Regional geos aim to revive mobile satellite - geostationary satellites - Company Business and Marketing

CommunicationsWeek International, Dec 13, 1999 by Theresa Foley

Mobile satellite services have suffered from the financial setbacks of global operators. But now regional alternatives could give the market a boost.

The reputation of mobile satellite telephony, which suffered during a year in which two of three global service ventures entered into bankruptcy proceedings, may be revived by a second wave of systems.

Several operators are setting up regional services based on single geostationary satellites (geos) instead of global low-Earth orbit (LEO) multi-satellite constellations, and which rely on entirely different technical and financial models. Each is investing several hundred million dollars in a single geo, a more economical proposition than the several billion dollars each spent by LEO operators Iridium LLC and ICO Global communications Ltd.--both in financial difficulties--and Globalstar LP.

Roger Rusch, president of TelAstra Inc., of Palos Verdes, California, who has carried out analysis of the mobile satellite competitors, said the regional geo projects should fare better than their non-geostationary counterparts. "Both Iridium and Globalstar have relatively low capacity for the amount of investment. It might take several years of operating experience before the revenue capacity [of the LEOS] is known," Rusch said.

The geo systems will offer handsets for $400-$800 and per-minute prices of 50 cents to $1, compared to the LEO systems which were charging $1,500-$3,000 or more for handsets and $1.50-$3 a minute or more for calls. The regional operators also say the fact that their satellite systems cost far less and have longer lifetimes allows them to cut prices if necessary.

Jai Singh, president and chief executive of geo company ASC Enterprises, said the geo mobiles will succeed where the LEOs have struggled, "simply because of superior economics, significantiy reduced complexity and use of a familiar and understood part of the spectrum [1.5 to 1.6 gigahertz]." The regional geos also benefit because they do not orbit over empty oceanic or polar regions, and thus can focus coverage on land where the highest populations and telecoms traffic are located, he said.

Competitive pricing

PT Asia Cellular Satellite Co. (ACeS), of Indonesia, will launch its Garuda satellite in early 2000. PT Pasifik Satelit Nusantara of Indonesia owns 34% and Lockheed Martin Corp., of Los Angeles, 33%.

Satellite analyst Tom Watts, first vice president at Merrill Lynch in New York, said "ACeS' pricing will be competitive with terrestrial wireline and wireless data." The wholesale price of ACeS' calls to its national service providers should be 10-20 cents per minute, he said.

The $800 million ACeS project eventually will be able to provide data services at rates to 156 Kbps, capitalizing on the overwhelming trend toward mobile data access. In this regard, it leaves Globalstar and Iridium behind, Watts said.

Next up will be Thuraya Satellite Telecommunications Co., of Abu Dhabi, with a launch scheduled for May 2000 and services starting in September. Handset prices will be around $600, with calls costing 50 cents to $1 per minute. Thuraya has a goal of 400,000 subscribers in the first year, with the satellite covering 99 nations across Europe, North and Central Africa, the Middle East, Central Asia and the Indian subcontinent.

Major redesign

Meanwhile, ASC Enterprises, of London, is still trying to complete its financing and satellite construction, and plans to orbit the Agrani geo in time to start service in 2002. Singh said Indian financial institutions and banks have committed to loan ASC more than $290 million.

The Agrani satellite underwent a major redesign in the last year when ASC decided to change the satellite's coverage to focus on India rather than on a larger geographic area, and to use a multi-frequency, multi-purpose payload on the satellite instead of a pure L-band mobile system. The latter development means that revenues will come not just from the mobile market, but also from fixed telephone and satellite television customers.