Northern Sky Research

Sub-Saharan Africa: A Looming Crash for FSS Operators?

Nov 29th, 2011

A quick look at the supply numbers seems to indicate that the previously hot satellite market in Sub-Saharan Africa has the potential to become an oversupply fiasco for the FSS industry. During the run up of the African market, satellite operators of every stripe decided to launch new capacity into the region with NSR estimating over 300 TPEs of new and replacement C- and Ku-band capacity will be launched in the coming two years for Sub-Saharan Africa alone.  The slew of satellites includes ABS-2, Africasat-1a, Amos-4, Amos-5, Apstar VII, Arabsat 5C, Astra 2E, Astra 2F, Astra 2G, Atlantic Bird 7, Badr-7, Intelsat 20, Intelsat 22, NigComSat-1R, SES-4, SES-5, Thaicom-6, W3C, W3D, W5A, and Yamal-402.

Further, tens of terabits of undersea cable capacity has landed on the continent over the last 12-18 months, and more is on the way. Less visible but just as important, tens if not hundreds of millions of dollars are also being invested in new terrestrial fiber to move this capacity inland.

And to top it all off, O3b announced in early November 2011 that it would order four more satellites for its constellation that will effectively increase its global capacity by 90% compared to the original eight satellite constellation due to better average look angles.

Is a crash in the Sub-Saharan Africa FSS market inevitable given the vast amounts of new capacity entering the region?...Not necessarily.

NSR’s view is that the Sub-Saharan African market will certainly go through a period of transition, and there will likely be a significant, though probably more short-term, softening of capacity pricing. It is currently NSR’s best estimate that regional average FSS satellite fill rates will drop by about 5 percentage points, while average capacity pricing will likely sink to the low $3,000 per MHz per month range, even lower for some cases over the next year or two.

But, the fundamentals of the Sub-Saharan Africa market remain strong and in favor of the FSS operators. Historically, waves of new capacity tend to be a business innovator in regions that have experienced similar situations as perfectly illustrated by developments in Latin America over the last several years.

Plus, fiber does not and will not go everywhere in Africa and O3b, due to the cost of its ground equipment, is limited to a few specific applications but not appropriate for others. Anything related to TV or VSAT will remain the domain of the FSS operators in Sub-Saharan Africa no matter trends for fiber or O3b. Further, even if Africa has made great leaps in the last few years, it is still far behind much of the rest of the world in terms of telecommunications infrastructure investment. TeleGeography in a 5 October 2010 press release titled “Global Internet Traffic Growth Remains Strong in 2010” noted that “at mid-year 2010, the country of Austria—with a population of just over 8 million, had access to more international Internet capacity than the 1 billion inhabitants of Africa, combined.”

NSR’s view is that the mid- to long-term potential for the television market in the region, be it for free-to-air, DTH, or hot bird locations, is more than enough to justify much of the new FSS capacity. In many ways, Sub-Saharan Africa has as much (if not more) cultural and linguistic diversity as Central & Eastern Europe—a region that currently supports more than 30 DTH platforms and cable/IPTV bouquets plus a large free-to-air market compared to Sub-Saharan Africa that is, at best, one-third of this despite having a larger population. By 2020, NSR’s Global Assessment of Satellite Supply & Demand 8th Edition study forecasts that C- & Ku-band transponder demand for media services in Sub-Saharan Africa will increase by nearly 120 TPEs (36 MHz transponder equivalents).

Further, NSR still sees sustained potential in the backhaul and corporate VSAT market as well as room in the mid- to longer-term for a strong increase in government-backed school networks and rural connectivity services. Other specialized services in the mobility area will add additional demand as well. These combined data services in Sub-Saharan Africa could grow by over 70 TPEs of C- & Ku-band demand with the only weak spot being a decline in heritage telephony & carrier services as these move to fiber.

Bottom Line
In many ways Sub-Saharan Africa looks much like Latin America did 5 to 10 years ago.  Given the trends noted above, there is every reason to believe in the long-term that the development path of FSS satellite services in Sub-Saharan Africa could mirror what has been seen in Latin America, even if in the short-term there may be some bumps in the road for FSS operators.

Information for this article was extracted from NSR's report Global Assessment of Satellite Supply & Demand, 8th Edition