Satellite firms to cash in on outages

Speaking ahead of the Cabsat 2008 conference in Dubai this week, satellite firm SES New Skies said it was braced for a flood of extra business from the Middle East as telecoms firms ordered standby capacity in the event of a repeat of January’s disruption.

Internet was disrupted across the Middle East and parts of Asia after two undersea cables were severed, one in the Arabian Gulf 35 miles north of Dubai.

Robert Bednarek, President and CEO of SES New Skies, said he expected tens of millions of dollars to be spent by companies looking to access back up satellite capacity. “This area of our business is going to be very strong. We are already in discussions with telecoms operators and pointing out the availability of this capacity, suggesting they have it on standby. And it’s a relatively small investment compared to the kind of disruption and turmoil that occurred in January,” said Bednarek.

“It certainly would make sense if over the next few years we were to see in excess of tens of millions of dollars of additional revenue from that type of service. It’s a small number compared to the amount the fibre operators are generating in revenue, so it represents a small investment on their part to support their customers.”

SES New Skies orders the manufacture of satellites then leases the capacity out around the world. Its revenue from the telecommunications sector in the Middle East has increased four-fold to $18 million in 2007 from $4m in 2001. The firm achieves a 30 per cent overall profit margin on revenues.

It has a global fleet of seven satellites and works with broadcasters, corporations and governments, and is in town to attend Cabsat 2008, an event where firms can showcase the latest technological products and services. The conference, which runs from today until Thursday, this year has more than 650 exhibitors from 50 countries participating, according to the organiser, Dubai World Trade Centre.

Bednarek said he would be approaching telecoms companies like etisalat, and governments in the region with the offer of satellite back up to their fibre-optics networks. And he expected local rivals, Arabsat and Nilesat to do the same.

He added that the recent disruption to the Middle East’s Internet, slowed businesses, hampered personal internet usage and caused a flurry of speculation, including mentions of sabotage, highlighted the drawbacks of relying too heavily on fibre-optic cables.

“You are starting to see some of the limits and concerns about fibre. We provide back up and restoration services both to the fibre operators themselves and to private networks that don’t want all of their traffic on one particular source.

“One of the problems is that the fibre industry overtime has lessened its own back up reliance on satellites. Proper back-up requires a commitment in advance by the fibre operators to plan for extra capacity in the event of a failure. They discovered recently that they probably need to do a little bit more, and their customers discovered this too,” said Bednarek.

Large-scale internet disruptions are rare, but East Asia suffered nearly two months of outages and slow service after an earthquake damaged undersea cables near Taiwan in December 2006. Banks and businesses in Taiwan, South Korea, China and Japan had telephone and internet problems.

Bednarek said: “In the Pacific, over the course of the year after the event, both the fibre operators and their customers came to us asking for more capacity. We expect much the same to occur here over the next year.”

SES New Skies has approximately 15 to 20 per cent market share of the telecommunication-satellite sector in the Middle East. And the company posted $17.9m revenue in 2007 from Middle East-based customers.

Bednarek added: “We’ve seen very strong growth on the telecommunication side of the business in the Middle East, mainly because of our close connections with private networks used by the oil and gas industry and the banking industry. Wherever there is strong economic development there is strong need for telecoms and satellites have a role in telecoms.

Satellites are an alternative to fibre-optic cables, but experts have warned there are problems with latency and cost concerns and are therefore not suitable for organizations conducting real-time financial transactions.

SES New Skies has three satellites in orbit serving the Middle East market, and is launching two more in during 2009 and 2010 in response to the increase in demand for capacity.