PARIS – ST Engineering presented its investors with a picture of satellite connectivity’s place in tomorrow’s urban and rural landscapes that is as optimistic as anything seen since SoftBank Chief Executive Masayoshi Son defended his billion-dollar investment in OneWeb at a February 2017 meeting: https://bit.ly/2J19PJQ
Like SoftBank, ST Engineering appeared to have no ulterior motive in putting satellite communications, and particularly constellations of low-orbiting satellites, on center stage in its vision for tomorrow’s smart cities, autonomous cars and IoT/M2M in addition to the more-expected backhaul markets.
In a March 27 investor call to outline the thinking behind the company’s purchase, for 250 million euros ($286.1 at Jan. 1, 2019), of satellite ground technology provider Newtec, the company said the coming thousands of LEO broadband satellites would drive down bandwidth costs and multiply use cases.
When that happens, ST’s Electronics division, which already owns satcom ground network provider iDirect and will fold Newtec into its portfolio, will be ready to capture the growth.
Ravinder Singh, president of the Electronics division, said per-megabit costs for satellite bandwidth will drop by 99% — yes, 100-fold — in the coming years.
“This will make a lot more applications cost-effective and enable the sale of ground equipment,” Singh said.
It became clear during the call that some investors assumed that the LEO broadband market was already thriving and that Belgium-based Newtec was already a major player in it. One asked whether Newtec does any business in the geostationary-satellite market.
The reality is that Newtec has provided modems to Telesat of Canada to test Telesat’s lone experimental satellite. Those tests have delivered promising results, Telesat and Newtec have said.
Singh was obliged to bring the discussion closer to the facts on the ground.
“These applications are relatively new,” he said. “At this point some of the constellation owners have only put up test satellites. So the businesses have not been established.
“But we expect that once the constellations start to go up, and stabilize, this demand will grow and that we will start to see the revenue opportunity.”
ST Engineering Vincent Chong said Newtec and iDirect together will create an additional 200 million Singapore dollars ($147 million) in value creation in the next five to seven years. The figure refers to cost synergies as Newtec and iDirect join forces, and revenue synergies as they achieve scale.
For ST, iDirect’s focus on aeronautical and maritime markets neatly complements Newtec’s focus on higher-bandwidth broadcast applications.
ST has a goal of doubling revenue from its Smart City portfolio of products and services to 2 billion Singapore dollars between 2017 and 2022. Connectivity is a piece of that growth story, Chong said.
“Undergirding our capabilities is digital connectivity, including satcom,” Chong said. This [the Newtec acquisition] fits very well with our overall Smart City strategy. Newtec is another meaningful development in the execution” of ST’s growth strategy, he said.