Beyond borders

Why the Middle East satelite sector is set to surge.

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Beyond borders
By  ITP.net Staff Writer Published  October 13, 2011

Why the Middle East satelite sector is set to surge.

The years running up to the financial crisis of 2008 were marked by some frenzied deal making in the Middle East telecoms sector, with many of the region’s incumbent operators bidding huge sums for foreign licences and stakes in other operators.

While many fixed line and mobile operators have been battered by the economic slowdown, the mobile satellite services (MSS) sector has remained remarkably robust, with traffic growing modestly and the sector’s major players remaining optimistic about growth.

Indeed, according to recent research from NSR, a US-based market research and consulting firm specialising in satellite and wireless technology, the sector continued to grow in 2009 “by a few percentage points” and is forecast to achieve a retail value of $10.9 billion in 2019, up from about $4.2 billion in 2009.

NSR’s research also predicts a growth in MSS units, from 1.9 million units in 2009 to more than 5.7 million in 2019, at a compound annual growth rate of 11.6%.

“The MSS industry has weathered a storm in the past 18 to 24 months and held on despite a general investor confidence crisis and the economic recession,” says Claude Rousseau, senior analyst, NSR.

“With government funding and private investors supporting the industry, it has continued to show growth in traffic while targeting a larger set of customers in the maritime, land-mobile and aeronautical markets,” he says.

Rousseau also sees significant potential for the satellite sector in the ATC (Ancillary Terrestrial Component) space, with demand for services such as mobile data backhaul growing rapidly.  But with only about 2 million subscribers worldwide, the MSS satellite sector is also relatively small, and this could lead to consolidation in the sector.

“The challenge is that expected consolidation in the MSS industry has not happened yet, despite the market not being adverse to it,” Rousseau says.

“There are still too many players vying for a piece of a relatively small pie compared to other telecommunications markets, which stretches an already fragmented industry, especially in the legacy maritime sector.”

He adds that while consumption of data airtime remains low, the satellite data market should grow with increased “capabilities and integration” with positioning, navigation, safety of life, security and tracking applications.

Globally, the MSS sector is dominated by Inmarsat, which commands a 53% market share; Iridium, which has a 24% market share; and Thuraya, which has a 13% share of the market, according to NSR’s research.

However, the picture is probably quite different in the Middle East and Africa, where Rousseau guesses that regional player Thuraya is likely to have the biggest market share, followed by UK player Inmarsat and Iridium, which is based in the US.

But while consolidation might be expected globally, in the MEA region, there remains plenty of demand for MSS, providing potential growth opportunities for all of the main players.

“As far as mobile satellite services are concerned, we see a growing demand and more service providers and operators addressing the markets in the Middle-East and Africa,” Rousseau says.

“The need for mobility is increasing in the region and demand for vertical markets such as government, military, NGOs, satellite news gathering, oil and gas as well as maritime users is growing, in large part thanks to low infrastructure build-out but also for improved connectivity demand brought about by remote office locations and operational requirements.”

While industries including oil and gas, transportation, and defense remain the leading users of MSS, the key trends in the sector include growth in data products, rising bandwidth demand and continued support in government and military mobility markets, according to Rousseau.

“A lot of demand over the past few years for satellites has been driven by two major factors – geopolitics and funding – usually one goes with the other.”

He adds that each of the main MSS players has the potential to grow in the region. For example, Inmarsat has seen “good growth” in the market because of its strength in oil and gas and satellite news gathering, and in the government sector.

However, he adds that Thuraya “cannot be underestimated” because it is launching numerous new products such as Thuraya IP, which it is adapted for the aviation industry. “In my view, Thuraya will also be capable of providing good competition to Inmarsat,” he says.

This growth is something that Dan Mercer, regional VP, distribution channels, Europe, Middle East and Africa, is familiar with. After gaining a licence to set up business and market its products in South Africa last June, the US-based satellite operator has big ambitions for regional growth. The licence means that Iridium now has frequency allocation in the country and can market and sell its services there.

Iridium, which has a number of licences in the Middle East and Africa and offers its products through service providers in many countries, is confident that it will gain significant business in South Africa.

Mercer says that Iridium is working with partners including Globalcom, Global Plus and Satcom ZA, which each have their own niche markets. “Really the biggest game is the ability to sell to government ministries and the MOD who of course are all large users,” he says.

Iridium also has partnerships with more than 250 product suppliers that buy its modems and integrate them into their niche products, which are designed for various industries, according to Mercer.

These companies will also now be able to market their products that contain Iridium technology in South Africa. Mercer points to maritime as a key target market in South Africa. About 40% of Iridium’s traffic globally is from international waters, mostly ships and some aircraft, he adds.

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