Shifting orbit

With multiple satellite launches each year and new operators entering the market, the Middle East satellite industry is evolving at an unprecedented rate. John Parnell speaks to the major players.

The huge amount of financial and intellectual capital required to establish a satellite operation has historically limited the field in the Middle East. Arabsat, founded in 1976 by the member states of the Arab League, was the first provider to truly embrace the satellite broadcast market.

Competition from Nilesat, upon its formation in 1996, came at the perfect time to support the explosion of free to air channels (FTA) that went on to transform the Middle East broadcast landscape.

With few of these channels operating with genuine commercial goals in place and fewer still attracting sizeable audiences, many view these as the cause of the current capacity crisis in today's satellite market.

Internationally, broadcasters have looked to combat dwindling advertising revenues with the provision of value-added services, chief among them being high definition (HD).

The lack of capacity for these bandwidth-sapping services has made it difficult for any of the region's big players to offer any meaningful HD services to their viewers.

Recent developments impacting the structure of the satellite industry serving the region appear to have ensured that this situation does not continue for much longer.

This year's inaugural Satellite MENA show, co-located with CABSAT MENA, saw the launch of a new satellite service operator for the Middle East, the second such launch in as many years.

Following on from the 2007 creation of the Abu Dhabi government-backed Yahsat, comes the launch of SmartSat.

The most notable point of difference between SmartSat, as it is keen to stress itself, is the absence of any government-sourced funding.

The new company will be the first privately Arab satellite company with Jordanian satellite communication and voice service provider Smartlink acting as parent company.

The bulk of the funding for the US $500 million company has come from the Al Jawhara Invest Holding Goup (JIH) in Kuwait.

"Our customers will have the freedom to buy capacity at market designated prices. We will be able to sell it without any pressure from outside entities to choose one customer over another," says Khaled Derbas, chairman and CEO, SmartSat.

"We are open for business with anyone. We have no restrictions or limitations placed on the quality of service and the price that we provide."

The earth station for the company's satellites, the first of which will be launched in 2011, will be housed in Dubai Studio City (DSC). With DSC partly owned by the UAE government, will SmartSat's landlord be able to exert any of the undue influence that the company is trying to avoid?

"No. DSC is a freezone. We do not anticipate any interference," asserts Derbas.

"We will locate our corporate headquarters and the command and control centre there.

"We need to keep the services 100 percent independent, and as much as we can, shield the business from political issues.

"The political climate in this region can make it challenging sometimes. It is our intention to remain as private as possible without restriction so the company can be run along commercial considerations only," claims Derbas.

In the absence of any national investment in the company, SmartSat has been funded by a collection of private investors from across the region.

"There is a significant portion from (JIH) and the rest of our funding has come from the GCC and Arab region. JIH will manage the financial arm of the business and Smartlink to handle operations and technical management," explains Derbas.

The company has set a target of getting its accounts into the black within five years with the health of the industry at present giving Derbas reason to be confident the company can achieve this goal.

"We are absolutely committed to delivering a dividend to our investors at that point," he says.

"The business plan shows that it is a promising and unique sector and is likely to provide some growth. We believe there is substantial profit to be made for all involved. However, the sector is only promising if you operate in a shrewd way. You have to choose the right technology and get the timing of your services just right."

Part of this decision-making process is assessing which beams and consequently, which industries, will be served. SmartSat has chosen to devote its first satellite towards the more profitable military and communications fields.

"The first satellite we will split its capacity 80/20 between the communications and broadcast industries. We will be targeting GSM, ISPs, telcos and also offering military and government applications. These will be our main focus."

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