[Satellite News 12-30-08] The satellite industry was largely shielded from the full impact of the global recession in 2008 and some companies posted record-setting yearly profits, a majority of executives told Satellite News.
    However, when asked about their outlook for 2009, many of them admitted that sustaining their economic stability would be a challenge.
    With the U.S. digital television switchover planned for Feb. 17, a new U.S. presidential administration set to take office on Jan. 20, possible changes to the U.S. Federal Communications Commission (FCC) that may affect the ease of acquisitions and mergers, dramatic increases in broadband capacity demand and an even more dramatic decrease in the ability to secure funding for large-scale projects, 2009 is sure to test even the strongest satellite business model.

Changing business plans for a weak global economy.
Like many others in the satellite industry, Sara Poulton, senior director of marketing for DigitalGlobe, said her company is sticking to a business model that worked before and even after the economic crisis hit global markets. “Today, we are continuing to execute against our published strategies and financial goals,” said Poulton. “At this juncture, we do not have any plans to change or alter our strategies.”
    DigitalGlobe, who is planning the launch of its new WorldView-2 imaging satellite in the third quarter of 2009, is counting on a growth of demand for imagery services by the U.S. government and military as well as in the civil space sector, according to Michael McCarthy, DigitalGlobe’s senior director of business development.
    “The government continues to show high levels of interest in supporting the commercial satellite industry,” said McCarthy. “We see that enthusiasm continuing through WorldView-2 and the next-generation satellites that are on the horizon today. We also continue to see interest and demand for alternative energy exploration increase as we continue to see demand using this data from the satellite for analysis and exploration of opportunities there.”
    Clay Mowry, president of Arianespace said his company continues to see business in the launch sector, but is cautious of how long it will sustain. “Only time will tell,” said Mowry. “We continue to see orders from the large satellite fleet operators who are well capitalized and have strong cash flow from their core businesses, but it is difficult to predict right now what the impact will be on smaller operators or start-ups.”
    ComDev CEO John Keating said that while more speculative business plans may have to be temporarily shelved, his company is confident it can continue to find growth opportunities with government business despite the tense financial climate. “More than half of our business is directed toward government programs,” said Keating. “We see no evidence of any scaling back on government spending.  On the contrary we see evidence of increased opportunity for us in Canada, the United States and Europe.”
    Keating said that ComDev’s blue chip customers, such as Lockheed Martin, Boeing, Thales Alenia Space and EADS Astrium, are unlikely to suffer liquidity crises. “They, in turn are building spacecraft primarily for service providers who are successful and have very solid business plans with tremendous cash flows from their operating activities,” he said.
    Astrium Services CEO Eric Beranger believes his company’s focus on the institutional market means it is less likely to be impacted by the credit crunch due to the services the company provides. “We are addressing government and institutional customers, whose budgets have been set at least for 2009,” said Beranger. “Depending on the depth of the crisis and how long it will last and how deep it goes, there could be some impact at some point in time, but at the moment, I am not seeing that right away. The impact of the crisis is starting in the commercial world and less in the institutional world. … If I look at the various finance budgets for customers, so far, we have not seen budgets decrease. The services we provide are essential parts of national infrastructure. They are core to what is done by governments. This is not the first area where they will decrease budgets.”

Will HDTV carry broadcasters through 2009?
    Not all businesses are sitting as comfortably as those with well-financed customers. Broadcasters may feel some downward pressure on demand due to tightened household financial situations, but while some customers may trim unnecessary expenditures, some executives, like Keating, believe that television has become too integrated into the lives of consumers to do without. “By and large, watching TV is a pretty essential activity and that there are likely to be few people who will turn off their TV sets and sit in the dark,” he said. 
    Many executives say that the rapid procurement of HDTV receivers and subsequent subscriptions to HDTV services has the potential to increase the revenue stream of service providers. 
    Dan Goldberg, president and CEO of Telesat, said HD is perhaps the key growth area for Telesat in the near future. "We are going to see significant growth over the next 12 months driven by the fact that we are launching three new satellites,” he said. “When I look at two of those satellites, Nimiq 4 and Nimiq 5, they are already 100 percent sold out to Bell TV and EchoStar, who need the capacity for the introduction of additional advanced television services. And probably the most important advanced services these satellites will be used for is HDTV so in that regard, HD is driving our growth today."
    Keating adds, “the fill rates on many satellites are quite high and with increasing global demand for TV services, coupled with the need for extra bandwidth to support HDTV, there is every chance that this sector will be spared form significant reduction in demand, or end user revenue streams. It is possible that some service providers will decide to defer some capital procurements temporarily, but with relatively high fill rates, there will be a limited ability to do that and, in any case, it will result in higher demand in subsequent periods.”
    In Europe, Romain Bausch, president and CEO of SES, believes revenues derived from HD would be significantly boosted as markets show long overdue progression in the area. "You will see sudden increases (in the numbers of HD channels) driven by individual markets," he said. "The [United Kingdom] will be first, followed by the French market and then, hopefully, the German market in the 2010 time frame. I would not be surprised if HD in Germany will happen at the same time the analog to digital conversion is in full swing. I would not be surprised if there would be 30 to 40 HD channels in Germany by 2010 or 2011. It is clear that once one of the public broadcasters in Germany decides to go HD, this will give momentum for private broadcasters to also go HD."
    While encouraged by growth in this area, Eutelsat Chairman and CEO Giuliano Berretta, says it is “difficult to predict” how many HD channels his may be carrying in 12 months because the market is still uncertain. “We are still in a market before the great acceleration,” he says. “When you are in that phase, a little variation is enormous. When you are in the stable part of growth, predictions are much easier to make. One thing I can tell you is that the acceleration we saw in the first six months is continuing and that today we have 55 HD channels broadcasting through our fleet.”
    Pacome Revillon, managing director of EuroConsult, said that significant growth prospects are split between communication needs of emerging regions and sustained growth for [standard-definition] and HD channels depending on the markets. “Significant growth should continue to be observed this year due to the investment strategy of both telecom and media players that is still unlikely to abruptly slowdown,” said Revillon. “Growth should still be high in 2008 and could begin to slow down in 2009, but [growth] could still be higher than 7 percent.”