Latin America has attracted major investments in the satellite markets throughout the years. The region encompasses South America, Central America, Mexico and all the Caribbean islands. Roughly 531 million people reside in this region. Latin America has the world’s fifth most populated nation, Brazil, and two of the four most populated cities, Mexico City and Sao Paulo. Two additional cities, Buenos Aires and Rio de Janeiro, have populations exceeding those of London and Chicago. These factors as well kept satellite business innovators around, even through current troubled economic times.

Space-Based "Land Rush"

The satellite frenzy surge began in the late ’90s with the dismissal of important trans-border regulatory barriers, with privatization of international satellite operators such as Intelsat and with World Trade Organization actions. Technology advances have also inspired the "land rush" of the past half-dozen years. One example is a single satellite such as Intelsat’s 907 now orbiting above Latin America at 27.5 degrees W. Built by Space Systems Loral (SS/L), the 907 is equipped with a payload of 98 transponders, 76 in C- and 22 in Ku-band, in 36 MHz equivalents. Combined with today’s digital compression and its multiplicative capacity, the latest satellite models are a far cry from the past.

Not to be outdone, Panamsat’s newest bird is its Galaxy 3C in orbit at 95 degrees W, above the equator just west of Colombia and Ecuador. Built by Boeing Satellite Systems, the 702 spacecraft sports a payload of 76 transponders, with 24 in C-band and 52 in Ku-band. These new spacecraft models are definitely not your grandparents’ 1,200 pound, 12- transponder HS 376 of 30 years ago.

Making Money In Troubled Times

At this point in time, 11 satellite operators are searching or are about to search for Latin American profits, during some very difficult economic and political times. With regulatory barriers down, several will advance beyond Latin America into the United States.

The three major players, in numbers of transponders and/or estimated revenues, are the industry’s three international giants: Intelsat, Panamsat and SES Global, which appear to have a collective 70 percent of the action so far in Latin America.

SES Global’s role is represented by Brazil’s Star One, spun off from Embratel, and Argentina-based Nahuelsat, operating the Nahuel 1 satellite at 71.8 degrees W. SES Global owns a 19.99 percent participation in Star One, and a 28.75 percent participation in Nahuelsat.

Star One operates a cluster of Brasilsat C-band satellites and has started to construct its new Star One Series C1 satellite. As part of its deployment plan, Star One considered ordering two new satellites to replace Brasilsat B1 and Brasilsat B2, both in the 2006-2007 timeframe. Initially, C1 was designed to be totally Ku-band but management is now considering a change to a C-/Ku-band hybrid since the region has shown a reduction in market size due to the current economic situation in South America. With this new environment, Star One believes there is only room to launch two satellites in the next three years. Since one of its current orbital slots has both Ku- and C-band licenses, the solution is to have one of the replacement satellites changed into a hybrid.

SES Global’s SES Americom is on the fringes of the Latin America land rush. Thirteen of Americom’s satellites already have regulatory approvals to provide services to and from Latin American states.

Star One, in addition to its relations within the SES Global family, is also leasing capacity from Canada-based Telesat’s Anik F1, located at 107.3 degrees W, for VSAT and broadband IP services managed by Gilat. By late this year, the Boeing 702 Anik F2, designed for commercialized Ka-band, is scheduled to be launched with a footprint over North and Latin America giving the Canadian operator a stronger play within this region (Editor’s note: Star One does not plan to use Anik F2).

In addition to the above players, there is also U.S.-based Loral Skynet and its associations with Satmex and Estrela do Sul in the Loral Global Alliance; European-based New Skies; and Spain-based Hispasat. All of the players have been worrying about Latin America problems beyond their control, and the global uneasiness of war.

Beware, All Of You

One voice in the crowd is that of Maria Velez de Berliner, president of U.S.-based Latin Trade Solutions Inc. "There are excellent opportunities for telecommunications in Latin America, particularly in communications and financial transaction security, satellite-based competitive intelligence gathering, biometrics and military intelligence," she says.

Needless to say, however, Berliner strongly warns satellite operators about "the unstable political and economic climate in which companies will have to operate. Without relative stability, the region will continue to stagnate or decline."

She identifies factors that "will contribute to instability and delay recovery." Among those factors is the Venezuelan crisis that she believes will continue until President Hugo Chavez is ousted, and the growing guerrilla insurgency in Colombia spreading to Ecuador, Peru and Venezuela that must be halted. She also notes the renegotiations by Argentina of privatization contracts, and the seeming disregard by the U.S. government of international security threats in the region.

In addition, Berliner says, "The Triple Frontier (Brazil, Argentina and Paraguay also known as Brasiguaya) is a flash point for terrorist and illegal activities." Finally, she adds, "If the war in Iraq is a protracted one, a negative impact on the region will be sizeable."

Will DTH Providers Fold?

Another major problem in Latin America is the satellite direct-to-home (DTH) television marketplace. Steve Blum, owner of Tellus Venture Associates, is a U.S.-based international consultant specializing in direct-to-home projects. He has closely followed the situation in Latin America.

"The DTH business will not drive transponder demand in Latin America for the next few years," he says. "Of the four DTH systems in the region, two are slipping out of sight and a third has filed for bankruptcy."

Blum adds, "Tecsat in Brazil has struggled to keep a subscriber base of, maybe, 100,000 homes. The rapidly declining value of the Brazilian currency has made business all but impossible, indicating the company would do very well to keep its five transponders on Intelsat 705 lit through 2003."

As for TdH in Argentina, says Blum, "They still occupy two transponders on Nahuel 1 but they have slipped completely below the radar as a true DTH enterprise."

DirecTV Latin America, he adds, has been in a gradual decline, having lost roughly 100,000 subscribers in the second half of 2002, and expecting the decline to continue in the early months of 2003. "DirecTV Latin America has to pay for its transponder time (albeit to a sister company, Panamsat) and for programming primarily in U.S. dollars. Local currency devaluation(s) have pushed it into Chapter 11," he says. DirecTV Latin America occupies 28 Ku-band transponders on Panamsat’s Galaxy 3C satellite.

But some improvements within the DTH community are surfacing. "Sky Latin America is doing much better," says Blum. "Its owners–News Corp., Televisa, Globo and Liberty Media– all have significant programming interests and can offset distribution platform losses, if any, with income credited to content ownership. Sky is much stronger than DirecTV in Mexico where the economic crisis has not been as severe. Sky’s stated goal of one million subscribers each in Mexico and Brazil by the end of 2003 is not unreachable."

Should Sky take over DirecTV Latin America? Though no public business announcement regarding such a deal was commented upon, such a transaction would likely hurt Panamsat. In addition to the 28 transponders it provides to DirecTV Latin America on Galaxy 3C, it also provides 37 transponders to Sky on the PAS 6B and PAS 9 spacecraft, including 12 Ku-band transponders on PAS 9 for Sky Mexico’s DTH service, delivering more than 160 channels directly to consumer homes.

Addressing Challenges

The late Rene Anselmo was the colorful founder of Panamsat. He watched his uninsured PAS 1 satellite successfully launch in the first Ariane 4 vehicle on June 15, 1988. The 2,690 lb. spacecraft parked above Brazil at 45 degrees W, and Anselmo had a landing agreement with Peru, his company’s first customer. Today, of Panamsat’s 22 satellites worldwide, 14 are currently providing services to and from Latin America.

Panamsat’s Vice President for Latin America, Carmen Gonzalez-Sanfeliu, recently listed the company’s most important challenges for 2003. They include pricing volatility among competing satellite providers; local currency fluctuations; increased competition; excess transponder capacity; the region’s widespread economic recession; the debt load of companies in the region; and the satellite industry’s transforming of "bandwidth only" into a purely commodity business.

As to excess transponder capacity, she says, "With 11 satellite operators in Latin America, and more than 25 satellites offering coverage, I would definitely say there is an oversupply of transponder space for the region."

Asked about the status of Panamsat’s largest single customer in her region, she says, "DirecTV Latin America has acknowledged that the economic deterioration in the Latin America region has put the company under pressure to restructure its debt."

A Demand For Solutions

Ruben Levcovitz, regional vice president for Intelsat’s Latin America sales, says, "The decline in the overall market size in 2002 was due largely to currency devaluation in Argentina, Brazil and Venezuela rather than structural problems such as oversupply."

TV revenues in Latin America, he adds, are expected to triple between 2000 and 2010. "Overall, the region has experienced tremendous growth in the market for satellite services. With the gradual elimination of regulatory barriers and the emergence of competition, the market for satellite operators has grown 20 percent annually throughout the last five years."

He says the greatest opportunities for Intelsat in Latin America have been in two areas: the growing video community on the 805 satellite located at 55.5 degrees W and the broadband solutions offering by the satellite operator.

"We have found there is a growing demand from broadcasters and programmers in Latin America for greater distribution services, and we have found that our 805 satellite is well- suited to meet that demand. Our 805 offers simultaneous coverage of all of South America, Mexico, the Caribbean, the 48 contiguous U.S. states and part of Western Europe in a single beam," he says. In addition, Brazil’s giant television broadcast and cable network, TV Globo, has recently signed a major contract for capacity on the 805 satellite.

Last February, the 907 satellite with its 98 transponders, was successfully launched. This completes launches of the Intelsat 9 series. Four of the seven 9 series satellites, including 907, are located in prime orbital slots over Latin America.

Dealing With Delays

Loral Space and Communications Corps.’ Loral Skynet will soon launch a series of delayed spacecraft that will increase the company’s presence throughout the Latin American region. Telstar 8 to 89 degrees W, Telstar 13 to 121 degrees W and, through its Brazil subsidiary, Telstar 14/Estrela do Sul at 63 degrees W will become the newest spacecraft to offer capacity to this area. Telstar 13 will have a payload of 58 transponders, of which Echostar Communications Corp. will own 34 Ku- and Ka-band high-powered transponders.

At press time, Loral Space and Communications executives estimated that Telstar 13 would probably launch in mid-2003. In addition, Telstar 8 will complete manufacturing in mid- 2003, but will be stored until market needs improve, and Telstar 14/Estrela do Sul is slated for launch in the second half of 2003.

Likewise, Satelites Mexicanos (Satmex) has also weathered delays in fleet additions. In January, Satmex delayed the launch of SS/L-built Satmex 6. The 1300 spacecraft will carry 36 C-band and 24 Ku-band transponders. The launch to 109.2 degrees W is now expected to occur in the late summer.

Other Players On The Horizon

Hispasat, founded in 1989 as a state initiative in Spain and privatized in 1996, currently operates five satellites but plans, through a Brazilian subsidiary named Hispasat do Brasil, to construct and launch in 2004 the Amazonas satellite to 61 degrees W for a stronger Latin American business play. The spacecraft will have a payload of 36 Ku-band and 27 C-band transponders. In contrast to its Spanish counterpart, the Netherland-based New Skies Satellites N.V., has changed its plans for its NSS 8 spacecraft. Originally eyeing the Latin American region, NSS 8, scheduled for a late 2004 launch, has currently been moved to the Indian Ocean region. But in an effort not to lose market play in Latin America, New Skies and Intelsat will share selected transponders from each company’s inventory.

The Rush Is On

This space-based land rush currently has a number of contestants and, probably, too many transponders for the Latin America geographic rectangle despite the region’s half- billion residents. With new satellites featuring nearly 100 transponders, it seems inevitable that some players will be absorbed in corporate consolidations. After expensive sifting for gold, which of them will be gone by 2005? Market developments will tell.

Robert N. Wold, based in California, may be reached at [email protected]