Lost In Space

With the growth of satellite capacity vastly outpacing demand, leading satellite operators Intelsat (I), Eutelsat (ETL) and SES (SESG) and Inmarsat (ISAT) have struggled to maintain investor confidence and significantly underperformed the market. Intelsat in particular is attempting to overcome potentially overwhelming growth challenges as its two largest segments, Network Services and Media, which represent 81% of revenue, face unprecedented pricing pressure.

In our call, HTS Capacity – Analyzing Competitive Dynamics & Demand Growth and Intelsat – Epic’s Value Prop & Market Positioning we fielded conflicting views of Intelsat’s growth opportunity by comparing the expected pace of satellite capacity price compression to potential sources of capacity demand growth in maritime, enterprise and aviation markets. Despite consensus that capacity prices could fall as much as 70% through 2016, disagreement remained concerning Intelsat’s ability, based on current use cases, to generate enough incremental demand to offset price declines.

Interestingly, as Intelsat’s Epic constellation came online, we gathered a variety of potentially positive data points by speaking with experts across maritime (Intelsat: Analyzing Epic Adoption, emerging Use Cases and Growth Outlook) and aviation (Intelsat: Analyzing Epic Adoption & Pricing), suggesting that pricing may have fallen within an acceptable range and Intelsat’s channel partners foresee acceleration in demand growth. As such, while Intelsat’s recent rally may reflect a brighter future, we have yet to have clarity into issues highlighted in our call, (I,VSAT,SES): North American Video Market – Deep Dive, which are expected to take longer to materialize as media companies renegotiate their satellite distribution contracts through 2017.