Seeking growth in unpredictable times: A conversation with SES CEO Steve Collar (Image Credit: Space News)
SES announced plans March 22 to buy U.S. government satcoms provider Leonardo DRS as demand for connectivity in the defense market grows in the wake of Russia’s war in Ukraine.
However, the war is also adding more economic pressures on a space industry still grappling with a pandemic that has clogged up supply chains, delayed satellite projects and disrupted skilled workforces worldwide.
“The Russian invasion in Ukraine is going to create a fair amount of stress in the economies of the world,” says SES CEO Steve Collar.
“None of this is necessarily unheard of, but I think the number of global issues that will impact our industry is probably growing.”
SES expects to deploy 14 satellites for its multi-orbit constellation in 2022 amid this uncertain climate. These include the first three satellites for O3b mPower, a next-generation constellation aiming to bring significantly faster speeds to SES’s O3b medium Earth orbit (MEO) network.
SpaceX planned to start launching 11 Boeing-built O3b mPower satellites in 2021, and then the first quarter of 2022 before another delay pushed the first batch into the second quarter.
SpaceNews spoke with Collar about how the industry is weathering shifting schedules as geopolitical issues add more complexities for the year ahead.
Where will O3b mPower launch?
The dates of individual launches have shifted, but getting the constellation up and operational and serving customers by the end of this year is very much on track.
We’re at a time when everyone else is slipping. If we are up and operational by the end of this year, we’ll have our second-generation constellation delivering services and generating revenue as other constellations and some of the big GEOs are struggling.
We’re two-plus years into the pandemic. Why is there still so much uncertainty around satellite project timelines?
It’s tough. If you look at the world in general, there are all sorts of industries having supply chain issues, and I think that’s where a lot of the struggles are.
Our vendors have done a good job and managed pretty well. We’ve got SES-17 on the way to orbit as well, after successfully launching that last year. Relative to the rest of the industry over the Americas, I think we will be there first versus the other big, Ka-band GEOs.
Our mPower, SES-17 and C-band projects all go into service this year. I think it’s 14 satellites in total that we are launching during 2022. Just 2022 would make us the fourth largest satellite operator — and for the time being, they are all on track.
What effect will delays in launching multiple big connectivity projects have on the broader connectivity market?
It’s hard to say because it’s not fully resolved. It’s going to impact chipset manufacturers, so terminals are something we’re laser-focused on. We’re working with Gilat and ST Engineering, and they’re doing a good job in maintaining schedules. With vendor diversity, even where one might have a challenge, the other can step in.
So I think [the effects of the pandemic are] not entirely done, and we, like others, will need to manage that. But we’re not big volume. High throughput, high flexibility services are where we differentiate ourselves. We are not residential broadband, so we don’t have to build tens of thousands, hundreds of thousands or millions of terminals. I think that helps us.
How long do you think the pandemic will disrupt the space industry?
We’ll still see it in 2022, although I don’t think it’ll be so much on the service providers. Cruise is now kind of back to pretty much full sailing. Aviation is probably not back to pre-pandemic levels, but on the upward track.
I think the impact will be around the supply chain, which reflects what’s happening in the broader tech space. It’s not just satellite.
Do you think we’ll still be talking about this next year?
My guess is yes. I think COVID and the associated implications will continue to have local impacts. Whether it be local lockdowns or supply chain challenges, I think we’re also going to start seeing the impact of inflation.
Companies are also going to have to manage some of these geopolitical issues. The Russian invasion in Ukraine is going to create a fair amount of stress in the economies of the world. None of this is necessarily unheard of, but I think the number of global issues that will impact our industry is probably growing.
Viasat saw broadband service disruption from a cyberattack that overlapped with the start of Russia’s invasion. Has SES been affected at all?
No, we haven’t, but we’ve certainly increased our sensitivity there because these are sophisticated space actors, and we have to be aware of and thoughtful about those threats.
We’ve been pretty proactive. We have people in Ukraine, so our priority was making sure they were safe.
We engaged very strongly with the European Union and the Luxembourg government to make sure that there were clear sanctions against channels carrying Russian propaganda. That was important to us so we could take action against those channels in a clear, certain, and supportable way. We’ve implemented humanitarian solutions, and we’re making our resources available to support the defense of Ukraine.
REGIONAL EXPANSION
What are your expectations for the joint venture SES recently announced with Indian telco Reliance Jio to expand in India?
It’s valued at more than $100 million, but I think in reality it could be several times that. It’s multi-orbit, so it includes O3b mPower, and having access to the Indian market with O3b is something that we’ve not achieved until now. And we are also doing it with one of the largest and most disruptive telecommunications operators in the world.
It’ll be tremendously beneficial for our business outside India because we will learn huge amounts as we integrate O3b mPower with the terrestrial capabilities that Jio has.
Could SES make similar arrangements elsewhere — are there other countries on the verge of opening up like India?
We’ve been having this conversation with Jio for the last 18 months, so it’s sort of a happy circumstance that, at the same time, the regulatory environment in India is opening. To be honest, I wouldn’t link those things too closely. The synergy in terms of how SES and Jio think about the market was there anyway.
We have mPower deals elsewhere that we expect to be able to announce in the next six to 12 months in the various segments that we’re operating in that have, I would say, similar weight and significance, but this one is unique.
How does SES see its role in Europe’s proposed sovereign broadband constellation a year into those plans?
It’s difficult to imagine a more European company than SES, so we feel like we have a very strong role to play and a voice at the table as this space capability gets developed.
In a sad way, the Russian invasion of Ukraine shows the strategic importance of space and the need for Europe to have a sovereign space capability that it can use and protect Europe should there be situations like this in the future where terrestrial networks can be interrupted. I think having an independent capability will ultimately be the thing that drives this project to happen. There’s still a huge amount of work to be done — a lot of architectural work, trade-offs and partnerships to be formed.
The most exciting thing about this project is there’s a 20-30 year vision. This is not a quick fix, although there’s definitely an element of starting with services as soon as possible.
Does OneWeb’s deployment pause change the landscape for that constellation?
There’s plenty of discussion about whether and how OneWeb can play a role. If Europe intends to develop its own LEO constellation, which I think is important in the context of an overall multi-orbit strategy, I’m not sure the presence of OneWeb or not has too much of a bearing on that strategic need and capability.
OneWeb is also seeking government and enterprise customers like O3b mPower. Does their stumble boost your MEO plans?
We’ve always felt very good about how we line up against the competitive positioning in the industry. Mainly because we’re very differentiated from anyone else. If you look at the service that OneWeb can deliver, regardless of the current struggles they’re having in access to launch, they are very different from those we’ve targeted. We’re the right fit for a whole bunch of government services, for cruise, cloud, edge connect — these sorts of services. We are not a good solution, deliberately, for low-end, contented, residential broadband-type services. We are more than happy to leave that market to others.
We are more focused on services where we think we have a meaningful advantage. I think that’s why you see four of the five largest cruise operators signing up, a lot of interest from government, the partnership with Microsoft — all of this suggests that we have something very different from anyone else out there.
And it helps that we’re also going to be up first. We’re going to be up with our second-generation services before pretty much anyone else is up with their first.
FUTURE SATELLITE BUSINESS
SES is absorbing SES Networks into the wider group, similar to what happened with SES Video in 2020. Running the business unit separately would have made a spin-off easier. What does the integration of Networks and Video say about how SES sees these businesses?
It doesn’t rule anything in or out, but I think it says that there are great synergies between our video and network businesses. Video delivers this fantastic visibility of revenues. It’s highly profitable. The majority of our cash flows are still generated in our video business. We see real longevity there, but it’s not the growth engine, which is networks.
And so, we are using the cash flows coming from video to make sure that we’re investing in what will be the growth engine for the next decade. And when we think about our cloud strategy, that now straddles our video and our networks businesses.
We looked at whether it made sense for us to separate these business units a couple of years ago. We decided it didn’t make sense, and we’re seeing the fruits of that decision now being born out in the performance of the two areas of the business.
What’s the future of the satellite TV market? It pulls in a lot of revenues for SES, but TV has been slowly declining historically as an industry. Has the pandemic changed this trend?
Our customers have, in general, done well over the pandemic. The global trend shows a return to linear, shared experience and more video consumed. Now, it’s definitely the case that video is being consumed on multiple platforms, not just the TV in the living room, but also on tablets, mobiles and so on. So having an ecosystem is important, and that’s something we take great pride in over in Germany, where we’ve got 50% of the market connected to SES satellites and two million subscribers on HD+. In 2021, we delivered HD+ ToGo, where subscribers can take their content on their mobile devices for a small incremental fee.
And we’ve also just announced that we’ve launched HD+ at home [a German internet-based streaming service called HD+ IP], which gives us access to the other 17-18 million households that are not currently satellite households.
I think satellite as an anchor in that broader media ecosystem is really important. Satellite remains the best way to transmit HD programming to millions of people simultaneously — it’s the cheapest and, by the way, the most environmentally friendly, which I think is not talked about very much. I saw a stat that said a movie stream is equivalent to boiling the kettle five times.
Over the next five to 10 years, more companies will aggregate content at the edge of the network, and there’s no better way of aggregating than DTH.
The other thing is, people watching the Super Bowl terrestrially were watching it typically 90 seconds behind those watching over satellite. The whole concept of watching sport is that it’s a shared experience; that I’m watching it not only in a room or in a pub or whatever with my mates, but I’m also texting others. Because we’re all connected, the shared experience now goes way beyond the people that you’re immediately with, and you want to be watching at the same time.
If there’s this big difference between a streamed game and a DTH game, I think it’s a problem. So there are some very important enablers and trends that will keep satellite relevant in the video environment. Does that mean it’s going to be as big as it was 10-15 years ago? Probably not, but I think it will be as profitable.
We’ll continue to drive costs out of the business. We’re going to replace 19.2 degrees with two satellites rather than four, and that means 50% capex efficiency, so from a profitability standpoint the business looks great.
I think we will continue to see low single-digit declines in video, but we feel very good about the overall picture, certainly for SES and our neighborhoods.
And what about demand for satellite connectivity?
It has been a complicated period for our networks business. The good news is I think we’re coming out of it. The long-lasting impact will be everyone needing to be connected everywhere, wherever they are, and this emphasis on connectivity programs will remain in all countries of the world.
Governments also have a big impact on connectivity for defense. This COVID period, and this instability in the world at the moment and the strategic importance of space, is one of those large megatrends that will influence our industry over the next five to 10 years. That will drive growth in the commercial satellite sector coming out of the pandemic as we look to leverage some of our capabilities for sovereignty, defense, border security and the like.
This article originally appeared in the April 2022 issue of SpaceNews magazine.
