PARIS — Will SkyVision be a carnivore in the jungle of satellite service providers or one of those disappearing in a consolidating market?
Time will tell. UK-based SkyVision, created in 2000, was purchased in 2016 by Spadina House AG, which previously had purchased Signalhorn, a managed communications solution company.
SkyVision recently landed a large contract to build, install and operate the ground network for Global IP, which is planning to launch a large Ka-band satellite for connectivity in 39 African nations.
SkyVision Chief Executive Ori Watermann talked about how a company like his negotiates a market where today’s suppliers are tomorrow’s competitors, and where selling mere bandwidth no longer cuts the mustard.
Is your contract with Global IP mainly services?
It’s network implementation and the hardware piece is significant. Building and installing the Ka-band gateways is a substantial portion of the contract. We are building 11 of these gateways.
How long does the services piece last?
We have a contract for 15 years, the length of life of the satellite.
The 11-station ground network is delivered when?
The satellite is scheduled for launch at the end of 2018, so end 2018 it all should be ready. There may be delays, but if it’s a late-2018 launch, we should start to give them service before the end of 2018.
Who builds your hardware?
CPI ASC Signal Division.
Where are your teleports?
We have negotiated with 11 teleports around Europe. Everybody is ready to start the work. The antenna production has also begun and in mid-2018 we will start to install them.
It is a unique project. I am not sure there has ever been a project like this, where you need 11 teleports on one continent to deliver to the satellite. We had a competition among many manufacturers but we selected ASC.
No teleports in Africa, where Global IP’s GiSat system’s customers are?
What we are selling in the end is pure internet and the best place for that is in Europe. The African customers will have the benefit of high-throughput internet with the main backbone in Europe. All the clients in Africa will be able to benefit from this using the European backbone. That is why the 11 gateways are in Europe.
One of the reasons Global IP selected SkyVision was that we have experience in operating teleports in Africa for Eutelsat, and in the Middle East for Amos Spacecom. What they needed here was solid Internet continuity, more than 150 Gbps to the satellite. In Africa they likely will have smaller antennas. They need the best internet they can get to upload to the satellite. Africa will have smaller antennas. And for future teleports in Africa we will be the one to do it.
Do you see your mobile satellite services business as a core capability?
MSS is not a big thing for us. We are more focused on VSATs to Africa for trunking. Lately we are trying to diversity because the market for selling megabits is getting totally commoditized. We are trying to diversity.
If you want to stay alive you need to consolidate or find new verticals, new growth areas. We re looking at two things — first in the satellite business, where we are doing ok but the competition is aggressive and the prices are going down.
Then second, we are focusing on the ground services and broadcast markets. We are providing turnkey solutions to our customers — ISPs, telcos, NGOs, they all used to be just customers for satellite. Now we are selling fiber and a full network service, LTE, microwave, fiber or satellite.
You lease capacity from multiple satellite fleet operators in the Middle East, Africa, North America and Asia. Are bandwidth prices still falling?
What is happening in satellites has happened in other telecom areas. Demand for bandwidth is going up but customers are unwilling to pay more, so you have to provide more capacity for the same price.
In Africa, the market is developing fast for cellular and internet consumption, but the ARPU in Africa is not high. The cellular operator needs to provide internet for $4 or $5 a month — and to be efficient with the service. They are constantly fighting on prices. You cannot have your growth and EBITDA if you only focus on megabits.
Isn’t it good news for you if bandwidth prices are going down?
The good news is that the market is growing. We forecast that the number of mobile subscribers in Africa in the next five years will double. The internet penetration, in five years, will also double. We think we are in the right continent. Now we have to give the operators and customers the right solution with the low ARPU. So we have to introduce innovation and every technology — cash solutions, optimization, data monitoring, everything to give them quality of service at affordable prices.
Has the satellite contribution to your annual revenue changed in five years?
Yes. It used to be 100 percent satellite, now it’s 60% and next year it will be 40%. I don’t call Global IP a satellite connectivity contract for us. Satellites like Global IP, with dramatically lower prices for bandwidth, will change things. With HTS satellites, demand will grow through prices that are similar to fiber and sometimes ever lower than fiber.
But a number of mergers or bankruptcies along the way among service providers?
I am sure there will be some consolidation. With all these big satellite operators with their C-band at high prices, they need to change there business model. The satellites coming onto the market will be very strong, with much, much lower prices. Here I am talking only about data — broadcasting is another business.
How much bandwidth do you have under lease now?
We are a private company. I don’t want to disclose that.
Who owns SkyVision?
A: A company called Sky Acquisition, our grandmother is Spadina, which also owns Signalhorn, a sister company to us. We were acquired a year and a half ago, and we use Signalhorn’s teleports, so it was a good combination for us as a group.
Is cellular backhaul a big growth area for you?
Demand is going up, but remember: Our customers can buy that directly from satellite operators. The competition sometimes means we are fighting our own suppliers, which is why we offer turnkey solutions or else we could not compete with them.
Is O3b, now renamed SES Networks, a competitor?
O3b is a competitor because they go directly to customers. We would be more than happy to work with them, but they try to go after our customers, They are part of SES, our main supplier and partner for capacity. It’s been like this for years. We are more than happy to cooperate.
This is the difference with Global IP, who understand that they need local partners. And Skyvision is the best local partner you could find in Africa.
We have a lot of people on the ground in Africa, and offices in-country. If you want to be successful in Africa you need to know the continent very well, with local partners.
Given your teleports and POPs, especially in West Africa, you have a lot of boots on the ground. Working with SES while competing with O3b – like working with the father, and competing with the son?
I happen to think the SES acquisition strategy is correct for this market. We work successfully with their capacity sales division. They only recently purchased O3b and this may have an impact in the future. In this industry, you need to get closer to the customers and have more distribution channels. Years from now the traditional way of doing business will have disappeared.
It happened in the cellular business and it will happen in the satellite business.
For sure there will be consolidation, there is tons of capacity in the sky now and while demand is high the prices are getting lower and lower.
Are there too many players at your level, on the services side?
Yes, and we have already consolidated in a way, in our partnership with Signalhorn. For the future, we are looking for acquisitions, larger and larger, because there is no sense in being small in this industry.
You sound like P.J. Beylier, CEO of Speedcast.
He is the mentor, the shining star of the industry! Everybody’s talking about him. A few years ago he was not known and now his company has gotten big.
The few big service providers can use their size to be selective. But the smaller companies are smaller than SkyVision and they need someone to buy them and they need suppliers. For us, SES is very good and keeps the competition out of our way. As long as it continues, its fair. Intelsat for example has sales teams in Africa competing with us. It’s a complicated situation.
One or two big LEO constellations for high-throughput data may be launched. Do you factor that in in your business plan over five years?
I don’t know if it will be one or three, but this is the game of giants — to connect the unconnected. For us it’s good news because all these guys will need someone on the ground to do the billing, the customer service, the maintenance.
Someone needs to be on the ground. When Facebook said it was going to connect Africa with Amos 6, people in my company were worried, but I thought it would be a big opportunity for us. They needed a middle man who knows how to do business.
Facebook didn’t go this way because of the Amos satellite failure, but Global IP will and perhaps there will be others.
You know what a smartphone costs in Africa today? $40, and a Chinese smartphone will be $15 in a few years. The people want internet, that’s for sure. this i s the only way to connect hundreds of millions of people that demand internet. They want internet, that’s for sure.
How do you see fiber penetration developing in inland Africa.
LTE is the buzzword in Africa, everybody wants cheaper solutions to connect. In microwave you can get some cheap solutions and Global IP has plans to connect to LTE. Africa is a disruptive market. They jumped from nothing to LTE.
We are doing projects where we provide solar panels and power consumption as part of the connectivity solution. This is part of the business now.
Two years ago I was in Juba, Sudan. Infrastructure is bad, the main street is a dirt road, you take directly water from the Nile and the electricity goes down every few hours. But they have LTE. You buy a SIM card and you are in the West again. LTE is the infrastructure of the 21st century. They prefer smartphones to paved roads.
That is one of the good things about our work that I really like. we are connecting people to the world.