Some fiber upgrades are being undertaken and there will therefore be pockets of IPTV-positive infrastructure, where the technology will thrive. But, in general, broadband penetration in the region remains low. IPTV is therefore restricted from even greater progress, both by this lack of broadband penetration and also by the fact that where broadband is in place it is not always suitably robust to facilitate IPTV provision.
Currently, there are over 500 FTA channels broadcasting on Arabsat, NileSat and Eutelsat. For the price of a low cost receiver, households can tune into FTA services. Operating costs are covered by various governments and private groups who are entering the market strategically; as a result, they may currently not be viable from a financial point of view. As a result of the plethora of FTA services in MENA, the adoption rate for satellite TV is upwards of 90%.
There are also fundamental issues to address, like how to get the sector to be run on a fully commercial basis. Much-needed consolidation among the main pay TV platforms has finally taken place, resulting in the creation of OSN, a subscription television service in the Middle East and North Africa. It has added some attractive premium content to its roster, but the most significant omission from its line-up is the most sought after sports content, particularly soccer.
The pay-TV industry is also confronting signal piracy, which may account for lost revenues of $500 million to pay-TV operators in the Middle East and North Africa according to news reports. As early as February last year, it is estimated that across the Arab world, around US$ 500 million is lost across the Arab world to those siphoning premium TV content without paying those who own the rights to legally distribute it, according to media consultant Ali Ajouz.
Industry sources have estimated that two million subscribers in the Arab world are lost to signal theft, with around 56,000 commercial operations redistributing pay-TV signals illegally. In the meantime, despite the recent social and political turmoil, rapid conversion to digital TV continues in the Middle East and Africa, according to Digital TV Research. Report author Simon Murray said digital penetration will reach 81 percent of TV households by 2016 and eight countries will achieve 100 percent penetration with Israel becoming the first to reach it. “Another bonus for the region's TV industry is the high birth rate, with nearly 20 million TV households to be added between 2006 and 2016,” he said.
Strategic Tie-ups
In the meantime, GlobeCast and Arabsat have announced in January that the Global Arabic Bouquet (GAB), a grouping of premium Arabic channels from the Arab States Broadcasting Union (ASBU) available anywhere in the world, is now located on the 5C satellite over Africa. GlobeCast, Arabsat and ASBU are partners for the worldwide distribution of the GAB providing all the technical services required for end-to-end delivery. The terrestrial delivery is done from Amman by Jordan Media City. This service via ARABSAT replaces the bouquet's previous distribution.
Since the launch of their partnership in 2004, GlobeCast, Arabsat and ASBU have expanded the Global Arabic Bouquet's potential viewership and footprint, offering a single global coverage to ASBU members.
Globalstar, Inc. announced in the last week of January that it has signed a letter of intent with Shahad Al Sahra Trading Est. (SAS), for SAS's ownership and operation of a satellite gateway ground station located in Saudi Arabia.
The gateway, which is already constructed, will provide Globalstar mobile satellite voice and data services to all of Saudi Arabia and throughout parts of the surrounding Middle East region. The transaction would also provide SAS as the independent service provider, with access to one of the world's largest remote petrochemical exploration markets.
Belgium Satellite Services and Intersat Africa Limited have also recently forged a strategic tie-in to expand Into the Middle East and Africa. Intersat currently offers Internet via satellite connectivity to major organizations, government institutions and the private sector through the African continent and the Middle East. The company has invested in new technologies to make service delivery more efficient and reliable.
Thuraya, the Dubai-based mobile satellite operator, signed in January a service partner agreement with Africell Holding, a subsidiary of Lintel Holding. The partnership will allow Africell, one of Africa’s GSM operators, to provide Thuraya’s data and voice services in Gambia, Sierra Leone and the Democratic Republic of Congo.
Although Middle East oil exports are expected to decline a little from US$793 billion in 2011 to US$725 billion in 2012, according to the Institute of International Finance, the still high level of revenues will continue to spur government spending for infrastructure development. It said that years of US$ 100 oil prices have already left Gulf States in the pink of economic health and Gulf economies which grew 7 percent despite global and regional turmoil in 2011 will see a slightly lower growth rate in 2012. Many economists believe Gulf States will continue to be persuaded to invest in big ticket projects such as telecoms development, which augur well for the satellite industry.
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Peter I. Galace is editor for Asia Pacific of Satellite Markets and Research. He writes extensively on telecommunications and satellite developments in Asia for numerous publications and research firms. He can be reached at peter@satellitemarkets.com
