With a life-saving reprieve from his bondholders, Avanti CEO David Williams is now focused on getting two satellites through production at their U.S. and German manufacturers and onto the manifest of launch-service provider Arianespace. Whether both will be ready for launches on the Ariane 5 rocket in 2017 is unclear. Credit: Arianespace
LONDON — Satellite fleet operator Avanti has been a dramatic story in the past year: Liquidity crisis with falling bandwidth prices in its core African markets, strategic review and possible sale, then a bondholder rescue and now awaiting two Ka-band satellite payloads to bolster Avanti’s business.
Avanti Chief Executive David Williams founded the company and has stuck with it — a surprise to many in the industry who predicted his interest was only short-term — for a decade.
Williams discussed his company’s prospects during the UK Satellite Finance Network conference on March 20.
You recently reported further declines in bandwidth prices in Africa. Are we now at a bottom?
Crystal balls tend not to work very well. The good news about owning a high-throughput satellite fleet is that if you’re benchmarking historic prices paid for Ku-band transponders you have an enormous amount of margin.
So one of our megahertz costs only a couple of hundred dollars to produce. If historic prices have been at $2,000 then we are relatively relaxed if prices slip from that point.
In terms of African economics, yes it’s been a tough period for any kind of business trading in Africa because of the currency depreciations that we have seen coming off the back of the commodities slump. There is a little bit of evidence of currency prices stabilizing and commodities rising.
In some markets there is good economic growth. Kenya for example is a great market for us at present, showing GDP growth at 6 percent per annum, and we have won a lot of business there recently.
There is quite a lot of demand in Nigeria, where our Hylas-4 satellite will be serving next year. Some parts of southern Africa are still showing difficulty.
So I don’t think you can treat Africa as a single unit. There are wide disparities between different countries. But the big problems of currency devaluation and commodity prices do seem to have turned.
In a big market like Nigeria does satellite pricing follow crude-oil prices?
I don’t think so. The markets that excite us the most are government, which tends to be a relatively rapid source of connectivity demand in economies that are not well served by terrestrial comms; and the potentially much larger market, which is cellular backhaul.
Avanti has reasonable claim to say it is certainly a world leader, if not the world leader, in cellular backhaul. I think we have the largest 4G backhaul network contracted in the world, with ee — Everything Everywhere — here in the UK. So we have an extraordinary level of expertise in providing backhaul to 4G base stations. We are finding there is very high demand for backhaul from mobile network operators right around the African region.
That doesn’t have terribly much to do with the oil price. It’s got to do with: Can these MNOs expand their business and can they meet the universal service obligations that their license-awarding governments place upon them?
If you are struggling to get base stations out beyond big cities, it’s going to be for one of three reasons: Either it just does cost in at all and you don’t want to do it, in which case you are in a bad place with your government; or power availability is problematic, and most MNOs react to that by building diesel generation plants if they have to.
The most common is backhaul. It’s just very difficult to get fiber beyond big cities in Africa and that’s the market that we serve. That’s the most exciting growth opportunity for us and it’s got not a lot to do with oil prices.
Your bondholders have given you breathing room as you wait for two satellite launches — both scheduled this year. What is their status?
The Hylas-3 payload is a hosted payload on a satellite called EDRS-C, which is procured by [the European Space Agency], who have let the manufacturing contract to Airbus, who have placed the assembly contract with OHB.
It’s a rather convoluted industrial consortium. We don’t have very much control over the schedule. It will be what it will be. At the moment ESA is declaring its availability in 2017 and if I know differently I’ll tell the market.
Hylas-4 is much more under my control because my project managers are in the factory [at Orbital ATK in the United States] overseeing it. It’s currently in the thermal-vacuum chamber, so it’s in a very advanced state of manufacturing. It should be available for delivery around about the end of June, so we are quite confident to get it launched in the current calendar year.