On Nov. 14 2008, it was announced that the Eurozone (European Union Member States) had gone into recession, and on Nov. 27, the European (EU) unveiled the EU Recovery Plan which aimed to pump billions of euros into the market to boost economies throughout Europe. On Dec. 1, the National Bureau of Economic Research said the United States had been in recession since Dec. 2007, and the U.S. government enacted a stimulus bill in February valued at nearly $800 billion. While the global economy slogged through 2009, the satellite sector performed well overall and set the stage for 2010.

Financial Moves

While most analysts and executives considered the satellite sector recession-proof, or at least recession-resistant, due to strong fundamentals and long-term contracts, there were financial bumps in the road for some companies. DBSD North America, formerly known as ICO North America, a subsidiary of ICO Global Communications, filed for bankruptcy protection in the United States in May, as the U.S. MSS operator began to feel the heat. Perhaps the most high-profile bankruptcy of the year took place in June, when Sea Launch, announced its intention to seek Chapter 11 bankruptcy protection. The move caught many by surprise, says Marco Caceres, senior analyst at the Teal Group. “Their main problem was cash flow. Their costs have gone up. I read that their suppliers in Russia and Ukraine had increased the costs of their materials and services. I think that has impacted them. I don’t think it is do with lack of business. Their backlog is pretty good.” Sea Launch’s fate remains in doubt, although many hope it can emerge from bankruptcy protection to remain competitive in the launch services market. Intelsat has pledged to do all it could to help the operator. “Sea Launch is not on its own. We do not want to see liquidation,” Intelsat CEO David McGlade said during Euroconsult’s World Satellite Business Week in September.

The other major bankruptcy involved Asian satellite operator ProtoStar. The startup filed for bankruptcy in July, and the operator’s downfall, according to many, was not due to the economic gloom but rather poor management. “It shows that you can launch satellites that are not coordinated, and they can interfere with existing satellites,” Peter Jackson, AsiaSat’s CEO, said at the time of the filing. Intelsat won the bidding for the ProtoStar 1 satellite in October with a $210 million offer. ProtoStar is scheduled to auction the ProtoStar 2 satellite in December. In November, Asia Broadcast Satellite (ABS) announced that it will acquire Mabuhay Satellite Corp., gaining control of the Agila-2 satellite, built by Space Systems/Loral and launched in August 1997. The spacecraft carries C-band and Ku-band transponders that cover the Philippines, China, Taiwan and Hong Kong, and ABS also will own Mabuhay’s Subic Space Center, a satellite communications facility in the Philippines.

U.K. sports broadcaster Setanta Sports went into administration in June as the battle to compete with BSkyB for sports broadcasting rights in the United Kingdom proved too difficult. Setanta’s exit led to ESPN gaining live English Premier League soccer rights for the first time as the North American broadcasting giant aims to become more of a presence in Europe.

There were some other notable events in 2009. Not least, GlobalStar announcing in March that it received $574 million in financing from Coface, France’s export credit agency, which it can use to acquire and launch satellites. In a similar vein, O3B Networks, another much talked about newcomer, announced a similar type funding deal with Coface in September.

The year will not be particularly remembered for any groundbreaking deals, but there was some activity. The most significant move may have been unveiled in October when Viasat announced it was going to acquire WildBlue for $568 million, which would create a U.S. satellite broadband powerhouse. From a technology standpoint, Rockwell Collins made a key move in April when announced it was acquiring Datapath, a satellite-based network communication solutions provider. The deal was valued at around $130 million and gave Rockwell Collins, a defense and aerospace company, greater possibilities in the satellite communications space.

Canada’s International Datacasting Corp. made a pair of moves to strengthen its business prospects, acquiring the radio and television network product lines, including HD and SD digital video compression and decompression products, interface converters, video encoders and receivers, and satellite broadcast equipment, of Tiernan Video in August and agreeing in November to acquire select product lines and technology related to transport stream multiplexing, IP multicasting and unicasting as well as broadcast record and playback products for the terrestrial, satellite and cable broadcast markets from Logic Innovations LLC.

On the DTH side, perhaps the most significant piece of consolidation saw the two leading DTH platforms in the Middle East, Showtime Arabia and Orbit, combine in July to create a single platform to serve the region. “From an operator perspective, it puts an end to an escalation of programming costs that became somewhat irrational and somewhat disconnected from the reality of the sizes of the business,” Marc-Antoine d’Halluin, CEO of Showtime Orbit, says. “It brings some common sense into the mix from every perspective, and in addition, in the Middle East it will enable the merged entity do a far better job in fighting piracy, which is one of our major challenges in the region.”

Fixed Satellite Services

For the four largest FSS players, Intelsat, SES, Eutelsat and Telesat, 2009 was a year about building businesses organically rather than making signature acquisitions. Eutelsat announced in June that Michel de Rosen was joining the company and would become CEO by the end of the year, replacing Giuliano Berretta, who will remain chairman of Eutelsat.

The more interesting developments in the FSS sector took place in emerging markets, and the Middle East, in particular, was a hive of activity. In February, a new private satellite operator, SmartSat, was established in the region. The $500 million company is a joint venture between Smartlink, the Jordanian private shareholding company that operates as a global broadband satellite services provider in the Middle East, North Africa and Eastern Europe, and a leading Kuwaiti investment holding company. SmartSat Managing Director Khaled Derbas said the operator hoped to make an announcement about a new satellite by May, but at the end of October, the operator had not yet unveiled any plans. The Middle East also saw Yahsat, a relatively new player itself, team up with SES Astra to form the YahLive joint venture to target the Middle East broadcast market.

In Africa, long believed to be a huge potential growth market for satellite services, it was a relatively quiet year. In March, Nigcomsat, one of the domestic operators trying to make an impact, announced that it had signed a deal for the Nigcomsat 1R satellite, a replacement for its doomed Nigcomsat 1 satellite. While ProtoStar dominated headlines in Asia, the region was a hub of activity. Asia Broadcast Satellite (ABS) announced in June that it signed a deal with Space Systems/Loral (SS/L) to build the ABS-2 satellite, which ABS claims “will be the most powerful commercial satellite ever launched in the Asia-Pacific region” with 78 C-band, Ku-band and Ka-band transponders across eight different beams.” The spacecraft is scheduled to reach orbit in 2012.

Mobile Satellite Services

Along with Globalstar’s refinancing effort, it was an eventful year for some key MSS operators. The year started with a bang in February with a collision between an Iridium and a Russian Cosmos satellite. The collision brought the issues of space debris and space surveillance to the top of the agenda, as the that number of satellites in orbit is expected to grow.

In May, the European Commission announced that it had awarded licenses to Inmarsat and Solaris Mobile (a joint venture of SES and Eutelsat) to build next-generation mobile satellite communications systems in Europe using S-band spectrum. Despite protests from the likes of ICO, the result was really not surprise. However, despite winning the license, it was a challenging a year for Solaris Mobile. A technical investigation of Solaris Mobile’s S-band payload on Eutelsat’s W2A satellite revealed significant non-compliances from its original specifications, according to a Solaris Mobile statement issued in early July. It will be interesting to see how both Inmarsat and Solaris perform in this area in Europe, and whether they can build long-term, profitable businesses based around next generation mobile services.

Among U.S. players, Terrestar, placed its Terrestar-1 satellite into orbit in July, and in September announced it had teamed up with AT&T to bring to market the first fully integrated satellite cellular smartphone in the United States.SkyTerra revealed it September that it would be acquired by a new corporation formed and indirectly wholly-owned by Harbinger Capital Partners Master Fund I Ltd and Harbinger Capital Partners Special Situations Fund LP

Launch Services

Arianespace and ILS continued their steady performances serving the commercial marketplace, however, with the Sea Launch situation still unresolved, the potential lack of alternatives for reaching orbit has became a bigger concern for satellite operators. Boeing Launch Services and Lockheed Martin Commercial Launch Services have the capability, but with lucrative U.S. government contracts in place, neither company is in a rush to increase their presence in the commercial launch services space. “We have identified one or two commercial launches a year. We don’t have an intention to make large commercial market share play with our product. In terms of how we participate in the market, it is business case driven,” David Markham, president, Lockheed Martin Commercial Launch Services, says. New entries are angling to enter the market but look to be years away, at best, of making any impact. SpaceX performed the first commercial mission of its Falcon 1 vehicle in July and is developing its Falcon 9, while in August, China’s Long March vehicle left the PT Indosat Palapa-D satellite short of its intended orbit.

Broadcasting

A running theme throughout the year is the changing nature of the ways we access content, with technology vendors looking to help operators as they looking to provide services beyond the TV, and content deals are beginning to reflect this transition. In March, DirecTV signed a deal with the National Football League (NFL) which included Internet, TV and wireless broadcasting rights. “They have signed an extension … agreement [that] not only includes making games available for viewing for television but also across different devices. I see that as a harbinger of what will come,” says Patrick Harshman, CEO of Harmonic.

2009 also saw advancements in 3-D TV, as the technology has become a revenue generator for niche markets such as live events to theaters, and BSkyB announced in July that it would launch the first 3-D channel in the United Kingdom in 2010. “If you were to look two years ago, 3-D was viewed as a bit of a science fiction thing for television. Since then things have moved on at speed and domestic 3-D experiences are now a reality,” says Gerry O’Sullivan, Sky’s director of strategic product development.”

BSkyB also made news in May when it announced it would team up with Microsoft to make Sky content available to Microsoft Xbox 360 users in the United Kingdom, a further example of the converging media worlds. “I think this is a landmark deal. It is the first time that live TV has been brought onto a console platform, and it is a real indication of the way digital media is going, where both ourselves and Sky are looking to offer as much choice to consumers as we can and this allows us both to look at our customers and offer them a more complete service than what we were offering before at a holistic entertainment level,” says Neil Thompson, head of Xbox U.K. and Ireland.

Military

With the economic recession deepening throughout 2009, there were fears that this could lead to a cut in terms of spending on next-generation military space systems. The biggest announcement took place in early April, when U.S. defense secretary Robert Gates announced that the United States was canceling the Air Force’s $26 billion Transformation Satellite System military space program.

As militaries look to save costs, more deals similar to an April agreement between Intelsat and the Australian Defence Force (ADF) could be on the horizon. The ADF agreed to purchase a specialized UHF communications payload aboard an Intelsat satellite scheduled for launch in 2012. As part of the hosted payload contract, valued at about $167 million, Intelsat will arrange for the construction and integration of the UHF payload with its satellite.

Satellite Broadband

The satellite broadband market begins to take hold around the globe, and a pair of late-year deals demonstrated that value of these companies is growing.ViaSat’s announced in October that it signed a definitive agreement to acquire WildBlue Communications in a cash and stock transaction valued at $568 million. WildBlue’s Ka-band broadband service will use capacity on the ViaSat-1 satellite, set for launch in early 2011, and ViaSat will integrate its ground network technology with WildBlue’s operational and distribution platform.In addition to accelerating the growth of WildBlue’s consumer satellite broadband business, the transaction also is intended to promote growth opportunities for ViaSat’s commercial and defense businesses.

In June, Hughes announced plans to expand its offering with the launch of a next-generation, high-throughput satellite in the first quarter of 2012. The spacecraft will be designed to deliver speeds of more 100 gigabits per second (Gbps) and use an enhanced version of the IPoS broadband satellite standard. Then in October, Hughes sold 10 percent of the capacity to Canadian broadband provider Barrett Xplore in a deal valued at $100 million. The deal also leaves the possibility of consumer premise equipment, which could increase the contract amount.

Eutelsat and SES continued their efforts to develop the satellite broadband market in Europe. Eutelsat, in particular, seems to be the more aggressive out of the two, as its dedicated Ka-band satellite, Ka-Sat, is scheduled to launch in late 2010. A newcomer to watch out for is Avanti Communications which is launching a high-powered satellite, Hylas, in 2010.

Final Thoughts

Overall, the satellite industry held up well throughout 2009. Demand for capacity remained strong, and there were very few casualties in terms of bankruptcies. With world economies still in recovery mode, 2010 could be another tricky year, but it looks as if the demand for bandwidth will not slow down.

Mark Holmes is Via Satellite’s Associate Editor.