NSR’s SOFA6 Report Finds Challenging but Opportunistic Changes in Satellite Operator Finances

 
September 12, 2016

NSR’s Satellite Operator Financial Analysis (SOFA), 6^th Edition report, released today, finds that in an era of falling capacity prices and chaotic CAPEX developments, the satellite industry is at a crossroads. Decisions regarding business models and the way that operators conceptualize capacity will greatly affect  their place in the telecom value chain. NSR’s SOFA6 includes analysis of CAPEX calculations yielding significantly lower figures for “break-even costs”, and data-centric discussion detailing the extent to which pricing has fallen over the past few years.
 
Top-line operator revenues declined, in USD terms, by just over 5% in 2015, with several Euro-denominated operators seeing a sharp drop due to currency exchange rates. Revenues per leased transponder continued to decline, while metrics such as EBITDA margin remained surprisingly robust Due to the fact more GEO-HTS generally leads to lower EBITDA and more emphasis on services. Most noteworthy is the impressive increase in cash kept on-hand by operators, with 6 reporting operators seeing cash and cash equivalents on their balance sheets increase from $2.039B as of EOY 2015 to $4.897B as of H1 2016.
 
“Ultimately, the key question that operators must ask themselves is: what does their business model look like when they sell hundreds of megabits, or gigabits, to customers? Where do they stand in the value chain, and how can they streamline operations to capture more data-centric customers, while also not allowing capacity to become commoditized to the point of acting as a dumb pipe?” notes Blaine Curcio, NSR Senior Analyst and report author. “We have seen significant cash hoarding over the past year, with operators cutting back on CAPEX plans in some cases. This “wait and see” approach is hard to justify, unless one counts on a large percentage of revenues coming from prime orbital slots, which offers cushion to the storm surrounding data pricing,” adds Curcio.
 
“Indeed, a solid percentage of the demand in the enterprise data vertical is for very commoditized capacity,” adds Curcio, “and where that vertical is where most revenue growth is expected to come from moving forward. At that point, it becomes a question of, who is most efficient with their CAPEX? Who is getting the best bang for their buck in terms of dollar per unit of capacity to orbit, and who has the strongest distribution network to push this capacity through the pipeline?”, says Curcio.
 
SOFA6 analyzes a number of industry metrics to gain a better understanding of where the industry is headed tomorrow, with the short-term and long-term trends that these metrics reveal analyzed at length.