According to a new strategic research study by Frost & Sullivan Satellite Communications in the Asia Pacific, the entire satellite market, which consists of both the ground and the space segment, is experiencing a slowdown. China, India, and Australia, which have largely been insulated from the currency crisis, have nevertheless proceeded with caution. Business activity will continue in these insulated countries, but at a far slower pace.

Analyzing the space segment first, revenues grew slightly in 1997 from the previous year to $2.6 billion as a result of increased use of satellite networks. However, in the second half of 1997, transponder orders, specifically for Ku-band transponders, were down due to the onset of the currency crisis. By 2001, the market is anticipated to rebound to robust growth rates. The rates should continue through 2004, resulting in a fruitful market for competitors.

Drivers of demand for the space segment include an increased demand for transponder capacity for use in fixed and mobile communications, telecommunications modernization, decreasing transponder lease or sale prices, demand for the Internet and the creation of the Intranets, and the need for wide-area coverage. Market restraints include launch failures and risks associated with satellite deployment, financial wherewithal, the currency crisis, competition from terrestrial and wireless technologies, and physical conditions such as rain attenuation and propagation delay.

Currently, the ground segment market is experiencing a slowdown mainly due to the currency crisis. This is expected to be a short-term effect and demand growth rates should return to pre-crisis levels by 2000. In particular, the landmobile subsegment is expected to lead to high satellite terminal penetration rates making satellite technology begin to be part of the corporate life in the region.

In terms of unit shipments, demand in the ground segment is expected to quadruple within the 10-year period due to pent-up demand. In terms of revenue, the market is expected to be affected by two main factors: the currency crisis and the rate of price declines. Unlike the currency crisis that will have a short-term effect on revenue, the rate of price declines will have a more long-term effect. "Price declines have already begun to negate increases in unit shipments, leading to limited revenue growth rates from 1995 and 1996. Price declines are likely to add to revenue decreases in 1998, and again in 2001," according to Jose del Rosario, Frost & Sullivan's satellite telecommunications analyst. The expectation of high installations of landmobile terminals and their accompanying low prices will be the main cause of substantial price decreases in the total market segment. However, the price declines will also be main drivers of more unit shipments.

In order to survive in the ailing market, competitors need to be wary of many significant trends. One trend is the rush of new entrants into the market from individual countries which is likely to drive business away from existing players. In addition, there is competition from other systems such as Ka-band systems, LEO, and MEO systems. The spread of wireline and other terrestrial wireless techniques also poses a major threat to competitors. The bundling of services is another hot trend which providers continue to practice. Those who can bundle their services for a lower price are likely to have an edge over competitors. Key technology trends that will likely impact a competitor's success include price-performance pressures, geographical coverage of satellite systems, and the miniaturization of ground segment terminals.

By 2002, the entire Asian satellite communications market is expected to skyrocket. The revenue growth rate will continue to sustain high levels throughout 2004. Deregulation, pent-up demand, globalization, and technological advances are the primary forces that will propel the market.

This telecommunications industry research has integrated the Market Engineering consulting philosophy into the entire research process. Critical phases of this research included: Identification of industry challenges, market engineering measurements, strategic recommendations, planning and market monitoring. All of the vital elements of this system help the market participants navigate successfully through the Asian satellite communications market.

Indonesian Satellite Sector Update

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