The current global economic turmoil is having an effect on Asia, but a brief review of history shows that Asia will weather the storm better than other regions and will in fact benefit in several ways from this financial crisis--as well as have a faster rebound.
Three of the satellite based businesses which show continued regional growth are; television broadcasting services (DBS/DTH), machine–to–machine (M-M) services for tracking and monitoring high value assets, and off-shore/remote communication services supporting the oil & gas industry.
During the Asian financial crisis from 1997-98, Indonesia, Thailand, Malaysia, and the Philippines were all critically hurt by the devaluation of their currency. In the case of Indonesia for example, the national currency – the rupiah-dropped in value from roughly 2,000 to US$1 to, at various points in time during the crisis, 18,000 to US$1. Again in 2000 - 2001 these countries were hit by the dot.com crisis. These same economies rebounded and experienced incredible growth over the last six years.
There continues to be a requirement, a demand for these services driven by underserved populations in the case of television, by an increased concern for managing and protecting assets in the case of M-M, and the increased global demand for petrochemical products – when averaged over several years. By way of example, market statistics recorded during both of these periods showed families favored staying home and watching more television, versus participation in relatively more expensive activities during times of relative economic growth – in some markets viewing time more than doubled.
Opportunities
Typically one of two reasons holds the use of satellite service as the preferred choice over alternative options. The first; when geographical expanse, difficult/remote terrain, and off-shore conditions force the cost of terrestrial based infrastructure higher than that of satellite. Cost being measured in both CAPEX/OPEX expenditures and "time to market" (opportunity loss). The second is when the target market occupies a geographically large area which can best be served by point-to-multi-point transmission, such as the direct broadcast of television programming.
We see continued growth in petrochemical exploration driven activities which follow 10 and 15 year business development plans. Construction of exploration vessels and off-shore rigs, which requires years, continues as does exploration both regionally and globally. Crews may be operating in Africa and South America but the CEO, CFO and procurement offices are here - just down the street.
While today’s economic problems may adversely impact the rate of service growth, satellite communications remains the delivery method of choice. It is in these Asian markets that opportunities can continue to be developed.
The Market: "Capital vs. Product" – The Direct Broadcast Satellite Example
The emerging markets of Asia, measured in the billions of consumers, are characterized as having significant and growing populations, largely rural and in underserved regions, and are populations where the majority of people are below 35 years of age. While capital markets have taken a beating globally, the demand for television in Asia (by all transmission means-internet, IPTV, satellite, terrestrial) continues to grow.
The principal Asian market consists largely of huge populations in areas yet unserved or poorly served by any form of multi-channel television. The number of homes in Asia ready for pay-TV, could be reduced by one half and it would still take another 10 years to satisfy their viewing needs.
"Television, which supports arguably the vast majority of the satellite communications demand in Asia, has shown little measurable effect from the economic crisis." This was the sentiment expressed by television programmers and satellite platform operators alike at the recent CASBAA conference held in Hong Kong.
Using copper and fiber, in emerging markets costs too much in both money and time to market. Wireless, both satellite and terrestrial [Wi-Max/LTE/3G], deliver services faster than wired, but even when terrestrial service is the approach there remains a satellite component supporting backhaul and programming distribution.
The subset of these countries, which will offer the greatest likelihood for continued market growth, is one further refined by taking into account the impact of friendlier regulatory environments and one where the services offered are associated with television broadcast and programming distribution. These countries are - India, Indonesia, the Philippines and Vietnam - which over the next five years will reach a combined population of 1.7 billion.
"In the face of economic problems our market continues to grow and so do we," said Rahadi Arsyad, President Director & CEO of Indonesia’s TelKomVision.
Rahadi sees a growing business ahead telling me that Indonesia, with its 220 million population and 45 million television households, still has significant room to grow when one understands that today the pay television market has less than 2% penetration. He explained that with the current stability brought by the present administration, people are staying home for affordable entertainment during these times of financial crisis. Rahadi believes that with the program packaging his team has developed at TelKomVision, within the affordability of Indonesia’s largest economic segment, they will attract the millions of existing free to air satellite viewers who are watching 12 national terrestrial channels on the TelKom 1 and Palapa C satellites.
Opportunities are There to be Developed
The two principal satellite services associated with television delivery are Direct To Home television broadcast (DTH/DBS) and Fixed Satellite Services (FSS) - supporting program distribution.
Recent growth in FSS service demands, fueled by cellular backhaul, will decrease as more and more cellular operators reduce or postpone 3G expansion and Wi-Max service implementation plans to serve their wireless internet market – both of which require substantial backhaul bandwidth. This leaves video distribution for cable head-ends and terrestrial redistribution as the major FSS market segments for the near term.
There are opportunities today in Asia for equipment manufacturers who have cash reserves to take advantage of the economics challenges facing those who have no access to needed resources - opportunities in terms of finding manufacturing partners and regional system integrators - as well as market expansion through strategic partnerships and/or acquisition.
With the availability of lower cost money, manufacturers can also increase their opportunities through vendor financing. With the uncertainty associated with both currency exchange rates and the cost of money, any manufacturer who offers Vendor Financing will multiply their short term sales effectiveness and improve their long term markets.
Probably one of the greatest opportunities/advantages for equipment manufacturers comes from a reduction in regional presence by their competition. In 1998 and again in 2000 Asia saw many North American companies pull back from their international business development activities. They left Asia before they left Europe – often due to issues of cultural comfort. Companies with senior management uncomfortable with international markets, are already exhibiting a "knee jerk" reaction - retracting from continued much less expanded presence-leaving the door open even wider for those who determined long ago that Asia, one way or another, held their future market.
During this economic crisis, as far as the Asian market is concerned, retracting from the market is pretty much the worst thing a company can do. Retraction from the market will open the doors even wider, not only for existing competitors but also for "Made in Asia" products and services. In particular China, with its huge cash reserves, lower cost of manufacturing supported by their own domestic market, and growing technology prowess, will have little problem establishing its market dominance as a supplier, especially if it is the only one to show. Once the economy improves it will be too late or, as a minimum, very expensive to re-enter the Asian market in the face of companies who stayed.
Continued growth in the demand for satellite space segment may slow down a little, but with the program providers are committed to Asia, and with Asia being the only place in the world to have the market size and demand, and with the space segments already paid for and in place or being launched, there is no reason to believe that there will be any significant diminishing of opportunities in Asia, in fact, just the opposite.
Conclusion
Today, solutions are selling, not boxes. For both equipment manufacturers and service suppliers opportunities in Asia exist to develop and deliver standards based, regionally supported solutions, which offer reduced operational costs. In recent meetings with a Chinese off-shore exploration company shopping for an advanced communications system for their new vessels, after hours of technical and business discussions, the president had only one question of his team, "Does the solution offered solve our problems and reduce operational costs?"
For satellite owners/operators the opportunities are in developing strategic partnerships with service providers - sharing near term risk and long term rewards.
And for large telephone and media broadcasting companies, facing slow subscriber growth in their home markets, it is the right time to bring out the war chest and develop win-win strategic partnerships in Asia.
Companies can manage costs while not losing out, by developing alternatives to "that’s how we do it." Alternatives include; not flying sales managers in, a substantial cost in both time and travel expenses, but rather hiring top flight regional talent who know the market, culture and people; finding and developing great strategic partners by investing in the selection and education process-understanding that the partner will likely still be with the company long after the ones who selected them have left.Opportunities exist for our industry but there is something we can’t afford to forget if we are going to be successful – while Asia is made up of thirty some countries and hundreds of cultures, all at different levels of economic growth, they all have one thing in common - business is all about relationships and long term commitment - not quarterly sales projections.
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Tom van der Heyden, a Hong Kong based consultant and satellite communications pioneer, has been building satellite communication and broadcast systems in Asia over 25 years. He can be reached at tom.vanderheyden@asia-pacific.net
