Thursday, October 16, 2008

China Lost In Asian Satellite Race

China Lost In SE Asian Space

By Peter J Brown
October 10, 2008
Courtesy Of
Asia Times Online

While much has been made of the bold new steps taken by China's space program, the country has still failed to transform these accomplishments into meaningful and profitable private sector applications. This failure is most evident in its inability to crack the Southeast Asian satellite communications market.

China has yet to complete a true commercial satellite transaction, and still relies on government-to-government exchanges for the limited amount of business it has conducted. While the US and Europe boast powerhouse companies working on space technology - such as Lockheed-Martin, Boeing, EADS Astrium, and Orbital Sciences - China still has only one commercial satellite enterprise, China Great Wall Industry Corp.

China resumed commercial satellite launches, after a prolonged period of inactivity, in 2005. But questions about its technological aptitude re-emerged with the well-publicized loss a year later of Sinosat-2. China had boasted Sinosat-2 would provide 100 million customers with satellite television, before it failed just 10 days after its launch due to a malfunctioning solar panel.

There is no question that China is slowly gathering momentum in winning global market share, but it appears unlikely to catch up with the US and Europe anytime soon due to a combination of adverse political factors, and a reluctance of customers to spend on China's low-cost satellites, given the very low number of "birds" it has in operation.

As Southeast Asia's satellite market has surged in recent years, China has stood on the sidelines. Southeast Asian ventures aimed at beaming direct-to-home (DTH) satellite TV services to millions of regional households including satellite-delivered e-learning, telemedicine, public sector e-government and interagency teleconferencing, have all seen steady growth.

To meet the emerging demands, new satellites have been launched at a brisk rate. The US-built Vinasat-1 was sent into orbit for Vietnam in April. Bermuda-based ProtoStar now has its first US-built satellite in operation serving the entire Asian market and will launch its second - ProtoStar 2 - next year.

Patrick French, head of the Singapore office of NSR Telecom Market Research and Consulting, says other new US-built "birds" are scheduled for launch in the broader Asia region, including Asiasat-5, Koreasat-6, JCSAT-12, Optus-D3, Intelsat-18 and SES New Skies Satellite-9.

One senior Asian satellite company executive estimated that over US$2 billion worth of new satellites will be launched across the wider Asian region, including coverage for Southeast Asia, by 2011. These include a joint venture for an ST-2 satellite by Singapore-based SingTel and Taiwan-based Chunghwa Telecom Co which will replace a jointly-owned ST-1 already serving Southeast Asia and other parts of the region.

While these big ticket projects come on-line, China's commercial satellite business is still in its infancy and confined to marginal markets. Although three recent overseas projects involving Chinese-built satellites, Nigeria's NigcomSat-1, Venezuela's Venesat-1 and a recent deal announced for Laos, are an important step towards China's global ambitions, they also demonstrate how far behind it is.

China provided nearly all the funding for NigcomSat-1, which was launched last year, and industry analysts believe Venesat-1, now scheduled for launch by China in November, and the deal inked in August with Laos, are aimed at extending satellite communications and surveillance capabilities.

The analysts believe there is a hidden agenda to advance the Chinese government's strategy of securing access to key global natural resources and commodities.

Offers of government-backed loans and other incentives to sell satellites are of course nothing new to the industry. Malaysia, Thailand, Indonesia and the Philippines have all inked US satellite deals backed by loan guarantees issued by the US Export-Import Bank. The French government recently provided loan guarantees to cover the launch of a new satellite for the Thailand-based communications company Thaicom, formerly known as Shin Satellite.

Even so, some industry analysts believe China's satellite industry is still too close to the government to challenge more established competitors in the global industry. Peter Evans, a senior analyst for Southeast Asia at Australia-based BuddeComm, has studied China's Ministry of Information Industry's (MII) five-year plan for the industry.

"There is passing reference to special planning of international communications and satellite communications, as well as broad reference to the MII facilitating the development of internationally competitive companies," says Evans. "These plans are very ambitious, providing as they do long wish lists of things to change or build or create, and the immediate question they prompt is, 'How is all this going to get done?'"

Others see positive developments emerging. "China is determined to be the manufacturer to the world in all [telecom and other high tech] fields," says Roger Rusch, a California-based satellite industry consultant. "Most [satellite] operators want the lowest costs, as long as the satellites are reliable, and China is establishing a reputation that will make the competition keener in the future."

Limited skies
As China gears up to compete, the average 12 to 15 year lifespan of a typical communications satellite, as well as neighboring countries' political concerns of relying on its big northern neighbor for sensitive satellite applications, will inhibit China Great Wall Industry Corp from making any significant commercial inroads into Southeast Asia's satellite market for at least a decade, if not longer, analysts say.

For several Southeast Asian countries, China's controversial history and proximity to the region are not necessarily strong selling points. Consider, for instance, Vietnam, which for centuries has had touchy relations with China. With the recent successful launch of the US-built Vinasat-1, Vietnam joined a growing list of countries in the region which independently operate their own satellites.

"When Vietnam launched Vinasat-1 earlier this year, as part of its independent image it shared the tasks around: Aa US-built satellite, a French launch, Japanese technical assistance, etc," says BuddeComm's Evans. "It continues to be wary of excessive Chinese involvement in its economy."

Adds Rusch: "Even given [China's] great desire and ambition, it takes a long time to become qualified and established as a commercial satellite supplier. Reputation and experience are essential credentials before low price is the decisive factor."

So, too, are government-to-government relations. In September, a senior Vietnamese official visited Laos to offer Lao TV capacity aboard Vietnam's new satellite at no cost. The following month, Vietnamese Minister of Information and Communication Le Doan Hop and Lao National Post and Telecom Agency Minister Khamlouad Sidakone concluded a broad agreement covering satellite television and other broadcast services.

The neighborly gestures ensure that Lao households will soon have satellite dishes pointed at Vietnam's new satellite and immediately raise questions about the economics of Vientiane's recently concluded deal with China.

China's bid to make regional inroads is also complicated by the fact that, after years of heavy spending and several planned future launches, Southeast Asia's skies are now saturated with capacity. Several of the region's national systems are under-utilized, according to consultant Rusch, who describes Southeast Asia as a "buyers market".

Data he has reviewed shows that only 46% of the region's satellite transponders are now utilized, although the situation has recently shown signs of improvement. Whether this improving trend, driven primarily by new service offerings, can withstand the global economic downturn emanating from the US is still uncertain.

According to Rusch, several Southeast Asian nations need to rethink their satellite strategies and consider using the facilities provided by larger international operators, such as Luxembourg-based SES Global, Bermuda-based Intelsat, or ProtoStar, or even consider consolidating their individual satellite operations into a regional network.

He says Southeast Asia is now plagued with "vanity satellites", including in Indonesia, Malaysia, Thailand and the Philippines, whose commercial operations have often been loss-making.

China could yet strike a deal with space laggard Myanmar, which now relies heavily on Thaicom and ST-1 for its satellite links to the outside world. Otherwise, satellite opportunities for China's largely unproven "birds" will be few and far between in Southeast Asia. While China is no doubt prepared to take a long term view towards the regional market, its state-led plans to become a low cost satellite provider have so far failed to spark much commercial interest.
Peter J Brown, a Maine-based satellite specialist, writes frequently about satellite industry trends and developments in Asia.

(Copyright 2008 Asia Times Online (Holdings) Ltd)

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