The launch of Satmex 6 on an Ariane 5 ECA May 27 was the best news Satelites Mexicanos S.A. de C.V. (Satmex) and the Latin American region has received for some time.

But in the near term, the Latin American market will face more challenges before it becomes robust enough for sustained growth. Analysts at Aon Explorer forecast that the satellite market will continue expanding, growing to 694 transponders by 2014. Likewise, they see a 3.2 percent compound aggregated growth revenue (CAGR) and revenues from operations expanding to $834 million by the end of 2014.

Within the next 10 years, Aon Explorer expects C-band services will remain strong in the region, though declining to 66 percent by 2014. Television is expected to continue to generate nearly half of the demand for satellite transponders, while the Internet share is forecast to expand to 39 percent by 2014.

In addition, industry analysts at Frost and Sullivan predict, in the case of networking applications, the demand for satellite transponders most likely will stem from higher bandwidth requirements in videoconferencing, distance learning and telemedicine, especially within large countries such as Argentina, Brazil and Mexico.

With the addition of the Space Systems/Loral-built Satmex 6, Satmex adds substantial capacity to its fleet, with 36 C-band transponders and 24 Ku-band transponders providing coverage of Mexico plus most of North America and Latin America. The new spacecraft joins a pair of C-/Ku-band satellites – the Boeing 601HP Satmex 5 and Boeing 601 Solidaridad 2. Analyst Maria Velez de Berliner, president of Latin Trade Solutions, says that Satmex 6 is a pretty interesting satellite in terms of the capabilities it brings to the region. Andrea Maleter, technical director for Futron Corp, adds that this satellite gives the breadth of coverage, the kind of coverage and the higher power capacity needed to realize emerging opportunities in the Latin American market.

But for Satmex executives, having another spacecraft to sell in a challenging market, coupled with the company’s ongoing financial restructuring, raises more challenges than solutions. With little uptick on the emerging opportunities front and the continued oversupply of satellite capacity shadowing the region, garnering actual business revenues from this investment will be challenging at best.

In addition to the oversupply of satellite capacity, Satmex will have a battle on its hands as it tries to compete against the likes of a combined Intelsat-Panamsat. Fleet consolidation between the two global operators means some duplicated services likely will be eliminated, but the new Intelsat can then increase transponder capacity in the Latin American market. According to Velez de Berliner, she sees the future of the Latin American satellite industry resting with big players and suspects the future of Satmex will involve it being acquired by a venture capital fund looking to score a quick profit by flipping the satellite operator.

The question then remains, who will take Satmex?

Understanding the cycles and foreseeing the local problems always is a key in doing business within local markets, but it seems to be even more important in Latin America. There is already a tremendous amount of investment in Latin America that is slowly being paid off. In particular Latin American governments have vested considerable amounts of money in the satellite industry by initiating programs to increase connectivity across villages, schools, universities and colleges through satellite-enabled broadband solutions. Such programs have been a driver of the satellite industry in recent times and are expected to increase the satellite bandwidth consumption in the region for the near term. But this market remains a risky endeavour.