[08/17/07 – Satellite News] Al Yah Satellite Communications Company (Yahsat) is aiming to become a major force on the satellite landscape in the Middle East. The satellite operator, a wholly owned subsidiary of Mubadala Development Company, a UAE-based company, is spending big to rival other satellite operators in the Middle East. On August 8, it signed a major deal with leading European satellite companies EADS Astrium and Thales Alenia Space regarding the buildout of a dual satellite communications system, costing more than $1.6 billion. The two satellites are scheduled to be launched in the second half of 2010.

The deal will enable EADS Astrium and Thales Alenia Space to design and construct Yahsat’s two satellites from design concept to post-launch. Both satellites will be launched within months of one another, allowing Yahsat to provide customers with solutions for broadcasting services, Internet trunking via satellite, corporate data networks and backhauling services to telecom operators. The Yahsat satellites aim to fulfill the satellite communication requirements of both government and commercial customers in the Middle East, Africa, Europe and Southwest Asia. The system is designed to accommodate the trends of emerging applications in the satellite industry like High-Definition TV (HDTV) and other broadband satellite services.

In a major exclusive interview, Satellite News talks to Yahsat CEO, Jassem Al Zaabi about the operator’s plans. Al Zaabi outlines the opportunity for Yahsat, and why despite the presence of many satellite operators in the market, he is convinced Yahsat will succeed.

Satellite News: Could you tell us the significance of the deal with EADS Astrium and Thales Alenia to build the new satellite system? Can you give us a timeline of what is going to happen now?

Al Zaabi: It is very important project for Mubadala, the shareholders of Yahsat, and for the government of Abu Dhabi. Basically, it signals the commitment of the Abu Dhabi government and Mubadala towards a large investment high-tech project. Also, it positions Abu Dhabi as a hub for the regional telecoms industry. We have signed with EADS Astrium and Thales Alenia Space for the manufacture of two satellites. The first satellite will be launched by the second half of 2010. When choosing the partners, we, of course completed a comprehensive review of the satellite suppliers in the market. We launched a competitive bid process but for the last two months, we have been exclusively talking to EADS and Thales. Honestly, all the other competitors did a great job, but eventually, when we looked at our satellite and market requirements, we saw that the consortium’s technology offered the best option for our system.

Satellite News: Could you tell us about the Yahsat project and the significance it will have in the Middle East? What are the major challenges for the project over the next two years?

Al Zaabi: At the moment, there is a scarcity of capacity over the Middle East. There is a very healthy demand for capacity in this region, despite the numbers of satellite operators and players in the market. The competition is not yet able to provide all the capacity that is needed, and most importantly, applications in the market. We see that the region needs the satellite industry services to keep growing. The market needs more capacity, and more satellite applications. On the commercial side, we are going to provide very strong beams over the Middle East and Africa. It will provide unique uplinking facilities. There will be a lot of connectivity between different beams and different frequencies due to the dynamic connectivity features on the satellites.

Satellite News: A second satellite is due to be launched in 2010. Why do you need the extra capacity? Could you tell us the demands you expect for capacity on both Yahsat satellites? Are you looking beyond the launch of these two satellites?

Al Zaabi: A big chunk of our capacity has already been committed to and we are in final discussions with those anchor clients. Our major client is the government; we will have government and military clients within the UAE. We’ll probably announce it in the next two to three months who those clients are. We believe the capacity of those two satellites will be consumed in the market within a window of 2010-2012. We are hoping that by the time we launch the first satellite, we will have sold 50 percent of the satellite commercial capacity. It’s our vision to eventually operate more than two satellites but at this stage, we have no confirmed plans.

Satellite News: How much capacity would Yahsat have to sell for the initiative to be profitable? When do you expect to reach this point?

Al Zaabi: Our shareholders have decided to comment on this issue at a later date. What I can say is that Yahsat’s potential returns will be very attractive. But, this is a shareholder matter.

Satellite News: What does Yahsat bring to the satellite landscape in the Middle East. With satellite operators such as Arabsat and Nilesat already present, why is there a need for extra satellite capacity in the region?

Al Zaabi: The question is more about the users than the competition – it’s a matter of demand. I believe all the competition is doing a great job in this market. However, demand is outstripping supply today in the market. When Mubadala looked at the market in depth we could see that there was a demand emerging for a new player to enter the field, and so decided to pursue this opportunity.
We are a regional company, and we are going to focus on the Middle East, Africa, parts of south Asia, and Europe. In terms of Europe, we want to be a facilitator for uplink and downlink services for our clients in the Middle East and Africa. We see Africa as a prime market for us. However, it is difficult to break it down on a country-by-country basis.

Satellite News: While some of the capacity will go to government and military applications, do you expect there to be strong interest from commercial organizations for this capacity?

Al Zaabi: We are in the final negotiations stage for government and military capacity on the satellites and this is going to be fully sold out. Whatever is left will be sold for commercial applications on the satellites. In other areas of the market, we will be able to support things like HDTV in the region. We hope that we can promote a new hotspot at 52.5° East. We believe Yahsat will enjoy a solid market share in the media market out of the UAE, and that this will grow further as the region develops.

Satellite News: Why do you think broadcasters who have traditionally done deals with other satellite operators would look to partner with Yahsat?

Al Zaabi: This is a question we have been asking ourselves throughout the last few months. We want to come up with a strategy that is a win/win relationship with those media players. We are very much focused on partnerships. We will be communicating more to the market in the first quarter of next year in terms of how we are going to work with media partners. We will see a big push next year in terms of pure marketing, and relationship-building in the market.

Satellite News: Will there be more competitive pricing in the region for satellite capacity as a result of Yahsat’s entrance into the market?

Al Zaabi: We believe there is enough room for all the different players in the markets. Yahsat is making a bold statement: We are not here to initiate a price war.

Satellite News: How do you see satellite broadband developing in the Middle East? What role can Yahsat play?

Al Zaabi: It is an interesting situation as this is a market controlled by the applications and the end user equipment in the market. We are talking to couple of partners in terms of developing this market and I hope to announce something in the first half of 2008.

Satellite News: Finally, what role do you see the project playing on the satellite services landscape in the Middle East? Where do you hope to position the company in 12 months time?

Al Zaabi: It is a tough market and Yahsat needs to be different. We don’t just sell capacity. When customers think of Yahsat, we want them to think of the whole end-to-end solution. To do that, we have to sell in-house expertise over and above what is available in this region now to provide innovative satellite solution.

In 18 months time, we hope that the majority of the capacity on the first satellite will have been allocated. We also hope we will have some sort of partnership on the commercial side with one of the other satellite players. We are here, not only to compete, but to make long lasting and fruitful partnerships that mutually benefit all parties. We want to be one of the major players in this market over the next few years. We are very determined to achieve this goal. We need to build a strong network of suppliers and satellite service providers. Building a strong network will be one of the major challenges over the next year- but it is one we are looking forward to!