WHITEFISH, Montana — Satellite fleet operator AsiaSat on Aug. 17 reported stable revenue and backlog for the first six months of 2017, saying its core satellite-television market will grow with the deployment of high-definition television.
Hong Kong-based AsiaSat also said it had resolved a long-standing dispute with India’s tax authorities over a 10% withholding tax on revenue generated in India, a subject that has preoccupied many fleet operators for at least five years.
Partial resolution of Indian tax liability issue
The most contentious issue was the Indian parliament’s decision in 2012 to change the tax code retroactively to 1997/1998. AsiaSat and other operators, as well as the Cable and Satellite Broadcasting Association of Asia (CASBAA), had challenged the law’s fairness.
With interest and late-payment penalty charges mounting each year, and the continued importance of the Indian market to many non-Indian satellite operators, pressure was on companies like AsiaSat to find a resolution.
AsiaSat agreed to pay 193 million Hong Kong dollars ($24.7 million) to cover 16 years of tax liabilities, to 2012/2013, in return for India’s agreeing to waive interest and penalty charges. AsiaSat also agreed to drop all its appeals of the tax decision for those years, but remains free to appeal future years’ levies.
For the first half of 2017, AsiaSat estimates its tax liability in India will be 31 million Hong Kong dollars, compared to 6 million Hong Kong dollars for the same period in 2016.
Revenue and backlog stable for H1 2017
Foreign-currency effects in the first six months of 2017, couple with a tax reversal in the first half of 2016 that did not repeat this year, lowered AsiaSat’s profit for the first six months of 2017 by 28%, to 180 million Hong Kong dollars.
Revenue for the period was stable at 642 million Hong Kong dollars, as was backlog, which stood at 4.08 billion Hong Kong dollars at June 30.
AsiaSat said the fill rate on its five in-orbit satellites was 73% on June 30, compared to 67% a year earlier. Last year’s fill rate did not include the 24 Ku-band transponders leased, starting in February, to Amos-Spacecom of Israel.
Spacecom has leased the entire Ku-band capacity of the Amos-8 satellite and moved it to 4 degrees west under a lease scheduled to run at least four years and resulting in $22 million in annual revenue for AsiaSat.
AsiaSat-9, built by Space Systems Loral (SSL) and scheduled for launch in late September aboard an International Launch Services Proton-M rocket, will add 28 C-band, 32 Ku-band and a Ka-band payload to AsiaSat’s inventory. It will replace the AsiaSat-4 satellite at 122 degrees east and will add dedicated beams for television markets in Myanmar and Indonesia.
AsiaSat Chief Executive Andrew Jordan, a veteran of Paris-based Eutelsat who assumed his current post earlier this year, has said the company’s core television market remains healthy despite the bandwidth overcrowding in Asia and the pressure on prices.
Market assessments have concluded that only 20% of Asia’s pay-television audience has moved to high-definition television from standard-definition format, compared to 70% in the United States and Brazil, leaving ample room for growth.
AsiaSat has also begun broadcasts in ultra-high-definition format and hopes demand will accelerate with the 2020 Olympic Games in Japan.
Separating myth from reality of HTS in Asia
In a filing with the Hong Kong Stock Exchange, AsiaSat said pricing remains under pressure in part from customer confusion about the potential of high-throughput0satellite (HTS).
HTS satellites feature small spot beams allowing frequency reuse that results in much higher overall throughput per satellite and much lower per-megahertz costs.
HTS capacity is not considered a threat to the satellite television business but it has made wide-beam satellites less competitive in the market for data services including cellular backhaul and both aeronautical and maritime mobile communications.
AsiaSat Chairman Ju Wei Min, in a statement on the financial results, suggested HTS’s potential is exaggerated by some customers.
“For the data market, there is the expectation that the new HTS will lower the price for satellite capacity,” Ju said. “[E]ven though this ubiquitous coverage from HTS satellites does not yet exist in our markets, it is affecting our customers’ perceptions on pricing levels.
“The fact that HTS technology … is not suitable for all applications or services has led to ongoing misconceptions as to future pricing levels,” Ju said.
AsiaSat is considering its own Ka-band HTS satellite for data and mobility applications, and said it is already the largest provider of satellite bandwidth to China’s aviation connectivity market.
The company said it is in the “advanced planning stage” for an HTS spacecraft. Jordan suggested in June that a decision may be made late this year.
AsiaSat said that given the spotty quality of many terrestrial wireless networks in Asia, over-the-top (OTT) video is not yet a competitive threat.