by Patrick K. Brant

The financial results are in for the year 2008 and they are very positive! The global FSS (Fixed Satellite Services) operators all reported annual revenue growth in the 8 percent-12 percent range and EBITDA margins from 78 percent to 82 percent. Certainly, this is good news for the operators and it should trickle down to some extent to the larger integrators such as Caprock, Artel, Globecomm, and others. Smaller integrators however, are struggling under the pressure of tight credit, high capacity utilization, and costs associated with creating support infrastructure. New satellites have been launched successfully and there are more under construction. Overall, 2008 was a good year in the industry.

Most organizations in the industry are proceeding cautiously in 2009 and managing their businesses based on the key performance indicators of revenue, EBITDA, capacity utilization, new sales contracts and contract renewals. Increasing productivity per employee, responding effectively to regional trends, as well as understanding key ‘demand drivers’ will be essential to continuing industry health. The global economy is presenting a challenging environment and will require solid management analysis, evaluation and actions. The FSS industry’s financial performance has historically lagged recoveries from economic downturns.The industry’s greatest challenge will be to dig below the high level indicators and exercise strategies that can change some of the underlying dynamics in the industry and provide a foundation that will grow regardless of the global economic climate. Improving the underpinnings of the business rather than simply sustaining the improved operating efficiencies created over the past decade means 2009 can be the year when the industry drives its performance and energizes the global economy.

The current economic climate creates an opportunity for companies that can focus on action and implementing strategies for change while others are focusing on ‘maintaining the status quo” in these difficult conditions. An outline of differentiating strategies are listed and several critical differentiators for sustained success could include:

Energize the industry by taking stock of the benefits and advantages of the services you offer and actively promoting those solutions to target markets that are looking to improve efficiencies:

• Broadband solutions can provide a positive impetus to the global economy
• “Sell what is in the wagon”— The satellite industry owns assets that have been fully paid for and operate at less than 80 percent capacity use
• 20 percent underutilized capacity equals sales opportunity without significant capital costs
• Unused capacity is not always in the most attractive areas, but still presents opportunities
• New satellite construction has NOT been stopped. Business plans and projections have to have NEW perspectives
• Ground segment is significantly underused and overbuilt, providing opportunities for cost-effective solutions
• Develop and provide applications that will make a difference. Innovation has always been important, but coming out of this global economic downturn, fresh and interesting applications will give you an immediate advantage over competitors that spent the last few years “hunkered down.” Now is not the time to eliminate new product planning and development.
• Opportunities to drive the advantages of reach, speed, and cost
• Technology solutions for security, IP
• Market analysis
• Distance learning is now a concept that is 20 years old and still very limited in actual usage
• Business continuity has been discussed but nothing new has been introduced
• Emergency response and management interoperability still have few accepted standards
• Improve Industry employment demographics
• Average age of Industry employees is near 50 years of age
• Need more energetic, ‘new Idea’ engineers directly out of college to be mentored by the veteran engineers in the industry
• Attract newcomers to sales with high activity thresholds
• ‘If all you do is what you’ve done, all you’ll get is what you’ve got.’
• Improve the relationship between Operators and Integrators
• Integrators and service providers should be viewed as partners
• A distribution channel for the operators rather than as customers
• Operators should partially share the enormous margins they receive by reducing the capacity cost
• This would result in greater capacity use, a more motivated distribution channel, and more hard dollar profit with a slightly lower percent of profit over revenue
• Develop a mix between Commercial and Government customer targets
• Fortune 1000 accounts are multinational, require security, desire control of communications
• Government has requirements in Defense (military), Diplomacy (State), and Trade (commerce). Knowledge of contracting process required

The news for 2008 was very positive and the outlook for 2009 is solid, but there are opportunities for those who seize the moment to drive the industry to new levels of excellence in the years ahead. The development and execution of operational plans that can step outside of “the way it has always been done” will position the industry to come out of the global economic downturn with credible growth strategies in place. These companies will not only avoid that lag and grow throughout the downturn but excel as the recession recedes.

About the author
Patrick K. Brant formerly served as President and CEO of Loral Skynet as well as the COO of Loral CyberStar, Loral’s former data services company, and he played a crucial role in the integration of CyberStar with Skynet in 2003. Pat served as president of Controlsat and as a senior director for Orbital Communications, the first provider of global data services via low earth orbit (LEO) satellites.