Focus on Africa
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Africa: The connectivity conundrum
With an estimated population of 1.2 billion, Africa is the second most-populated region in the
world. However, the majority of the population has largely been left behind when it comes to new
technological innovations like Smart phones, Internet access and other advances many of us
take for granted. Recent years have seen satellite operators invest heavily in the region to boost
connectivity rates closer to those seen in the Western world; with continent-wide connectivity
currently so limited, demand is expected to be high. While this may be true, other factors are also
at play. The widespread lack of electricity grid access, for one, means that even when Internet
access is made available, many consumers have no way to power devices. Here, Satellite
Evolution examines the African satellite industry and how it might develop going forwards.
When we think about technological evolution, Africa is
an interesting continent to consider. Traditional steps like the
installation of landline telephones for the general population
have largely been bypassed, and consumers have instead
leapfrogged straight to mobile Smart phones. Some 20
percent of the population has access to a mobile Internet
connection, which is forecast to rise to 60 percent by 2020.
The number of connected Smart phones in Africa is expected
to be more than double North America’s by 2020, exceeding
700 million.
Despite the rapidly growing connectivity, around two thirds
of the population have no access to grid electricity. “If you
can’t have electricity, you can’t drive any industrial
development,” Akinwumi Adesina, President of the African
Development Bank, told the Guardian newspaper. “Electricity
drives everything, so until we fix that problem Africa faces
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huge challenges. It’s the most critical issue holding back
Africa’s development.”
In a country with few consumer landlines, access to the
Internet was extremely low until 2009, when fibre connectivity
was vastly improved. Penetration grew to 16 percent in 2013
and to more than 20 percent in 2015. However, access to
broadband speeds remains low, and inland connectivity is
extremely poor.
Growing demand
The limited connectivity in Africa today indicates that there
is a lot of opportunity for growth. Euroconsult’s 2015 report,
‘Prospects for Satellite Communications and Broadcasting
in Africa,’ states that in 2009-2014, satellite capacity usage
grew at a CAGR of 11 percent, and is expected to grow at
the same CAGR for the next decade, for a total of almost
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200Gbps of satellite traffic. Growth is attributed to a number
of factors:
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The transition to digital TV has only recently begun, while
paid-for TV market penetration is low to date.
Operations diversity and geographical expansions in oil
and gas, banking, mining and government networks.
New enterprise hot spots are evolving, particularly in East
and West Africa, in addition to historically strong VSAT
markets like South Africa, Nigeria, Angola, Kenya and
Tanzania.
High throughput satellites (HTS) offer better broadband
access for consumers and enterprises, and provide
trunking opportunities for landlocked countries like South
Sudan and the Democratic Republic of Congo (DCR),
where fibre is limited and unreliable.
Market research company Dataxis expects paid-for TV
subscribers in Africa to hit 30 million in 2021, up from 16
million in 2015, with digital satellite paid-for TV subscribers
to grow from eight million to 20 million in the same period.
The roll-out of digital terrestrial TV (DTT) is expected to
increase competition, reducing average revenue per user
(ARPU) in most African countries. Total paid-for TV revenue
is estimated to grow from US$4 billion in 2015 to US$6 billion
in 2021, with paid-for DTH expected to contribute up to US$5
billion of the total.
“Despite advances, statistics show that Africa still has a
long way to go in terms of household TV penetration. This
low rate is explained mainly by lack of basic economic
infrastructures like electricity. Moreover, poverty in developing
African countries make it impossible for its citizens to afford
television sets,” said Priscilla Tirvengadum, Research Analyst
at Dataxis Africa.
Mixed messages
There are a lot of mixed messages coming from major satellite
companies concerning Africa. In its ‘A new DTH frontier’
release, SES stated: ‘Central and West Africa are
experiencing unprecedented levels of economic and
developmental growth, increasingly being viewed as the most
dynamic and exciting regions for media and broadcasters to
do business in.’
On the basis of an expected boom period across the
continent, operators have been investing heavily in Africa in
recent years, with key players like Intelsat, Eutelsat, SES,
Telesat and Avanti all eyeing the area. However, at the same
time, the global markets have become extremely challenging,
with capacity demand fluctuating and disruptive innovations
like high throughput satellites (HTS) amplifying market
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uncertainty. Speculation of over-investment in developing
regions like Africa and Latin America is rife.
Since satellite operators do not report financial results
segmented by world region, it can be hard to discern the
state of play, and average satellite fill rates can only tell us
so much. Global players like Intelsat (76 percent), Eutelsat
(70.9 percent), and Telesat (66 percent) all boast strong
capacity utilisation, while Avanti, which is much more closely
focused on the African market, has improved its fill rate to
25-30 percent in the second quarter of 2016, up from 20-25
percent in the first quarter.
While many of the major operators have appeared to
struggle in recent years with falling revenues and profits, most
have pointed out that the negative effects are due to short
term market challenges, which will be offset in the medium
term. Looking at Africa, it’s certainly true that a lot of business
and new deals have been affected so far in 2016…
SES
SES operates ten satellites with coverage over Africa, and
works heavily with broadcasters to increase satellite TV
uptake across the continent. The company has developed
its ELEVATE training programme, which enables installers
across Africa to improve their skills and gain accreditation.
So far, the ELEVATE team has provided training in the DRC,
Cameroon, Ghana, Nigeria, Senegal, Cote d’Ivoire, Uganda,
Kenya and Tanzania.
SES has suffered a somewhat challenging year so far,
with growing revenues in the video and mobility sectors
weighed down by short-term slowdowns in enterprise and
government. However, the company has forged ahead with
two major acquisitions that will significantly help boost its
future results; O3b Networks and RR Media.
So far in 2016, SES has done a significant amount of
business across Africa. The company signed a multi-year
Photo courtesy Monkey Business Images/Shutterstock
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renewal with K-NET to continue to support the roll-out of DTH
and DTT services in Ghana. Since 2014, SES’ technical reach
in Ghana has grown by 18 percent to two million TV
households, and SES now distributes video content to over
90 percent of all TV homes in the country.
SES also secured an agreement to support Facebook’s
Express Wi-Fi programme in Sub-Saharan Africa. SES will
provide a highly tailored service, including satellite capacity,
data centre solutions and implementation services via its
Enterprise+ Broadband service, launched in February 2016,
which provides a simple, affordable and flexible connectivity
platform for service providers.
In addition, SES deployed its SATMED e-health platform
at Centre de Dépistage et de traitement de l’Ulcère de Buruli
(CDTUB) in Allada, Benin, as well as at the CURE Hospital
for Children in Niger. SATMED was conceived by SES
Techcom Services, a wholly-owned subsidiary of SES, and
is funded by the Luxembourg Government and the Ministry
for Cooperation and Humanitarian Action. The satellite-based
communication solution aims to improve public health in
developing countries by enabling multiple medical
applications and tools to operate collectively on a single
platform. SATMED has already been installed at a number of
locations across Africa to improve the speed and quality of
healthcare services, particularly in remote locations where
satellite is often the only means of providing consistent
communication between sites.
Eutelsat
Eutelsat is another major operator with a significant presence
in Africa. 18 of its 39-strong fleet of satellites operate over
the continent, providing broadcasting, Internet and data
services, among others.
In the first half of 2016, Eutelsat reported growing
revenues, contributed to by sustained growth in video
applications revenue following the launch of Eutelsat 8 West
B and Eutelsat 36C, which provided market growth in SubSaharan Africa and MENA. Eutelsat was one of the operators
that highlighted specific market challenges: “We are facing
the challenge of a lower growth environment in certain of our
core businesses, particularly data…” commented Rodolphe
Belmer, CEO of Eutelsat.
Eutelsat established its ‘Broadband for Africa’ initiative in
2015, which aims to deploy affordable high-quality broadband
in Africa, initially using leased Ka-band capacity in partnership
with Facebook from Spacecom’s AMOS-6 satellite, and later
with its own HTS. However, in September 2016, SpaceX’s
Falcon 9 launcher exploded during a test fire with AMOS-6
on board, destroying the payload. No updates have been
made at the time of press regarding the next steps.
Meanwhile, Eutelsat also ordered a 75Gbps HTS from
Thales Alenia Space in 2016, and expects to launch it in
2019. ‘Broadband for Africa’ will develop consumer and
enterprise broadband services with Wi-Fi hotspots, mobile
phone backhauling and rural connectivity.
During the first half of 2016, Eutelsat signed a multi-year
contract with the Tunisian Broadcasting Corporation (ONT)
for the broadcast of a subscription-free TV platform across
North and West Africa via Eutelsat 7 West A. Meanwhile,
StarTimes arranged a new multi-year deal to accelerate the
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roll-out of digital broadcasting in Sub-Saharan Africa,
renewing its capacity lease on two Eutelsat satellites and
adding extra capacity for an anticipated expansion by the
end of the year. In another deal, Eutelsat arranged a new
agreement with Liquid Telecom for multiple transponders on
Eutelsat 7B for enterprise solutions and DTH broadcasting
services across Africa.
Nicolas Baravalle, Eutelsat’s Regional Vice President for
Sub-Saharan Africa, voiced his view of the African satellite
market for Satellite Evolution: “Terrestrial infrastructure has
its limits when it comes to covering a continent which is 30
million square km and where 50 percent of the population
lives in rural areas. This creates significant opportunities for
satellites that deliver seamless coverage across large
geographic areas for broadcast and broadband services that
leave no one beyond the benefits of digital. Africa’s ongoing
move to a fully digital broadcasting environment is one of the
key technology transformations underway across the
continent. With half of our satellite fleet covering this continent,
we are fully engaged in supporting digital switchover for
viewers across the continent. We are equally committed to
working with the best telco and Internet partners to deliver
an enhanced online experience to Internet users. With newgeneration satellite broadband services about to launch,
Africa has an opportunity to untap a latent potential and
accelerate social and economic progress.”
Intelsat
Intelsat has served the African market since 1965, and today
has 25 satellites with coverage over the continent, reaching
16.3 million homes there. Intelsat 36, which has entered
service this month, will support growth for Intelsat’s South
Africa DTH market.
The company’s financials have certainly improved as the
year has gone on, with a massive 91.7 percent year-on-year
increase in net income reported for the second quarter of
2016. Deals such as its new agreement with AfricaOnline,
part of Gondwana International Networks, for which Intelsat
will provide services via Intelsat 28, will certainly have helped.
With the new deal, Gondwana will provide ground support
and network management services from AfricaOnline’s
facilities at Hartebeesthoek, South Africa. Intelsat and
Gondwana will deliver a high-quality, Ku-band broadband
service on a virtual network operator (VNO) basis to expand
Internet access throughout Sub-Saharan Africa.
Intelsat has placed a heavy emphasis on its new EpicNG
high throughout satellites (HTS), the first of which (Intelsat
29e) entered service over Latin America in July 2016. The
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second, Intelsat 33e, will come into service at the end of
2016 to provide coverage over Africa, Asia, the Middle East
and Europe. Several reports have claimed that Intelsat 29e’s
low-cost capacity has put additional pressures on prices in
Latin America; a similar outcome has been forecast for the
Intelsat 33e coverage areas when it comes online. Intelsat’s
Chief Executive, Stephen Spengler, has asserted that, overall,
Intelsat 33e will be a market enabler, and a way to unlock
demand across multiple sectors.
“Prices… are subject to market pressures at any given
time - competitive pressures,” said Spengler. “That’s been a
factor. But in most of these cases, customers have opted for
more overall volume of capacity, leading to an uptick in overall
revenue. That price decline might be a little faster than we
had anticipated in our business plan, but the volume is a
little higher. So we’re within our expectations in terms of the
business plan for the Epic satellites.”
Telesat
Telesat has long seen the value of investing in Africa; the
company believes that ‘satellite broadband is helping drive
economic growth while improving educational services and
quality of life across the continent.’ Telesat operates two
satellites that have coverage over Africa: Telesat 11N and
Telstar 12 VANTAGE. With them, it serves the oil and gas,
mining, maritime, broadband, GSM backhaul and
communications sectors.
The company reported strong results in the first half of
2016, despite operating in a challenging marketplace. Indeed,
Telesat’s Chief Executive, Daniel S. Goldberg, confirmed that
prices have recently fallen by 15-20 percent in Africa. “There
is excess capacity for sure in certain markets, and has been
for at least a year now,” said Goldberg. “Demand is still
growing; folks want more bandwidth. But industry is going to
have to digest the excess supply by lowering capital
investment to give time for demand to grow into the existing
capacity. Operators are exercising more capex restraint and
the excess supply will be mopped up. These conditions have
been true for at least 18 months and it will take two, three, or
maybe five years to recover.”
One of Telesat’s major 2016 deals came when it agreed
to provide Globecomm with new Ku-band capacity over SubSaharan Africa and Europe via its Telstar 12 VANTAGE
satellite. With it, Globecomm will increase its media, maritime,
government and IoT business.
Avanti
Unlike the other operators discussed here, Avanti relies on
the African market for a large proportion of its business, with
two of its three active satellites providing coverage over that
continent. Avanti’s HYLAS 3 and HYLAS 4 satellites, both
due for launch in 2017, will also provide coverage in the
MENA, and Europe and Africa regions, respectively.
Despite suffering a challenging year so far, Avanti expects
50 percent annual continuing business revenue growth for
the full 2016 financial year. The company has signed several
major deals in Africa in 2016, including the supply of Kaband capacity via HYLAS 2 to VSAT equipment provider
Intersat Ltd, in order to deliver broadband services to its
enter prise, government, defence and GSM operator
customers across East Africa.
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In addition, Avanti extended its contract with African
broadband provider iWayAfrica until March 2018. Avanti
supplies iWayAfrica with its SELECT solution, which enables
iWayAfrica to provide affordable broadband to bridge the
digital divide. Inmarsat also extended its contract with Avanti
for an additional two years, enabling Inmarsat to grow in the
consumer, SME and enterprise markets in 14 countries in
Sub-Saharan Africa, with a particular focus on Kenya.
Inmarsat has added Avanti’s SELECT and CUSTOM products
as part of the deal, for the consumer and SME markets, and
enterprise market, respectively.
A promising future
Despite the doom and gloom being cast on the satellite sector
in regions like Africa right now, a review of the news reveals
that there is definitely big business to be done there. Eutelsat,
Intelsat, SES, Telesat and Avanti have all made great strides
in Africa in recent months, perhaps indicating a sooner-thanexpected market upturn.
The lack of essential infrastructure development and
widespread poverty are the biggest challenges to the African
satellite market today. Without access to grid electricity, or
an appreciable disposable income, consumers will struggle
to take advantage of the full host of capabilities that satellite
can offer. However, as government initiatives to improve
facilities take hold, we can expect to see more of the general
population adopting new technologies made av
Photo courtesy of Dimdok/Shutterstock
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