FSS Operators: Looking at Ways to Renew with Growth in a Transitioning Period
Dimitri Buchs, Senior Consultant, Euroconsult
Continued downward trend for FSS operators’ revenues in 2020
In recent years, the FSS industry has been going through a transitioning period. It is now more competitive than ever, with this new landscape forcing players to adapt to remain relevant. In 2019, the industry had an overall size of $10.8b (excluding vertically-integrated operators), with revenues down 5.3% year-over-year. This was the strongest decrease in revenues since 2015 and this downward trend is expected to continue in 2020.
More than three quarters of a year after the start of the Covid-19 crisis, there are visible signs that the FSS industry has been overall negatively impacted by the pandemic. Most publicly-listed operators reporting on a quarterly basis including global operators have reported lower revenues after 3Q 2020 vs. 3Q 2019. Publicly-listed FSS operators accounting for more than 2/3 of FSS industry revenues have seen their revenues decrease by 4% after the first three quarters of the year. Some satellite operators have even reported a double-digit decrease in revenues during the period (e.g. Telenor, Telesat). Revenues have been hit by the crisis which has led some operators to revise their revenue targets downward for 2020. Interestingly and maybe a sign of what to expect for 2021, the gap between 2019 and 2020 revenues of companies reporting has progressively narrowed between 1Q 2020 and 3Q 2020.
Operators with a strong mobility business have overall been more impacted than others. Several operators have already indicated that their mobility revenues (i.e. maritime and aero IFC) have decreased in recent months and/or are expected to decrease in the current fiscal year. This includes Eutelsat, Intelsat and Sky Perfect JSAT. One of the exceptions is SES which reported negative revenue growth at a company level but a double-digit year-over-year growth in its mobility business after the first three quarters of 2020 due to fact that the vast majority of SES’ commercial mobility contracts are fixed.
An increasingly competitive FSS industry
Amid the tough overall environment for the FSS industry and despite the significant changes observed during the past few years, the market structure of the FSS industry remains concentrated at the top with a growing fragmentation at the bottom. The top 10 players have remained largely unchanged in recent years as highlighted in Euroconsult’s new edition of FSS Operators: Benchmarks & Performance Review published in November 2020. However, eight new players have emerged between 2017 and 2020, the latest being Kacific, leading to a total of 50 active operators in 2020 (excluding vertically integrated operators).
The growing number of active players has so far not translated in additional revenues despite growth in capacity demand. This situation and the fact that satellite capacity prices have fallen in recent years, is pushing a growing number of FSS operators to look for other sources of revenues ahead of the expected return to revenue growth from satellite capacity leases. In particular, vertical integration is a growing trend allowing FSS operators to have greater control over satellite capacity pricing, improve value to end users and grow utilization of large pools of HTS capacity supply. Recent examples include Eutelsat with the acquisition of Bigblu Broadband’s European activities (July 2020), Intelsat with Gogo’s commercial aviation business (September 2020) and Inmarsat with the acquisition of Speedcast’s primary Fleet Xpress, FleetBroadband and Fleet One service contracts (November 2020).
Because of the vertical integration trend observed in the satellite industry, service revenues are expected to grow for operators in coming years as their strategies continue to evolve. This trend should also contribute to a return to revenue growth in the next 2-3 years for an FSS industry that is keen on entering a new cycle.
Numer of FSS Operators And Top 4 Operator Market Share
in million USD
About the Author:
Dimitri Buchs is a Senior Consultant at Euroconsult, based in Montreal, Canada. Since joining Euroconsult in 2007, he has managed and contributed to more than 50 consulting missions for a wide range of international clients including satellite operators, service providers and investment funds.
Dimitri is also an editor and key contributor to our premium research report in satellite communication and broadcasting markets. Prior to joining Euroconsult, Dimitri participated in several consulting assignments on mobile TV services and social media marketing. Dimitri has a Master’s Degree in International Management and a Bachelor of Economics from the Pantheon-Sorbonne University in Paris.
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