Spanish operator Hispasat is in for a busy year. It is just over a year away until the operator launches its dedicated Latin American satellite Amazonas at 61 degrees West. Despite difficult economic conditions in most of the markets in Latin America, Hispasat is confident that it can generate significant revenues from the region going forward. While the countdown to the Amazonas launch begins, there are other events that could make 2003 a significant year for the operator. In Spain, the merger between digital satellite platforms Canal Satelite Digital (CSD) and Via Digital is likely to be completed in the summer. With CSD based on Astra and Via Digital on Hispasat, it appears that either SES Astra or Hispasat will be a big loser here. Also, the operator is stepping up its efforts in the satellite broadband market as a recent deal with satellite manufacturer Nera indicates. It promises to be a busy year. In an exclusive interview to Interspace, Hispasat CEO Jacinto Garcia Palacios talks about the Amazonas launch, the Spanish direct-to-home (DTH) situation and why he is optimistic for the future of Hispasat.

Interspace: You recently signed a deal with Nera to launch a new effort in the broadband satellite market? Could you tell us about your strategy in terms of developing satellite broadband services? How do you see the demand for these services developing in Spain, Portugal and Latin America?

Palacios: We have set-up a deal with Nera after doing a survey of different products in the market. For both relationships and terminals, we have decided that Nera has the best system. We have a small contract with them, but we expect it to grow.

In terms of the satellite broadband market, in Spain, the political establishment has a concept that the Internet should go to any site in the country, so even those small towns that will never receive ADSL or anything else have to be connected to the Internet. In the future, there will be a number of small opportunities in the country that Hispasat could cover, so we are preparing this infrastructure with Nera. We are well placed here in Spain for this.

On top of that, these kinds of services will be welcome in Latin America because the needs for infrastructure are much bigger. The connectivity through fiber, cable or ADSL is slower than in Europe. In Latin America, the figure could be 70 per cent of the population that may not get access to these technologies. There will be a nice market if the regulation is in place there.

Interspace: The Spanish pay-TV merger between Canal Satelite Digital and Via Digital is likely to be closed in the summer. How optimistic are you that Hispasat will be the platform of choice for the new pay-TV operator in Spain? How important is it for Hispasat to be the platform of choice in its home market?

Palacios: For Hispasat, this is an important issue. We are convinced that technically speaking, we are in a better position. Why? Because our satellites have been designed for this territory. That means the power of our signal is higher in all the extended areas of the country including the Azores Islands, as well as Portugal, the Spanish provinces in North Africa. So, this is not the case for our competitor and their satellite. They have been unlucky in losing their last satellite (Astra 1K), as this satellite was seen to provide better service to the Spanish market. We are in a much better position in Spain. Also today, Hispasat is covering 100 per cent of the Spanish speaking countries, and 96 per cent of the Portuguese speaking countries for this digital platform.

Interspace: How close are you to a deal?

Palacios: As of today, a decision has not been taken. The merger has not been incorporated yet. It is likely to be done in May or June. The first board of the new operational company is likely to be set up at the end of June/early July. At that moment, they will start thinking about what the better solution is for them. They will not continue indefinitely with two satellite operators because it is quite expensive. So, there is nothing decided. It is true that we are being very active here. But, there has not been any real offer put on the table, either for Hispasat or for their competitors. We are working in the background and no decision has been taken yet.

Interspace: In terms of Latin America, could you tell us about the levels of revenues you hope to generate in 2003? Do you see a recovery taking place in the market in 2003? With so much of Hispasat’s future success dependent on being successful in Latin America, how does the economic volatility in the region affect your prospects?

Palacios: Hispasat will depend on success in Latin America. Today, we are reasonably comfortable because we have all the financing for the projects already accepted and approved by the board. These have also been negotiated with the banks. We have no problems with cash. So, that means we will have costs involved with the financing. But, the project is closed. We are comfortable in terms of the schedule. We hope to be ready to launch Amazonas between March and June 2004. In the market place, we have a big contract already signed with Telemar, which will take a small share [6 to 7 per cent] in our company in Brazil. They will be our partner, as well as our customer. We will be starting off in a relatively comfortable situation. In the meantime, we are already doing some smaller contracts, which will initially use our 1D satellite with its six transponders. Those will be transferred to Amazonas. So, there are a number of things being done before the launch.

Interspace: How much capacity have you already sold on the satellite? Could you give us an update on the launch of the Amazonas satellite in terms of a date and insurance?

Palacios: When the launch is executed, we will have sold around 30 per cent of the capacity on the satellite. The Amazonas satellite will be launched in June 2004. Everything is on track here. We have not decided on insurance presently. We want to see if we can get a lower rate of insurance than is available today. We will have the insurance done by September.

Interspace: A number of operators, such as SES Global, are expecting a flat year in terms of revenues? What levels of revenue growth are you looking for in 2003? What are the major financial challenges for the company in 2003?

Palacios: For the whole group, we expect to generate more than 100 million euros ($107 million) for the whole group. We will be line with the revenues we achieved in 2002. If anything, the revenues will be slightly lower because of the market conditions. We also have more expenditure due to the cost of capital. The major financial challenges will be to support alone, without any external help, the Amazonas investment.

Interspace: Finally, what are the main operational and strategic challenges facing the company in 2003? What are the utilization rates across the Hispasat fleet?

Palacios: The main challenge of the company is to achieve an agreement with the merged platform in Spain. We have a utilization rate of 84 per cent across our entire fleet.

–Mark Holmes

(Contact: Inaki Latasa, Hispasat, e:mail: [email protected])