Flying sky high

The Middle East and Africa is one of the most important markets for mobile satellite service providers. Traditionally a niche industry, satellite providers are expanding the appeal of their offering and Ronan Shields caught up with a number of the players effecting the change.

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By  Ronan Shields Published  July 9, 2007

The global mobile satellite services market is undergoing something of a resurgence since the dark days at the early part of the decade, which saw industry stalwarts Globalstar and Iridium file for bankruptcy protection.

A recent survey conducted by the Satellite Industry Association recorded an average 10.5% annual revenue growth year-on-year across the global satellite industry between 2001 - 2006.

An additional breakdown of statistics displays an industry-wide, year-on-year annual revenue growth rate of 19.5% between 2005 and 2006, compared to just 7.4% for the year ago period.

The survey concluded that the overall value of the industry reached US$106.1 billion in 2006, with satellite services constituting 59% of that figure for the surveyed period.

In a development highlighting the growing appeal of mobile satellite services, global mobile satellite provider Inmarsat recently partnered with several global distribution companies, including Dubai-based Axiom Telecom, to support the launch of its new satellite phone services scheduled for launch in 3Q07. Other distribution partners include: ACeS, Chinasat, Evosat, Fono, MCN, MVS, SatCom Global and Stratos.

"Our distribution partners play a critical role in our service proposition, and will form the foundation for the global delivery of our new satellite phones," said Michael Butler, president and COO of Inmarsat.

Inmarsat's new suite of satellite phones - which includes a handheld, fixed and maritime phone - are scheduled for launch from early 3Q07. The services will initially be available in the Middle East, Africa and Asia before they are rolled-out globally, underpinning the importance of these geographies to Inmarsat.

Traditionally a provider of voice and high-speed data communications to the governmental and enterprise verticals, Inmarsat has been able to leverage its network of 440 partners to generate revenues of US$500 million for the year ended December 31 2006, translating to a pre-tax profit of US$89.8 million.

The recent agreement with mobile phone retail specialist Axiom Telecom suggests that not only is Inmarsat developing a new route to market, it is also targeting a new and wider market segment.

"We typically see the first adopters of our satellite phone services as being our present customer base," states Samer Halawi vice president of Inmarsat, Middle East, Africa and Asia Pacific.

Inmarsat claims its agreement with Axiom, which is essentially a supply and distribution contract, forms a core component of Inmarsat's market strategy, with Halawi predicting that consumers will begin to represent a growing percentage of the company's overall subscriber base.

This strategy correlates with Thuraya's policy of increasing market share by targeting the consumer segment. The strategy of Thuraya, a mobile satellite provider that is controlled by the UAE's Etisalat, has seen the satellite provider recently negotiate prepaid roaming agreements with regional GSM operators, including Etisalat and Saudi Telecom, in a bid to increase its 260, 000-strong customer base.

Thuraya's prepaid subscribers can now roam on the GSM networks of the operators with which it has agreements, and in turn the prepaid subscribers of those GSM operators are permitted to roam on Thuraya's satellite network, which extends to over 110 countries.

Gleb Larionov, managing director of Thuraya international service provider XSAT, claims Thuraya launched its ThurayaECO package as a response to the changes in consumer behaviour observed in the market.

"Approximately 40% of our customers in the Middle East and Africa are end-user customers, including small scale traders and large scale corporations, which demand connectivity no matter where they go," he says.

"Many of our target users will travel into areas where GSM coverage is sparse and through our partnership with Thuraya we offer extensive coverage with tariffs as low as US$0.20 per minute," he adds.

Larionov also points out that Thuraya's channel strategy bears a close resemblance to the distribution tactics employed by GSM operators, given the wide availability and GSM-compatibility of Thuraya products in the retail market.

However, he also notes that despite the corporate segment accounting for only 10% of XSAT's Thuraya subscriber base, the segment helps generate 50% of XSAT's Thuraya revenues.

Inmarsat predicts the global handset satellite voice market currently stands at around US$350 million a year and that this figure is expected to grow to US$500 million by 2010. Inmarsat expects to target a 10% market share at that time.

"This year we are expecting our revenue growth to double that of 2006, as a result of our aggressive market manoeuvres. We believe that the satellite phone service will be a big driver behind this growth," Halawi claims.

He also notes that the buoyant growth predictions are based on the performance of the company's Broadband Global Area Network (BGAN) service, first launched in 4Q05.

"BGAN has been our fastest growing service in our history. In 12 months our subscriber base for this service reached 10,000," says Halawi.

Inmarsat's confidence is also spurred by what it claims are the comparatively harsh economic conditions facing two of its main competitors (Globalstar and Iridium). "We also think the current climate in the satellite phone services market will offer us an opportunity to grab a sizeable market share quite quickly," states Halawi. "Our satellite service will not expire until 2020 whereas Globalstar's and Iridium's will expire sooner than that. They will also have to replenish their satellite services," he adds.

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