Prospects for Satellite Services in the Latin America Telecom & TV Markets up to 2014
Laurence Journez, Vice President, Aon Explorer
April 2005
(courtesy of Aon Explorer)

The modest recovery initiated in 2003 in the Latin American economy was confirmed in 2004 when GDP reached US$1,871 Billion with a 5.5% annual growth rate. Inflation rates have improved in the meanwhile from an average 12% in 2002 to 7.7% in 2004. Recovery should continue in 2005; the latest estimates predict a regional 4% GDP growth in 2005 and inflation rates below 6%.

The satellite market was severely impacted by the collapse of the telecommunications and Internet industries in 2001. Since then, it has been caught in an overcapacity situation, particularly in regard to Ku-band. A large amount of Ku-band capacity was launched in the mid-nineties but never found a market because the development of new services, such as broadband, rural telephony and distance learning, failed to grow as initially expected. Despite a 5% CAGR over 1998-2004 in total satellite capacity sold in Latin America, Aon Explorer estimates overall satellite fleet fill rates at 57%, whereas Ku-band fill rate is estimated at 38%. This situation has resulted in a drop in revenue per leased transponder from US$1.49 M in 1998 to US$1.18 M in 2004.

The satellite market is forecast to continue expanding, going from the current 501 transponders to 694 by 2014, with a 3.2% CAGR and revenues from operations expanding from an estimated US$584 million in 2004 to US$834 million by the end of 2014. Over the next ten years, C-band should maintain its dominant position, though declining from a current 76% to 66% by 2014. Television is expected to continue to generate nearly half of the demand for satellite transponders, while the Internet share is forecast to expand from 26% in 2004 to 39% by 2014.

Major growth drivers for the television market are expected to be the creation of new national packages, which should be favored by the consolidation of Sky and DirecTV packages, the expansion of existing packages with new local channels, and the launch of specialized channels. The satellite market for video applications is expected to increase from 208 transponders at year-end 2004 to 270 transponders by the end of 2014. Standard digital channels are planned to increase from 1,651 to 2,362 essentially driven by the expansion of cable and broadcast channels. Analog channels are expected to decrease by nearly half by 2014, with HDTV expansion filling the gap from 2009 onwards.

Internet growth is expected to be driven by the need to reduce Digital Divide both by deploying additional backbone connections outside fibered cities and by offering broadband access services in zones still without broadband access infrastructure. Satellite is, in fact, with fixed wireless the most cost-efficient technology to serve such areas. Government initiatives abound, getting telecommunications operators to commit to universal service fulfillment and financing the deployment of distance learning and infocenters in remote areas. Regional and international funds have been raised to finance the expansion of networks to rural and poor areas. In addition, demand for large VSAT-based networks is expected to continue growing as companies strengthen their presence on the territory. The Internet market is thus forecast to increase from the current 166 transponders to 332 by the end of 2014, with multimedia and VSAT networks representing around 70% of the demand.

In the coming years, the ongoing transferring of traffic to optic fibers is expected to cause a drop in transponder demand in those countries that currently generate the bulk of the demand for Internet and telephony trunking, i.e. Argentina, Brazil, Chile and Mexico. The telephony market is expected to shrink from 120 transponders in 2004 to 83 transponders by the end of 2014.

As a result, satellite operators will be required to adapt to new market trends and changing customer requirements in order to fully benefit from the expected growth of the satellite market.

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tel: +33 1 5875 6061
fax: +33 1 5875 7715
email: laurence_journez@aon.fr

http://www.aon.fr/aonexplorer

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