Asia Broadcast Satellite (ABS) created a buzz around CommunicAsia with the announcement of a huge new satellite as it aims to consolidate its position within the region. It has signed a deal with Space Systems/Loral (SS/L) to build its new ABS-2 satellite, which it said in a press statement, issued June 18, “will be the most powerful commercial satellite ever launched in the Asia Pacific region with nearly 14 KW of payload power and up to a total of 78 active C-band, Ku-band and Ka-band transponders across 8 different beams.”
    The satellite is scheduled to launch in 2012. In an exclusive interview to the CommunicAsia E-Daily, the CEO of ABS, Tom Choi, basically the decision to build the satellite came down to a two-horse race between Thales Alenia Space and SS/L, and Choi gives his reasons why SS/L eventually won out to build this big new satellite.

 
Choi: I think the significance of the announcement is that it is a major milestone for Asia Broadcast Satellite. It guarantees the future independence of the satellite company as our longevity will be assured by our ability to grow our business through this satellite. If we remain to be a one satellite company, the satellite would reach the end of its life, and that would have been an interesting project. However, ABS-2 will provide significant expansion capacity and in-orbit redundancy. Almost all of our ABS-1Ku-band beams will be backed up on a frequency by frequency and a channel-by-channel basis with spare transponders on ABS-2. All of those customers on the North and South Ku-band beams of ABS-1 will have backup transponders at the same frequency in orbit, which will provide redundancy. This is really important as wee have a Russian company who has launched DTH service and we also have a DTH business in our southern Ku-band. The capacity of the ABS-2 will enable us to drive sufficient cash flows for other ventures outside of 75 degrees East. We’ll be investing the cash flow in developing new locations to the East and West of 75E.  This will enable us to have long term stability and growth and will give us the momentum and economies of scale to allow us to expand into a meaningfully sized operator in the future.

Choi: When we first started to the RFP process, we didn’t think the satellite would become this big. We started off with an initial design of 10 kilowatts. This could have been easily built by Lockheed Martin, Boeing, Thales Alenia Space, SS/L. We went through the RFP process and narrowed it down to Thales Alenia Space and SS/L. We questioned the vendors about what more can each one of them provide, given a certain cost budget. Since they were fiercely competing against one another, they both came up with more proposals which provided more flexible and powerful payloads, in their attempt to outdo each other. We then found a size we were very comfortable with. It was so close. Both of these companies could build ABS-2, we are 100 percent confident of that. But, what has happened in the first half of this year is that the Euro/Dollar currency exchange has swung for the dollar. So, it made the Euro based offer from Thales Alenia Space impractical to consider. There was too much of a gap in the pricing. We were also more comfortable with the heritage that Space Systems/Loral has in building spacecraft of this size. 

Choi: We have decided to have such a large satellite to optimize the capacity of the type of spacecraft SS/L could build to add space segment across all territories visible from 75E. We see a lot of opportunity in Africa, Middle East and Russia, as well as Central Asia. There is already significant demand from our existing users on ABS-1.We are very comfortable with our current business and virtually all of our customers have requested new capacity on ABS-2.

Choi: We would be satisfied if we filled out 60 percent of the capacity by the end of this calendar year, and maybe move to 80 percent next year and then 90-100 percent before it launches.

Choi: We never had African customers come to CommunicAsia. But, they are here. The demand for capacity is so great, they are turning to Asian satellite operators. More than 50 percent of our dedicated Ku-band capacity will be dedicated to Russia, Middle East and Central Asia. While we believe Africa is going to have consistent demand, we are not putting all of our eggs in that basket. We are seeing a lot of demand from Russian broadcasters for capacity

Choi: I think the way we finance ABS-3 and ABS-4 will really depend on how much the Exim Bank and Coface will allow us to. We do have orbital slots that we are negotiating for East and West from where we are. The more contracts we can gain on ABS-2, the more comfort lenders may have in granting us more debt or other financing structures to expand our business. 

Choi:  We are financing ABS-2 through a combination of ABS-1 cash flows, advanced customer payments and debt. We have an anchor customer who has helped us by making pre-payments ahead of construction. The debt will come from the Export Credit Agencies (ECAs) of France and the U.S. We have engaged HSBC to work with Coface and the Exim Bank. The debt is not yet approved officially, but we have been working with these institutions for the past 18 months and they have given us a very favorable outlook on the successful approval of the process. We think in the next 3 to 4 months we will get the approval we need.

Choi: We are excited about what we can do on Africa. We have a very interesting south and central African Ku-band beam. We can have up to 10 transponders which can be switched on to African coverage. We think that there is a growth market for pay-TV services and VSAT applications. Africa is just getting used to Ku-band. So, we see demand there. We also see demand for Ku-band capacity in SE Asia, in places such as Malaysia, the Philippines, and Indonesia. We will be serving these markets with a dedicated Ku-band beam for SE Asia. There are many Universal Service Obligation (USO) projects in most of these markets, which will be optimally served by the use of low cost and small Ku-band equipment.