“The Sky is the limit” Stephen Spengler, CEO of Intelsat
Teletimes: Over the past few years, we have seen major changes in the global satellite industry space that are reflected in the changed strategies of many satellite companies. Can you please talk us through Intelsat’s evolution and growth over the past few years and the vision you have for the future?
Stephen Spengler: The satellite industry is in transition right now as it moves from simply offering wideband capacity to a focus on building infrastructure to support the data environment of tomorrow. It is estimated that there will be over 12 billion connected devices by the end of this decade. The monthly internet traffic is expected to multiply three times to reach 21 Gbps for every man, woman and child on the planet. I have worked in the satellite sector for many years, but I can’t remember a time when our prospects were more promising — it is a great opportunity for all of us that provide connectivity solutions.
At Intelsat, we anticipated these changes, and is why we are introducing high-throughput satellites (HTS), known as Intelsat EpicNG, that use spot beams to cover high-traffic areas. The traditional boundaries of fixed and mobile satellite services have dissolved, and our customers need broadband everywhere.
We launched our first two Intelsat EpicNG satellites in 2016 and we have five more in production that will launch in the next few years. At the same time, we are investing to support innovation in other parts of the sector. New antennas are coming to market, such as the flat-panel arrays from Kymeta and Phasor. As these innovations and others become commercially available, we will experience simplified network access to enable applications involving the connected car, the Internet of things and machine-to-machine communications with mobile platforms.
TT: Congratulations on the successful launch of Intelsat 33e and 36. How is the feedback so far?
Steve: Intelsat 36 has entered service and is operating as expected — meaning Africans are already enjoying more high definition content! The satellite’s Ku-band transponders primarily provide broadcasting and direct-to-home (DTH) services for Africa’s MultiChoice, the leading DTH platform in South Africa. The C-band payload on Intelsat 36 provides backup for Intelsat 17 and Intelsat 20, giving resilience to our media customers in the Indian Ocean region from Africa to western Australia.
Intelsat 33e, our second EpicNG satellite, will enter service in early 2017. It will offer HTS spot-beam services to our enterprise and wireless operator customers throughout Africa and the Middle East. Intelsat 33e will open up a range of services and capabilities that were not possible before by offering higher-performance data connectivity at lower cost per megabit than previous spacecraft. Our technology is designed to ‘close the business case’ for our customers — whether deploying 3G wireless services in sparsely populated regions or new broadband networks for businesses and governments. Customer tests of our first Intelsat EpicNG satellite, IS-29e, found that bandwidth efficiency improved 165% using existing ground equipment, and up to 330% using the next generation of ground antennas. This same benefit will be available to our African and Middle East customers on IS-33e.
TT: Would you like to comment on the Financial Results of Third Quarter 2016?
Steve: On 27 October 2016 we reported our financial results, including $543 million in revenue and $405 million in Adjusted EBITDA, on track with our guidance for 2016. Operationally, an important accomplishment in the third quarter was our successful dual launch of Intelsat 36 and Intelsat 33e—it was a critical milestone in our year, and also essential to positioning to meet our 2017 goals.
TT: How does Intelsat plan to tackle the increasing competition in Africa as a result of factors such as oversupply environment and fiber alternatives?
Steve: There is not a single answer to this question given the vast size and diversity of the African continent. We have some regions in Africa where customers can get the bandwidth they need, and others where the right service with the right price point is not available.
The Intelsat EpicNG satellites are the first to market with continent-wide HTS capability. These satellites are backward compatible with existing ground equipment, so our customers don’t have to make additional investments to use Intelsat 33e once it goes into service early next year. The transition will be seamless. And while more fiber will be installed to serve African customers, the complexity of the continent – more than 50 countries, people speaking hundreds of languages and dialects – means no single technology or company can reach all the possible markets. Communications solutions going forward will increasingly be a hybrid solution combining fiber, wireless networks and satellite. Add to this the fact that less than half of Africans have mobile phone service, and we see tremendous opportunity to bring satellite services to enterprise, wireless and mobility customers on the continent, typically in conjunction with terrestrial technology.
TT: Google, SpaceX, Facebook and OneWeb plan to launch satellites, drones, balloons and other Internet-delivery platforms. How will these developments evolve the satellite broadband market as it is today and how does Intelsat plan to become part of these development worldwide?
Steve: We certainly have seen a lot of announcements of plans to use many different types of technology to deliver the Internet to underserved markets. Some of these plans will come to fruition, and some probably won’t.
I think it’s easy to underestimate the complexity of starting a connectivity business from scratch. Just the process of getting regulatory rights in every country where a company wants to deliver a signal is very challenging. This is one of the reasons why we strive to build on our relationships with over 60 wireless operators serving the region — we think they are in an excellent position to connect the unconnected. But because of the vastness of the challenge, there will be many solutions required.
Of the innovative solutions coming to market, we made a strategic decision to invest in OneWeb because we believe in its technological and business approach. The OneWeb constellation will use Ku-band and be another layer of capability on top of our network. Once launched, the OneWeb satellites will be fully inter-operable with ours, meaning customers will be able to access both the Intelsat and OneWeb satellites from the same ground terminal. OneWeb’s focus of leveraging consumer-scale technology for their satellite-based solution is the right direction, and why we are working alongside them to capture innovation for the sector.
Of the innovative solutions coming to market, we made a strategic decision to invest in OneWeb because we believe in its technological and business approach.
TT: Please tell us about your relationship with Saudi Telecom Company.
Steve: Saudi Telecommunication Company is the largest telecom operator in Saudi Arabia and has long been an Intelsat customer. They are noted for their highly reliable networks and expertise in delivering enterprise-grade solutions to far-flung locations. STC recently expanded its relationship with us and entered into a new contract for satellite services on our Intelsat 10-02 satellite. The additional connectivity supports the private data network that STC provides for the largest oil and gas producer in the Kingdom of Saudi Arabia.
TT: Please tell us about your services in the Aviation and Maritime sector. How do you see the potential in these verticals?
Steve: If you’ll pardon my pun, the sky is the limit for these applications. Today, 80% of commercial flights have no broadband connectivity, and only a fraction of the 50,000 ships in the maritime sector have broadband connectivity. Our service-provider customers are focused on giving consumers a broadband experience that rivals what they get at home. Beyond that, machine-to-machine applications in the aeronautical and maritime sectors offer much, much more potential for providers of connectivity solutions. For example, a new Pratt Whitney engine has 5,000 sensors that can generate up to 10 gigabytes of data per second. The capture, transmission and analysis of this data can cut fuel consumption by as much as 10-15% and allow predictive maintenance — which means fewer delayed flights, and more time in the air. These potential cost savings dwarf that of the consumer-based connectivity.
Talking about Aviation and Maritime, the sky is the limit for these applications. Our service-provider customers are focused on giving consumers a broadband experience that rivals what they get at home.
Intelsat recognized the need for broadband mobility services back in 2011, so we built an early lead in these sectors — at the end of 2015, a 60% share in aero and 31% share in maritime, based upon market data. We were first to market with a mobility solution. When we started building our satellites and the beams, we assumed it would be for the maritime mobility sector, but by the time we marketed the services, aeronautical mobility providers were demanding connectivity as well. We quickly achieved a very high utilization of our global mobility network and then followed quickly with the Intelsat EpicNG fleet, for which the anchor orders are highly weighted to the mobility sector. For instance, Intelsat’s service providers already deliver satellite connectivity to 298 of the world’s 316 largest cruise ships — and a growing number of those are serviced from the Intelsat EpicNG beams.
High-throughput satellites alone will not be the magic that unlocks these two opportunities. We are introducing managed services that provide aeronautical and maritime services providers the flexibility to use our high-throughput spot beams and wide beams depending upon routes and seasonality of demand. Our managed services simplify the complex networking considerations, but still allow for the basics of enterprise-grade solutions, such as the ability to provide a service level agreement (SLA) or contract to specific Quality of Service commitments.
TT: Strategically, what will be your focus in terms of service and geographical markets for the coming years?
Steve: We operate the world’s first Globalized Network—from our inception, we have been a fully global company. We don’t focus on any one geographic market, but we do seek to provide regionalized services that address the most important needs in the geographies we serve.
Our move toward managed-service models, such as IntelsatOne Flex and IntelsatOne Prism, will expand hybrid network solutions that include satellite, wireless and fiber infrastructure. This approach will allow our customers to reduce their capital expenditures and redirect resources and manpower toward application development that will bring new traffic on their networks.
As we roll out more managed services in our product lineup, and access the innovations in ground hardware and new antennas, we will be able to address the opportunities in the sector such as Internet of Things and the connected car.
TT: How do you think will satellite communications contribute to the Internet of Things? Are you planning to target this market with any solutions?
Steve: We are investing and collaborating on developing services for the Internet of Things. Start with connected vehicles, which include cars, trucks, trains and any moving platform. We believe that the billions of dollars spent each year by car manufacturers to recall vehicles for software upgrades could be avoided by implementing broadcast software updates via satellite. We think broadcast capabilities, and the vastly superior security aspects, give satellite a real edge in delivering both operating and navigation software updates that will be essential as we move into the next decade. Earlier this year, we participated in a demonstration of the technology with Toyota and Kymeta at the Detroit Auto Show. This is an exciting application to develop.